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Economic Systems - Mixed Economy

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Mixed Economy
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Mixed Economy

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.

EXAMPLE

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.

EXAMPLES:

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.

EXAMPLES

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

A mixed economy is a mix between socialism and capitalism.

In this system the freedom in the economic activities are influenced by the Government's regulation and licensing policies.


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