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A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economics, free markets with state interventionism, or private enterprise with public enterprise.There is no single definition of a mixed economy, but rather two major definitions. The first of these definitions refers to a mixture of markets with state interventionism, referring to capitalist market economies with strong regulatory oversight, interventionist policies and governmental provision of public services. The second definition is apolitical in nature and strictly refers to an economy containing a mixture of private enterprise with public enterprise.
An economic system is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output of production.
A market economy is an economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.
In economics, a free market is a system in which the prices for goods and services are determined by the open market and by consumers. In a free market the laws and forces of supply and demand are free from any intervention by a government, or by other authority. Proponents of the concept of free market contrast it with a regulated market, in which a government intervenes in supply and demand through various methods — such as tariffs — used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.
In most cases, and particularly with reference to Western economies, the term "mixed economy" refers to a capitalist economy characterized by the predominance of private ownership of the means of production with profit-seeking enterprise and the accumulation of capital as its fundamental driving force.In such a system, markets are subject to varying degrees of regulatory control and governments wield indirect macroeconomic influence through fiscal and monetary policies with a view to counteracting capitalism's history of boom/bust cycles, unemployment and income disparities. In this framework, varying degrees of public utilities and essential services operate under public ownership and state activity is often limited to providing public goods and universal civic requirements - such as healthcare, physical infrastructure and management of public lands.
In economics and sociology, the means of production are physical and non-financial inputs used in the production of economic value. These include raw materials, facilities, machinery and tools used in the production of goods and services. In the terminology of classical economics, the means of production are the "factors of production" minus financial and human capital.
In economics and political science, fiscal policy is the use of government revenue collection and expenditure (spending) to influence the economy. According to Keynesian economics, when the government changes the levels of taxation and government spending, it influences aggregate demand and the level of economic activity. Fiscal policy is often used to stabilize the economy over the course of the business cycle.
Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
In reference to post-war Western and Northern European economic models as championed by Christian democrats and social democrats, the mixed economy is a form of capitalism where most industries are privately owned with only a small number of public utilities and essential services under public ownership. In the post-war era, European social democracy became associated with this economic model,as evidenced by the implementation of the welfare state.
A post-war period or postwar period is the interval immediately following the end of a war. A post-war period can become an interwar period or interbellum, when a war between the same parties resumes at a later date. By contrast, a post-war period marks the cessation of conflict entirely.
Christian democracy is a political ideology that emerged in nineteenth-century Europe under the influence of Catholic social teaching, as well as Neo-Calvinism. Christian democratic political ideology advocates for a commitment to social market principles and qualified interventionism. It was conceived as a combination of modern democratic ideas and traditional Christian values, incorporating the social teachings espoused by the Catholic, Lutheran, Reformed, and Pentecostal traditions in various parts of the world. After World War II, the Protestant and Catholic movements of the Social Gospel and Neo-Thomism, respectively, played a role in shaping Christian democracy. Christian democracy continues to be influential in Europe and Latin America, although it is also present in other parts of the world.
Social democracy is a political, social, and economic ideology that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and capitalist economy. The protocols and norms used to accomplish this involve a commitment to representative and participatory democracy; measures for income redistribution and regulation of the economy in the general interest; and welfare state provisions. Social democracy thus aims to create the conditions for capitalism to lead to greater democratic, egalitarian and solidaristic outcomes. Due to longstanding governance by social democratic parties and their influence on socioeconomic policy development in the Nordic countries, in policy circles social democracy has become associated with the Nordic model in the latter part of the 20th century.
As an economic ideal, mixed economies are supported by people of various political persuasions, typically centre-left and centre-right, such as social democratsor Christian democrats.
Centre-left politics or center-left politics, also referred to as moderate-left politics, are political views that lean to the left-wing on the left–right political spectrum, but closer to the centre than other left-wing politics. Those on the centre-left believe in working within the established systems to improve social justice. The centre-left promotes a degree of social equality that it believes is achievable through promoting equal opportunity. The centre-left has promoted luck egalitarianism, which emphasizes the achievement of equality requires personal responsibility in areas in control by the individual person through their abilities and talents as well as social responsibility in areas outside control by the individual person in their abilities or talents.
