Mixed economy

A mixed economy is an economy that contains both private and public, or state owned (or controlled) enterprises. According to the American Heritage Dictionary, a mixed economy is defined as:

An economic system that allows for the simultaneous operation of publicly and privately owned enterprises.

There is not one single definition for a mixed economy , but relevant aspects include; a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include intervention for environmentalism and social justice, or state ownership of some of means of production).

For some countries, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies in countries ranging from the United States to Cuba have been termed mixed economies.

Philosophy

A mixed economy contains private ownership of the means of production, infrastructure, and institutions but may also contain state-ownership of some of these things. It allows for private financial decisions by businesses and individuals, but not absolute nor near absolute autonomy, as many of these decisions are otherwise overridden by government.

The term mixed economy was coined to identify economic systems which stray from the ideals of either the free market, or various planned economies and "mix" with elements of each other. As most political-economic ideologies are defined in an idealized sense, what is described rarely if ever exists in practice. Most would not consider it unreasonable to label an economy that, while not being a perfect representation, very closely resembles an ideal by applying the rubric that denominates that ideal. However, when a system in question diverges to a significant extent from an idealized economic model or ideology, the task of identifying it can become problematic. Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a perfectly even mix, mixed economies are usually noted as being skewed either towards either private ownership or public ownership in varying degrees.

Which economies are mixed?

File:The farmer's market near the Potala in Lhasa.jpg

Private investment, freedom to buy, sell, and profit, combined with economic planning by the state, including significant regulations (e.g. wage or price controls), taxes, tariffs, and state-directed investment.

There is not a consensus on which economies are capitalist, socialist, or mixed. For example, while many would call the economy in the U.S. capitalist, others call it mixed. For example, according to economic and business historian Robert Hessen: "a fully free economy (true laissez-faire) never has existed, but governmental authority over economic activity has sharply increased since the eighteenth century, and especially since the Great Depression...Today the United States, once the citadel of capitalism, is a "mixed economy" in which government bestows favors and imposes restrictions with no clear or consistent principle in mind."

Elements of a mixed economy

A TGV train in Paris operated by the publically owned SNCF. In many countries, the rail network is partly or completely, owned or controlled, by the state.

A mail truck. Restrictions are sometimes placed on private mail systems by mixed economy governments. For example, in the U.S., the USPS enjoys a government monopoly on some first-class mail as described in the Private Express Statutes.

This hospital run by the National Health Service in the United Kingdom is an example of heavy state involvement in health care in a mixed economy.

The elements of a mixed economy typically include a variety of freedoms:

• to possess means of production (farms, factories, stores, etc.)
• to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
• to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
• to sell (same as buy)
• to hire (to create organizations that create wealth)
• to fire (to maintain organizations that create wealth)
• to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
• to communicate (free speech, newspapers, books, advertizements, make deals, create business partners, create markets)
• to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)

with tax-funded, subsidized, or state-owned services and infrastructure:

• legal assistance
• libraries and other information services
• roads and other transportation services
• schools and other education services
• hospitals and other health services
• personal and property protection at home and abroad (police, military)
• subsidies to agriculture and other businesses
• government monopolies and government-granted monopolies
• state-owned industry, such as telephone service and electricity.

and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as:

• welfare for the poor
• social security for the aged and infirm
• government subsidies to business
• mandatory insurance (example: automobile}

and restricted by various laws, regulations:

• environmental regulation (example: toxins in land, water, air)
• labor regulation including minimum wage laws
• consumer regulation (example: product safety)
• antitrust laws
• intellectual property laws
• incorporation laws
• protectionism
• import and export controls, such as tarrifs and quotas

and taxes and fees written or enforced with manipulation of the economy in mind.

Relation to form of government

While governments with harsh restrictions on economic and civil liberties can choose to begin a process to implement a mixed economy, many believe that it cannot be long sustained without causing that government to also implement more and more of the elements of a liberal democracy (or, conversely, that implementing liberal democractic reforms inevitably leads to liberalization of the economy). For example, "the mainstream view holds that China’s WTO entry and the opening of its media system to foreign owners will inevitably undermine the CCP’s authoritarian control and facilitate press freedom."

The economic freedoms that are a necessary part the capitalist portion of a mixed economy are part of a continuum of freedoms, ranging from those that require no governance to those that require very substantial governance in regard to (for example) establishing rule of law that protects private property and free markets (the details are beyond the scope of this article). Many say that economic freedoms are themselves important defining elements of a liberal democracy.

The western democracies implemented elements of capitalism and democracy over the last 300 years or so and perhaps are an example of this.

While the future of China is anyone's guess, many think China can not long follow the economic path the western democracies took without also, perhaps in spite of itself, implementing - over time, incrementally - the elements of liberal democracy. U.S. Secretary of State Condoleezza Rice was quoted by the New York Times as saying on March 19, 2005 in Tokyo, "[When China's leaders] look around them in Asia, they will see that freedom works....They will see that freedom of religion and respect for human rights are part of the foundation of decent and successful societies".

Historic examples

American System (also known as the National System) is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century as the country's policies evolved in a free market direction. It consisted of a three core policy initiatives: protecting industry through high tariffs (1861-1932) (changing to subsidies and reciprocity from 1932-1970's), government investment in infrastructure through internal improvements, and a national bank to promote the growth of productive enterprises. During this period the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the 1880's.

