Mixed economy

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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.^[1] Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety of government-sponsored aspects. See Elements of a mixed economy.

The underlying premise of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that profit-seeking enterprises and the accumulation of capital would remain the fundamental driving force behind economic activity. Additionally, the government would wield considerable influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises and unemployment, along with playing a role in social welfare interventions.^[2] Subsequently, some mixed economies have expanded to include indicative economic planning or large public enterprise sectors.

There is not one single definition for a mixed economy,^[3] but the definitions always involve a degree of private economic freedom mixed with a degree of government regulation of markets. The relative strength or weakness of each component in the national economy can vary greatly between countries. Economies ranging from the United States^[4][5] to Cuba^[6] have been termed mixed economies. The term is also used to describe the economies of countries which are referred to as welfare states, such as Norway and Sweden. Governments in mixed economies often provide environmental protection, maintenance of employment standards, a standardized welfare system, and maintenance of competition.

As an economic ideal, mixed economies are supported by people of various political persuasions, typically centre-left and centre-right, such as social democrats^[7] or Christian democrats. Supporters view mixed economies as a compromise between socialism and laissez-faire capitalism that is superior in net effect to either of those.

History

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.

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.^[8] Supporters of the mixed economy, including R. H. Tawney,^[9] Anthony Crosland^[10] and Andrew Shonfield were mostly associated with the British Labour Party, although similar views were expressed by Conservatives including Harold Macmillan.

Critics of the British mixed economy, including Ludwig von Mises and Friedrich von Hayek, argued that what is called a mixed economy is a move toward socialism and increasing the influence of the state.^[11]

Philosophy

The term mixed economy is used to describe economic systems which stray from the ideals of either the 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 towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees.^[12]

There is not a consensus on which economies are capitalist, socialist, or mixed. It may be argued that the historical tendency of power holders in all times and places to limit the activities of market actors combined with the natural impossibility of monitoring and constraining all market actors has resulted in the fact that, as we understand a "mixed economy" being a combination of governmental enterprise and free-enterprise, nearly every economy to develop in human history meets this definition; though some systems may be so close to being completely one way or the other that to call them mixed is redundant and it is more meaningful just to call them a free market economy or a command economy.

Elements of a mixed economy

The elements of a mixed economy typically^{[according to whom?]} include a variety of freedoms:

A TGV train in Marseille operated by the publicly 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 nonurgent letter mail as described in the Private Express Statutes.

This hospital run by the National Health Service in the United Kingdom. In most countries the state plays some role in the provision of health care.

• to possess means of production (farms, factories, stores, etc.)
• to participate in managerial decisions (cooperative and participatory economics)
• 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, advertisements, 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 factors of production, infrastructure, and services:

• libraries and other information services
• roads and other transportation services
• schools and other education services
• hospitals and other health services
• banks and other financial services
• telephone, mail and other communication services
• electricity and other energy services (e.g. oil, gas)
• water systems for drinking, agriculture, and waste disposal
• subsidies to agriculture and other businesses
• government-granted monopolies to otherwise private businesses
• legal assistance
• government-funded or state-run research and development agencies

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 tariffs and quotas

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

Relation to forms of government and other ideas

The mixed economy is most commonly associated with social democratic policies or governments led by social democratic parties^{[citation needed]}. However, given the broad range of economic systems that can be described by the term, most forms of government are consistent with some form of mixed economy.

Authors John W. Houck and Oliver F. Williams of the University of Notre Dame have argued that Catholic social teaching naturally leads to a mixed economy in terms of policy. They referred back to Pope Paul VI's statement that government "should supply help to the members of the social body, but may never destroy or absorb them". They wrote that a socially just mixed economy involves labor, management, and the state working together through a pluralistic system that distributes economic power widely.^[13]

Historic examples

The American School (also known as the National System)^[14] 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 with some regulatory oversight as trust busting became more popular.^[15] It consisted of a 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 England (though not the British Empire) by 1880.^[16][17][18] Shortly after this period (in the early 20th century), however, the American economy declined into the abysmal state known as The Great Depression. Laissez-faire Capitalism, itself, was thus abandoned by most Americans.^[19]

Dirigisme is an economic policy initiated under Charles de Gaulle 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 experienced what is called "Thirty Glorious Years" of profound economic growth.^[20]

Social market economy is the economic policy of modern Germany that steers a middle path between the goals of socialism 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 has emerged from desolation and defeat to become an industrial giant within the European Union.^[20]

Mixed socialist economies

The notion of a mixed economy is not inclusive to capitalist economies - that is, economies structured upon capital accumulation and private, profit-seeking enterprises. Various proposals for socialist economic systems call for a type of mixed economy, where multiple forms of ownership of the means of production co-exist with each other. For example, Alec Nove's conception of feasible socialism envisioned an economic system based on a combination of state-enterprises for large industries, worker and consumer cooperatives, private enterprises for small-scale operations, and individual enterprise.^[21]

Many proposals for market socialism involve a role for both economic planning and market forces in coordinating economic decisions.