Centre-right politics or center-right politics, also referred to as moderate-right politics, are politics that lean to the right of the left–right political spectrum, but are closer to the centre than other right-wing politics. From the 1780s to the 1880s, there was a shift in the Western world of social class structure and the economy, moving away from the nobility and mercantilism, as well as moving towards the bourgeoisie and capitalism. This general economic shift towards capitalism affected centre-right movements such as the British Conservative Party, that responded by becoming supportive of capitalism.
There is not only one definition of a mixed economy.However, there are generally two major definitions, one being political and the other apolitical.
The political definition of a mixed economy refers to the degree of state interventionism in a market economy, portraying the state as encroaching onto the market under the assumption that the market is the "natural" mechanism for allocating resources. The political definition is limited to capitalistic economies and precludes an extension to non-capitalist systems, being concerned with public policy and state influence in the market.On the other hand, the apolitical definition relates to patterns of ownership and management of economic enterprises in an economy.
Public policy is the principled guide to action taken by the administrative executive branches of the state with regard to a class of issues, in a manner consistent with law and institutional customs.
The apolitical definition of mixed economy strictly refers to a mix of public and private ownership of enterprises in the economy and is unconcerned with political forms and public policy.
The term "mixed economy" arose in the context of political debate in the United Kingdom in the postwar period, although the set of policies later associated with the term had been advocated from at least the 1930s.Supporters of the mixed economy, including R. H. Tawney, Anthony Crosland and Andrew Shonfield were mostly associated with the British Labour Party, although similar views were expressed by Conservatives including Harold Macmillan. Critics of the mixed economy, including Ludwig von Mises and Friedrich von Hayek, argued that there can be no lasting middle ground between economic planning and a market economy and any move in the direction of socialist planning is an unintentional move toward what Hilaire Bloc called "the servile state".
In the apolitical sense, the term "mixed economy" is used to describe economic systems which combine various elements of market economies and planned economies. 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. When a system in question, however, 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 towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees.
Jesuit author David Hollenbach, S.J. has argued that Catholic social teaching calls for a "new form" of mixed economy. He refers back to Pope Pius XI's statement that government "should supply help to the members of the social body, but may never destroy or absorb them".Hollenbach writes that a socially just mixed economy involves labour, management and the state working together through a pluralistic system that distributes economic power widely.
However, subsequent scholars have noted that conceiving of subsidiarity as a "top-down, government-driven political exercise" requires a selective reading of 1960s encyclicals. A more comprehensive reading of Catholic social teaching suggests a conceptualization of subsidiarity as a "bottom-up concept" that is "rooted in recognition of a common humanity, not in the political equivalent of noblese oblige".
In the early post-war era in Western Europe, social democratic parties rejected the Stalinist political and economic model then current in the Soviet Union, committing themselves either to an alternate path to socialism or to a compromise between capitalism and socialism.In this period, social democrats embraced a mixed economy based on the predominance of private property, with only a minority of essential utilities and public services under public ownership. As a result, social democracy became associated with Keynesian economics, state interventionism and the welfare state, while abandoning the prior goal of replacing the capitalist system (factor markets, private property and wage labour) with a qualitatively different socialist economic system.
Although fascism is primarily a political ideology that stresses the importance of cultural and social issues over economics, fascism is generally supportive of a broadly capitalistic mixed economy. Fascism supports a state interventionism into markets and private enterprise, alongside a corporatist framework referred to as the "third position" that ostensibly aims to be a middle-ground between socialism and capitalism by mediating labour and business disputes to promote national unity. 20th century fascist regimes in Italy and Germany adopted large public works programs to stimulate their economies, state interventionism in largely private-sector dominated economies to promote re-armament and national interests. Scholars have drawn parallels between the American New Deal and public works programs promoted by fascism, arguing that fascism similarly arose in response to the threat of socialist revolution and similarly aimed to "save capitalism" and private property.
"Mixed economies" as a mixture of socially-owned and private enterprise have been predicted and advocated by various socialists as a necessary transitional form between capitalism and socialism. Additionally, a number of proposals for socialist systems call for a mixture of different forms of enterprise ownership including a role for private enterprise. For example, Alexander Nove's conception of "feasible socialism" outlines an economic system based on a combination of state-enterprises for large industries, worker and consumer cooperatives, private enterprises for small-scale operations and individually owned enterprises.
The social democratic theorist Eduard Bernstein advocated a form of mixed economy, believing that a mixed system of public, cooperative and private enterprise would be necessary for a long period of time before capitalism would evolve of its own accord into socialism.