Dirigisme is an economic policy initiated under Charles DeGaulle of France designating an economy where the government exerts strong directive influence. It involved state control of a minority of the industry, such as transportation, energy and telecommunication infrastructures, as well as various incentives for private corporations to merge or engage in certain projects. Under its influence France experience what is called "Thirty Glorious Years" of profound economic growth.

Social market economy is the economic policy of modern Germany that steers a middle path between socialism and liberalism and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, public welfare and public services by using state intervention. Under it's influence Germany has emerged from desolation and defeat to become an industrial giant within the European Union.

Objection to the term

Ludwig von Mises argues, in Human Action, that there is no such thing as a mixed economy. He says "the market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such thing as a mixed economy, a system that would be in part capitalist and in part socialist." He reasons that even state-owned enterprises are subject to market forces; government may tax citizens to subsidize losses but those taxes exert a market force. He says that state ownership of the some of the means of production "is a step on the way toward socialism, but not in itself socialism." As long as there are no price or wage controls, he considers an economy to be a market economy.

See also

Note:Quotes in this section indicate content taken from the article in question.

• Corporatism "Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to corporations that represent economic, industrial and professional groups."

• Nationalisation "is the act of taking assets into state ownership."

• Pluralism "In a pluralistic society, power and decision-making (and the ownership of the results of exercising power) are more diffused."

• Public sector "is that part of economic and administrative life that deals with the delivery of goods and services by and for the government."

• Public-private partnership "a system in which a government service or private business venture is funded and operated through a partnership of government and one or more private sector companies."

• Statism "is a term to describe any economic system where a government implements a significant degree of centralized economic planning"

• Welfare state "In many "welfare states", welfare is not actually provided by the state, but by a combination of independent, voluntary, mutualist and government services."

Further reading

• Barr, Nicholas (“Economic theory and the welfare state: a survey and interpretation.” Journal of Economic Literature, 30(2): 741-803. 1992, a review essay looking at the economics literature
• Berkowitz, Edward D. (1991) America’s Welfare State: From Roosevelt to Reagan. The Johns Hopkins University Press.
• Buchanan, James M. (1986) Liberty, Market and State: Political Economy in the 1980s New York University Press.
• Cronin, James E. (1991) The Politics of State Expansion: War, State and Society in Twentieth-Century Britain. New York: Routledge.
• Derthick, Martha and Paul J. Quirk (1985) The Politics of Deregulation. Washington, DC: The Brookings Institution.
• Sanford Ikeda; Dynamics of the Mixed Economy: Toward a Theory of Interventionism London: Routledge 1997 a hostile (Austrian) approach

Sources and notes

• Gill: "By 1880 the United States of America had overtaken and surpassed England as industrial leader of the world.: (from "Trade Wars Against America: A History of United States Trade and Monetary Policy" Chapter 6 titled "America becomes Number 1" pg. 39-49 - published 1990 by Praeger Publishers in the USA - ISBN 0-275-93316-4)

• Lind: "Lincoln and his successors in the Republican party of 1865-1932, by presoding over the industrialization of the United State, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side...the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." (from "Hamilton's Republic" Introduction pg. xiv-xv - published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)

• Lind: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism...The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods...The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." (from "Hamilton's Republic" Part III "The American School of National Economy" pg. 229-230 published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)

• Richardson: "By 1865, the Republicans had developed a series of high tariffs and taxes thar reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded..."Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes...for ordinary expenses of Government." (from "The Greatest Nation of the Earth" Chapter 4 titled "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pg. 136-137 published 1997 by the President and Fellows of Harvard College in the USA - ISBN 0-674-36213-6)

• Boritt: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leornard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate cariety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" (from "Lincoln and the Economics of the American Dream" Chapter 14 titled "The Whig in the White House" pg. 196-197 published 1994 by Memphis State University Press in the USA - ISBN 0-87880-043-9)

• Buchanan, Patrick J., The Great Betrayal (1998)
• Curry, Leonard P. Blueprint for Modern America: Nonmilitary Legislation of the First Civil War Congress (1968)
• Croly, Herbert, The Promise of American Life (2005-reprint)
• Joseph Dorfman. The Economic Mind in American Civilization, 1606-1865 (1947) 2 vol
• Joseph Dorfman. The Economic Mind in American Civilization, 1865-1918 (1949) vol 3
• Gardner, Stephen H. Comparative Economic Systems (1988)
• Gill, William J. Trade Wars Against America: A History of United States Trade and Monetary Policy (1990)
• Lauchtenburg, William E. Franklin D. Roosevelt and the New Deal 1932-1940 (1963)
• Lind, Michael Hamilton's Republic: Readings in the American Democratic Nationalist Tradition (1997)
• Lind, Michael What Lincoln Believed: The Values and Convictions of America's Greatest President (2004)
• List, Friedrich, Outlines of American Political Economy (1980-reprint)
• List, Friedrich National System of Political Economy (1994-reprint)
• Richardson, Heather Cox. The Greatest Nation of the Earth: Republican Economic Policies during the Civil War (1997)