The Mixed Economy is a system that combines capitalism and socialism. The Mixed Economy incorporates the benefits of capitalism and socialism while avoiding their drawbacks.
Under a Mixed Economy, the private and public sectors coexist. Economic activity is directed by the government toward particular socially significant sectors of the Economy, and the balance is determined by the operation of the pricing mechanism.
The public and private sectors collaborate to achieve social objectives within the framework of a common Economic plan.
The private sector is a significant component of the Mixed Economy and is regarded as a critical engine of Economic growth. India is widely recognised as the world's best example of a Mixed Economy.
What are the features of a Mixed Economy?
In the Mixed Mixed Economy system, all three sectors exist together, that is the private sector, public sector and joint sector. The government and private companies together hold the responsibilities of the respective division. 51% of the total ownership belongs to the state itself.
According to the Mixedmixed Economy definition, a cooperative sector exists in a Mixed Mixed Economy. The significance of this sector is vital. In Mixed Mixed Economy countries, the government provides necessary items and financial aids to the areas involved in cooperative societies like warehousing, dairy industry and more.
To be precise, in a Mixed Mixed Economy, we denote that the individuals have complete liberty to manufacture goods and items and choose property and occupation according to their choice. The regulating body maintains control to avoid all sorts of discrimination and monopolistic issues.
In a Mixedmixed Economy, the central planning authority exists. All the sectors of the firm follow this rule and plan to pursue their goals. The plan is solely observed with the motive to attain national Economic growth.
The significant look out of a Mixedmixed Economy is the social welfare of society. It focuses on eliminating the unemployment issues from the country. The Mixedmixed Economy definition further says it enhances social security and public education facilities.
Apart from the above features a Mixedmixed Economy might also inherit most of the downsides associated with the other types of economies. It all depends on which aspects of the Mixedmixed Economy are highlighted.
For example, if the Market has too much freedom, it may leave society's less competitive members without government assistance. Government industries are likewise hampered by central planning.
The defence sector could become a monopoly or oligarchy system financed by the government. This could raise the country's debt, stifling long-term Economic progress.
Successful companies can persuade the government for further tax cuts and subsidies. The government may overprotect the free Market to the point of underregulation.
Businesses that were too big to fail, for example, could be bailed out by the government if they went bankrupt.
Mixed Economy - Merits
The following are the significant advantages of a Mixed Economy:
In a Mixed Economy, there is competition between public and private sectors, which ultimately results in increased efficiency and productivity.
Profits from public sector firms accrue to the government, and as a result, income inequality decreases under a Mixed Economy.
Economic activities are systematically planned in a Mixed Economy. The government plans the entire Economic system in detail.
Since Economic activities are planned, Economic stability prevails in a Mixed Economy.
In a Mixed Economy, goods are produced according to consumer preferences, which results in consumer sovereignty.
In a Mixed Economy, enterprise flexibility and profit incentive are critical. Due to these factors, initiative, innovation, and productivity always tend to grow.
A Mixed Economic system also prioritises social welfare.
A Mixed Economy protects individual rights.
The Mixedmixed Economy combines both the features of a socialist and capitalist Economy. Therefore, advantages from both sectors are present in a Mixedmixed Economy. For example, absolute individual liberty is there in a diverse Economy. Again, Economic freedom can be gained too in a Mixedmixed Economy.
An arguably Mixedmixed Economy is the method to establish socialism in a country following peaceful and democratic ways. For example, the Economy can move towards socialism through the progressive extension of the public sector.
In a Mixedmixed Economy, the private sector's efficient management is combined with the public sector's financial soundness. Resultantly, the country achieves a rapid rate of Economic growth.
The evils of the capitalist system, such as inflation, unemployment, etc., can be removed in the Mixedmixed Economic order. In the modern world, the objective of the government is to establish a welfare state. In the welfare state, the government aims at achieving maximum welfare for the maximum number of people. Arguably, maximum prosperity can be gained through the extension of the public sector. It is possible only in a Mixedmixed Economic system. This one is among the most significant advantages of a Mixed Mixed Economy.
Did you Know?
Here are some of the fantastic facts about the features of Mixed Economy that you will be surprised to read.
In a Mixedmixed Economy, though the private and public sectors exist side by side, the government puts certain restrictions on the working of the private sector. It is among the unique characteristics of a Mixedmixed Economy.
There are some acts passed by the government to regulate the dos and don'ts of the private sector. Consumer sovereignty stays intact in a Mixedmixed Economy.
Solved Example on What is Mixed Economy
1. Which among the following Systems is followed in India?
None of the three
Ans. The right answer is the third option Mixed. In India, a Mixedmixed Economy prevails. All the sectors, i.e., private, public and joint, exist side by side. Following the guidelines of Mixedmixed Economy definition, Central Economic planning authority exists in India, so does the price mechanism.