The People's Republic of China adopted a socialist market economy, which represents an early stage of socialist development according to the Communist Party of China. The Communist Party takes the Marxist position that an economic system containing diverse forms of ownership—but with the public sector playing a decisive role—is a necessary characteristic of an economy in the preliminary stage of developing socialism.
The Socialist Republic of Vietnam describes its economy as a "socialist-oriented market economy" that consists of a mixture of public, private and cooperative enterprise—a mixed economy that is oriented toward the long-term development of a socialist economy.
This meaning of a mixed economy refers to a combination of market forces with state intervention in the form of regulations, macroeconomic policies and social welfare interventions aimed at improving market outcomes. As such, this type of mixed economy falls under the framework of a capitalistic market economy, with macroeconomic interventions aimed at promoting the stability of capitalism.Other examples of common government activity in this form of mixed economy include environmental protection, maintenance of employment standards, a standardized welfare system and maintenance of competition.
Most contemporary market-oriented economies fall under this category, including the economy of the United States.The term is also used to describe the economies of countries that feature extensive welfare states, such as the Nordic model practiced by the Nordic countries, which combine free-market capitalism with an extensive welfare state.
The German social market economy is the economic policy of modern Germany that steers a middle path between the goals of social democracy and capitalism within the framework of a private market economy 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 its influence, Germany emerged from desolation and defeat to become an industrial giant within the European Union.
The American School (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.It consisted of three core policy initiatives: protecting industry through high tariffs (1861–1932; changing to subsidies and reciprocity from 1932–1970s), 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, surpassing the United Kingdom (though not the British Empire) by 1880.
This type of mixed economy specifically refers to a mixture of private and public ownership of industry and the means of production. As such, it is sometimes described as a "middle path" or transitional state between capitalism and socialism, but it can also refer to a mixture of state capitalism with private capitalism.
Examples include the economies of Singapore, Norway, Vietnam and China—all of which feature large state-owned enterprise sectors operating alongside large private sectors. The French economy featured a large state sector from 1945 until 1986, mixing a substantial amount of state-owned enterprises and nationalized firms with private enterprise.
Following the Chinese economic reforms initiated in 1978, the Chinese economy has reformed its state-owned enterprises and allowed greater scope for private enterprise to operate alongside the state and collective sectors. In the 1990s, the central government concentrated its ownership in strategic sectors of the economy, but local and provincial level state-owned enterprises continue to operate in almost every industry including information technology, automobiles, machinery and hospitality. The latest round of state-owned enterprise reform initiated in 2013 stressed increased dividend payouts of state enterprises to the central government and "mixed ownership reform" which includes partial private investment into state-owned firms. As a result, many nominally private-sector firms are actually partially state-owned by various levels of government and state institutional investors; and many state-owned enterprises are partially privately owned resulting in a "mixed ownership" economy.
This type of mixed economy refers to a combination of economic planning with market forces for the guiding of production in an economy and may coincide with a mixture of private and public enterprise. It can include capitalist economies with indicative macroeconomic planning policies and socialist planned economies that introduced market forces into their economies, such as in Hungary.
Dirigisme was an economic policy initiated under Charles de Gaulle in France, designating an economy where the government exerts strong directive influence through indicative economic planning. In the period of Dirigisme, the French state used indicative economic planning to supplement market forces for guiding its market economy. It involved state control of industries 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 experienced what is called "Thirty Glorious Years" of profound economic growth.
Hungary inaugurated the New Economic Mechanism reforms in 1968 that introduced market processes into its planned economy. Under this system, firms were still publicly-owned but not subject to physical production targets and output quotas specified by a national plan. Firms were attached to state ministries which had the power to merge, dissolve and reorganize them, and which established the firm's operating sector. Enterprises had to acquire their inputs and sell their outputs in markets, eventually eroding away at the Soviet-style planned economy.
Numerous economists have questioned the validity of the entire concept of a "mixed economy" when understood to be a mixture of socialism and capitalism.
In Human Action , Ludwig von Mises argued that there can be no mixture of capitalism and socialism—either market logic or economic planning must dominate an economy.Mises elabourated on this point by contending that even if a market economy contained numerous state-run or nationalized enterprises, this would not make the economy "mixed" because the existence of such organizations does not alter the fundamental characteristics of the market economy. These publicly owned enterprises would still be subject to market sovereignty, would have to acquire capital goods through markets, strive to maximize profits (or at the least try to minimize costs) and utilize monetary accounting for economic calculation.
