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DEFINITION“Mixed economy is an economic system which is combination of capitalistic economic freedom and principles of socialistic
economic control.”
Mixed economy aroused when the two systems suffered failure and need of third system was felt.
These failures are elaborated separately as: Failure of capitalism Failure of socialism
FAILURE OF CAPITALISM
During nineteenth century, all countries had free market economies and the government intervention was quite small.
But, with the passage of time, the evils of capitalism such as unemployment, inequalities in distribution of income and wealth and business cycle became quite clear
FAILURE OF SOCIALISM
The rate of economic growth slowed down and people started resenting the loss of their personal freedom. Socialist economies failed to match the rapid progress in technology by capitalistic countries.
In the beginning of 20th century, some countries adopted socialism. But soon the drawbacks surfaced up.
“WHY MIXED ECONOMY”
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies.
The term "mixed economy" arose in the context of political debate in the United Kingdom in the postwar period
SUPPORTERS AND CRITICS OF MIXED ECONOMY:
Supporters of the mixed economy : R.H.Tawney Anthony Crosland Andrew Shonfield Harold Macmillan. Critics of British Mixed Economy: Ludwig von Mises Friedrich von Hayek
“MAKING OF MIXED ECONOMY”
The making of mixed economy is divided into three different sections stated as follows:
Private Sector Public Sector Autonomous Bodies/Semi-Public Sector
PRIVATE SECTOR In economics the private sector is that part of the economy,
sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state.
PUBLIC SECTOR The part of the economy concerned with providing basic
government services to the public is called public sector.
The composition of the public sector varies by country, but in most countries the public sector includes such services as the police, military, public roads, public primary education and healthcare for the poor.
AUTONOMOUS BODY
Autonomous bodies are those in which public and private sector work together by merging their resources either to increase the efficiency or to supplement the deficiency of resources.
Still it does not mean that all autonomous bodies are efficient in their work. There is always possibility of lack of performance or inefficiency from public sector.
REASONS WHY MIXED ECONOMY
DEVELOPED
The demerits of two economic systems acted as the initiative for the need of third economic system.
DEMERITS OF CAPITALISM
Exploitation
Inequality of wealth distribution
Inappropriate use of productive resources
Emerging of monopolies
Unemployment
DEMERITS OF SOCIALISM
Inefficiency
Consumers suffer
Economic inequality
Non existence of political and economic freedom
Non-existence of competition
CAHARCTERISTICS OF MIXED ECONOMY
Co-existence of public and private sector. Middle of the road Policy. Freedom and control. Economic planning. Monopolies are regulated.
MERITS OF MIXED ECONOMY
Efficient Freedom of decision
making of Consumer Planned development Increase in National
Production
DEMERITS OF MIXED ECONOMY
Corruption Fear of nationalization Bureaucracy and red tapism Conflict between public and
private sector
EXAMPLES
COUNTRIES HAVING MIXED ECONOMIC SYSTEM
Almost all the countries have mixed economy system. America is supposed to be the Capitalistic economy but role of government is also seen there. China is considered to be the Socialistic country but private sector also exists there.
PakistanIndiaScotlandAustralia
JapanGermanyUK