A mixed economy is that economy which includes the aspects of more than one economic system.
A mixed economy contains both government-owned and privately-owned enterprises or is a combination of the characteristics of planned (Command) economy and market economy or is a combination of the characteristics of socialism and capitalism.
Countries like the United States of America (USA) and United Kingdom (UK) have mixed economies. However, a few developing countries like India have also opted for mixed economies to boost its economic growth.
In the next sections, you will earn the important features, advantages, and disadvantages of a mixed economy.
Features of Mixed Economy
#1. Both public sector and private sector exist together:
In the mixed economy, both public as well as private sector exist together and work with each other in harmony. In the public sector, enterprises are owned and managed by the state, whereas, in the private sector, enterprises are owned and managed by private entrepreneurs.
They have the freedom to make decisions to develop their industries, and they can also start a new industry. The private sector usually deals with IT works, Consumer goods, agriculture, and other construction work.
On the other hand, industries like heavy engineering, mining industry, nuclear and atomic energy industries, defense, etc. are owned by the public sector.
#2. The private sector is controlled by the government:
In a mixed economy, the private sector doesn’t operate independently. There are certain aspects of the private sector which are regulated and controlled by the state government.
Government has designed a licensing system to control the activities of entrepreneurs that means they are required to acquire a license from the government to start a new business.
In this way, the government makes sure that the entrepreneurs work in favor of national objectives and not for their benefits. In addition to this, the government also provide tax rebates to encourage more investment in favor of the nation’s economies.
#3. Encouragement to private sector investment:
One of the important features of a mixed economy is that it encourages private sector investment to boost capital formation in the country. The private sector gets various opportunities to start and grow a business.
#4. Right to own private property:
In mixed economies, every citizen of a country has equal right to own private property and to use that property in any way he wants if he is not using his property to do any illegal work.
#5. Cooperative sector:
Another important feature of the mixed economy is the cooperative sectors. This sector is created so that financial assistance can be provided to cooperative societies like agriculture, warehousing, etc.
#6. Control on Economic Inequality:
One of the important features of a mixed economy is control over economic inequality. In a mixed economy, the government tries to reduce the gap between the rich and poor population of the nation.
To do this, the government provides subsidies to poor people, provide pensions to old age people, job opportunities to youngsters, and other facilities like free medical facilities, education facilities, etc. and tax on the income and wealth of the rich people is imposed.
These measures are applied intentionally to minimize economic inequalities.
Types of Mixed Economy
#1. Capitalistic Mixed Economy:
In a capitalistic mixed economy, the control on the production is completely under the control of the private sector. The government does not interfere in any way in the production work of the private sector.
However, the government makes sure that the economy of the country is constantly booming and ensure that economic power is distributed equally.
#2. Socialistic Mixed Economy:
IN socialistic Mixed Economy, the government controls all production means in a country. The socialistic mixed economy works on the demand and supply forces. However, whenever required government also take decisions in order to boost the economy of the country.
Socialistic Mixed Economy can further be divided into two categories.
#1. Centralized Socialistic Mixed Economy:
In a centralized socialistic mixed economy, a central agency is responsible for taking decisions as per the needs of the economy.
#2. Liberal Socialistic Mixed Economy:
In a liberal socialistic mixed economy, the government takes deliberate decisions to alter the market forces so that the economy of the country keeps boosting.
Advantages of Mixed Economies
#1. Less economic inequality:
The mixed economy focuses on making people richer, and there is lesser income inequality among the people of a nation as compared to the other economies.
#2. Fast-paced economic development:
In mixed economies, the economy developed at a fast pace as both public and private enterprises contribute equally. In mixed economies, efficient use of resources is made, and it is also made sure that resources are used at a controlled rate, and no amount of resources is wasted in any way.
#3. Freedom to private enterprises to boost their businesses:
In mixed economies, there is no control of the government on the activities of private enterprises. Private enterprises have the freedom to invest in businesses of their own choice and hire people and manage their businesses the way they want.
People work hard to enhance their profits as in mixed economies people have the freedom to enjoy their rewards of hard work, and there are certain works that private enterprises can perform better than public enterprises.
#4. Lower Poverty:
In mixed economies, the government makes sure that there is less gap between rich and poor people. Poor people are provided various benefits to help them to lead a normal life, whereas rich people are imposed with taxes on their property and wealth.
#5. Implementation of policies which are in favor of people:
In a mixed economy, the government implements various policies which help various industries to grow. In this country grow to become successful.
#6. More job opportunities:
In mixed economies, not only the public sector but also the private sector provide job opportunities to youngsters of a nation. This also helps in eradicating unemployment in the country and fighting poverty.
Disadvantages of Mixed Economies
#1. High taxes:
One big disadvantage of the mixed economy is the high taxes imposed on the income of the people. People feel discouraged to work when they see a large portion of their income is going in paying taxes.
#2. Private businesses sometimes cause trouble for the economy:
Mixed economy encourages private businesses. Private businesses try to gain power whenever possible, to gain power. Monopoly is not good for the country as it can lead to new pricing policies.
#3. It triggers the gap between rich and poor if not managed properly:
We have learned that mixed economy work in such a way so that the gap between rich and poor people can be minimized. However, if this is not managed, the gap between rich and poor properly might increase.