Classical and orthodox Marxist theorists also dispute the viability of a mixed economy as a "middle ground" between socialism and capitalism. Irrespective of enterprise ownership, either the capitalist law of value and accumulation of capital drives the economy, or conscious planning and non-monetary forms of valuation ultimately drive the economy. Therefore from the Great Depression onward extant "mixed economies" in the Western world are still functionally capitalist because they operate on the basis of capital accumulation.
The apolitical definition of 'mixed economy' generally refers to the mix of public and private ownership forms...Here 'mixed economy' itself does not specify a political form. it means an economy characterized by a combination of public and private ownership as well as planning and markets
In the second, mainly post-war, phase, social democrats came to believe that their ideals and values could be achieved by reforming capitalism rather than abolishing it. They favored a mixed economy in which most industries would be privately owned, with only a small number of utilities and other essential services in public ownership.
There are in general two broad yet distinguishable definitions of 'mixed economy': a political definition and an apolitical definition. The political definition refers to the degree of state intervention in what is basically a market economy. Thus this definition 'portray[s] the phenomenon in terms of state encroaching upon the market and thereby suggest[s] that market is the natural or preferable mechanism...The political definition of 'mixed economy' precludes extending it to non-capitalist systems
The apolitical definition of 'mixed economy' generally refers to the mix of public and private ownership forms...Here 'mixed economy' itself does not specify a political form. it means an economy characterized by a combination of public and private ownership as well as planning and markets
The development of the economic system with public ownership playing a dominant role and diverse forms of ownership developing side by side is a basic characteristic of the socialist economic system at the preliminary stage. This is decided by the quality of socialism and the national situation in preliminary stage: first, China, as a socialist country, should persist in public ownership as the base of the socialist economy; second, China, as in its preliminary stage, should develop diverse forms of ownership on condition that the public ownership plays a dominant role
After World War II a wave of nationalizations occurred, affecting the Bank of France, the four largest commercial banks, the four leading groups of insurance companies, all electric power and gas producers, the coal mining industry, Air France, and the Renault automobile company (the last specifically because of wartime collabouration with the Nazis by its owner). Until 1981 no other firms were nationalized, although occasionally new public enterprises were created from scratch or the government bought part of ownership, as it did with Dassault Aircraft in 1978. Until 1986 none of these industries were denationalized.
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 capitalistic and in part socialist.
The fact that the state or municipalities own and operate some plants does not alter the characteristic features of a market economy. These publicly owned and operated enterprises are subject to the sovereignty of the market. They must fit themselves, as buyers of raw materials, equipment, and labour, and as sellers of goods and services, into the scheme of the market economy. They are subject to the laws of the market and thereby depend on the consumers who may or may not patronize them. They must strive for profits, or at least, to avoid losses.
To be sure, 'orthodox Marxism' maintains that the mixed economy is still the capitalism of old, just as 'orthodox' bourgeois theory insists that the mixed economy is a camouflaged form of socialism. Generally, however, both the state-capitalist and mixed economies are recognized as economic systems adhering to the principle of progress by way of capital accumulation.
Socialism is a range of economic and social systems characterised by social ownership and workers' self-management of the means of production as well as the political theories and movements associated with them. Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity. There are many varieties of socialism and there is no single definition encapsulating all of them, with social ownership being the common element shared by its various forms.
State capitalism is an economic system in which the state undertakes commercial economic activity and where the means of production are organized and managed as state-owned business enterprises, or where there is otherwise a dominance of corporatized government agencies or of publicly listed corporations in which the state has controlling shares. Marxist literature defines state capitalism as a social system combining capitalism with ownership or control by a state—by this definition, a state capitalist country is one where the government controls the economy and essentially acts like a single huge corporation, extracting the surplus value from the workforce in order to invest it in further production. This designation applies regardless of the political aims of the state and some people argue that the modern People's Republic of China constitutes a form of state capitalism and/or that the Soviet Union failed in its goal to establish socialism, but rather established state capitalism.
Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property, which is owned by a state entity; and from collective property, which is owned by a group of non-governmental entities. Private property can be either personal property or capital goods. Private property is a legal concept defined and enforced by a country's political system.