See also

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

• Economic system
• Third Way
• Radical center
• Centrism
• Distributism
• Constitutional economics
• Capitalism
• Political economy
• Rule according to higher law
• Social Democracy
• Nationalization
• Privatization
• Pluralism
• Public sector
• Public-private partnership
• State capitalism
• Statism

Mixed economic systems

• Social market economy
• Socialist market economy
• Rhine Capitalism
• Corporatist economy
• Welfare state
• Dirigisme

Further reading

• Rosin, Kirk (“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
• Buckwitz, Goerge 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.
• Gross, Kyle B. (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

Third way

• The Third Way by Anthony Giddens (ISBN 0-7456-2267-4), followed by The Third Way And Its Critics (ISBN 0-7456-2450-2)
• NEXUS Third Way Debate Summary
• Why Tony is not a guitar-wielding facist [sic] dictator; The Guardian, July 1, 2003—about Mussolini and Blair.
• Third Way a strategy center for U.S. progressives
• Sourcewatch.org entry on the Third Way Foundation
• The Third Way - an Answer to Blair by Patrick Harrington
• Official website of Policy Network
• 'Left, Right and the Third Way' - on the third way's mix of left and right.
• The Third Way and Beyond: Criticisms, Futures, Alternatives book looks at criticism of the third way.

Sources and notes

1. ^ (NB)
   • Schiller, Bradley. The Micro Economy Today, McGraw-Hill/Irwin, 2010, p. 15. "Mixed economy - An economy that uses both market signals and government directives to allocate goods and resources." This follows immediately from a discussion on command economies and market mechanism.
   • Stilwell, Frank. Political Economy: The Contest of Economic Ideas, 2nd ed., Oxford University Press. 2006. Stilwell
   • Hendricks, Jean and Gareth D. Myles. Intermediate Public Economics, The MIT Press, 2006, p. 4 "the mixed economy where individual decisions are respected but the government attempts to affect these through the policies it implements."
   • Gorman, Tom. The Complete Idiots Guide to Economics, Alpha Books (2003), p. 9"In a market economy, the private-sector businesses and consumers decide what they will produce and purchase, with little government intervention....In a command economy, also known as a planned economy, the government largely determines what is produced and in what amounts. In a mixed economy, both market forces and government decisions determine which goods and services are produced and how they are distributed."
2. ^ Pollin, Robert. Resurrection of the Rentier, University of Massachusetts: http://www.peri.umass.edu/fileadmin/pdf/other_publication_types/NLR28008.pdf, p. 141-142: "The underlying premise behind the mixed economy was straightforward. Keynes and like-minded reformers were not willing to give up on capitalism, in particular two of its basic features: that ownership and control of the economy’s means of production would remain primarily in the hands of private capitalists; and that most economic activity would be guided by ‘market forces’, that is, the dynamic combination of material self-seeking and competition. More specifically, the driving force of the mixed economy, as with free-market capitalism, should continue to be capitalists trying to make as much profit as they can. At the same time, Keynes was clear that in maintaining a profit-driven marketplace, it was also imperative to introduce policy interventions to counteract capitalism’s inherent tendencies—demonstrated to devastating effect during the 1930s calamity—toward financial breakdowns, depressions and mass unemployment. Keynes’s framework also showed how full employment and social welfare interventions could be justified not simply on grounds of social uplift, but could also promote the stability of capitalism."
3. ^ A variety of definitions for mixed economy.
4. ^ (4)Outline of the U.S. Economy - (2)How the U.S. Economy Works U.S. Embassy Information Resource Center. Accessed: 24 October 2011.
5. ^ U.S. Economy and Business - Conditions and Resources U.S. Department of State. Accessed: 24 October 2011.
6. ^ The Challenges of Cuba's Economy - An Interview with Dr. Antonio Romero In 1998 "Transformations have occurred in property ownership, employment systems, and income levels to the extent that today we have a particular kind of mixed economy."
7. ^ "social democracy". Jason P. Abbot. Routledge Encyclopedia of International Political Economy. Ed. R. J. Barry Jones. Taylor & Francis, 2001. 1410
8. ^ Reisman, David A.. Theories of the Mixed Economy (Theories of the mixed economy). Pickering & Chatto Ltd. ISBN 1-85196-214-X. 
9. ^ Tawney, R. H. (1964). Equality. London: Allen and Unwin. ISBN 0-04-323014-8. 
10. ^ Crosland, A. (1977). The Future of socialism. Westport, Conn: Greenwood Press. ISBN 0-8371-9586-1. 
11. ^ Gardner, Martin. Whys of a Philosophical Scrivener, St. Martin's Press (1991), p. 126
12. ^ Vuong, Quan-Hoang. Financial Markets in Vietnam's Transition Economy: Facts, Insights, Implications. ISBN 978-3-639-23383-4, VDM Verlag, Feb. 2010, 66123 Saarbrücken, Germany.
13. ^ John W. Houck; Oliver F. Williams (1984). Catholic social teaching and the United States economy: working papers for a bishops' pastoral. University Press of America. pp. 132–133. 
14. ^ The Library of Economics and Liberty on-line Book titled The National System of Political Economy by Friedrich List
15. ^ "The Progressive Movement". United States History. Retrieved February 12, 2011.
16. ^ The Making of Modern British Politics, Martin Pugh
17. ^ Global Political Economy, Robert O'Brien and Marc Williams
18. ^
    • 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 presiding 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 that 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 University of Illinois Press in the USA - ISBN 0252064453
19. ^ "The Great Depression and New Deal, 1929-1939". Collin College. Retrieved February 12, 2011.
20. ^ ^{a b} (Gardner)
21. ^ Feasible Socialism: Market or Plan – Or Both: http://www.whatnextjournal.co.uk/Pages/Ratner/Feassoc.html