In political science, statism is the belief that the state should control either economic or social policy, or both, to some degree.
State ownership is the ownership of an industry, asset, or enterprise by the state or a public body representing a community as opposed to an individual or private party. Public ownership specifically refers to industries selling goods and services to consumers and differs from public goods and government services financed out of a government’s general budget. Public ownership can take place at the national, regional, local, or municipal levels of government; or can refer to non-governmental public ownership vested in autonomous public enterprises. Public ownership is one of the three major forms of property ownership, differentiated from private, collective/cooperative, and common ownership.
Economic interventionism is an economic policy perspective favoring government intervention in the market process to correct the market failures and promote the general welfare of the people. An economic intervention is an action taken by a government or international institution in a market economy in an effort to impact the economy beyond the basic regulation of fraud and enforcement of contracts and provision of public goods. Economic intervention can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting income equality, managing the money supply and interest rates, increasing profits, or addressing market failures.
The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term "socialist market economy" was first used during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China's economic reforms. Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or "primary stage" of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.
Economic planning is a mechanism for the allocation of resources between and within organizations which is held in contrast to the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a direct allocation of resources within a single or interconnected group of socially-owned organizations.
The Nordic model refers to the economic and social policies common to the Nordic countries. This includes a comprehensive welfare state and collective bargaining at the national level with a high percentage of the workforce unionized while being based on the economic foundations of free market capitalism. The Nordic model began to earn attention after World War II.
An economic ideology distinguishes itself from economic theory in being normative rather than just explanatory in its approach. It expresses a perspective on the way an economy should run and to what end, whereas the aim of economic theories is to create accurate explanatory models. However the two are closely interrelated as underlying economic ideology influences the methodology and theory employed in analysis. The diverse ideology and methodology of the 74 Nobel laureates in economics speaks to such interrelation.
Economic liberalism is an economic system organized on individual lines, which means the greatest possible number of economic decisions are made by individuals or households rather than by collective institutions or organizations. It includes a spectrum of different economic policies, such as freedom of movement, but its basis is on strong support for a market economy and private property in the means of production. Although economic liberals can also be supportive of government regulation to a certain degree, they tend to oppose government intervention in the free market when it inhibits free trade and open competition.
Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish socialism from capitalism, and was one of the fundamental defining characteristics of socialism initially shared by Marxian socialists, evolutionary socialists, social anarchists and Christian socialists.
The modern welfare state has been criticized on economic and moral grounds from all ends of the political spectrum. Many have argued that the provision of tax-funded services or transfer payments reduces the incentive for workers to seek employment, thereby reducing the need to work, reducing the rewards of work, and exacerbating poverty. On the other hand, socialists typically criticize the welfare state as championed by social democrats as an attempt to legitimize and strengthen the capitalist economic system, which conflicts with the socialist goal of replacing capitalism with a socialist economic system.
State socialism is a classification for any socialist political and economic perspective advocating state ownership of the means of production either as a temporary measure in the transition from capitalism to socialism, or as characteristic of socialism itself. It is often used interchangeably with state capitalism in reference to the economic systems of Marxist–Leninist states such as the Soviet Union to highlight the role of state planning in these economies, with the critics of said system referring to it more commonly as "state capitalism". Libertarian and democratic socialists claim that these states had only a limited number of socialist characteristics. However, Marxist–Leninists maintain that workers in the Soviet Union and other Marxist–Leninist states had genuine control over the means of production through institutions such as trade unions.
Liberal socialism is a socialist political philosophy that incorporates liberal principles. Liberal socialism does not have the goal of completely abolishing capitalism and replacing it with socialism, but it instead supports a mixed economy that includes both private property and social ownership in capital goods. Although liberal socialism unequivocally favors a market-based economy, it identifies legalistic and artificial monopolies to be the fault of capitalism and opposes an entirely unregulated economy. It considers both liberty and equality to be compatible and mutually dependent on each other.
Social ownership is any of various forms of ownership for the means of production in socialist economic systems, encompassing public ownership, employee ownership, cooperative ownership, citizen ownership of equity, common ownership and collective ownership. Historically social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned by a single entity or network of entities representing society, but the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy. Social ownership of the means of production is the common defining characteristic of all the various forms of socialism.
Socialist economics comprises the economic theories, practices, and norms of hypothetical and existing socialist economic systems.