Mixed capitalism
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A mixed economy is variously defined as an
economic system An economic system, or economic order, is a system of Production (economics), production, resource allocation and Distribution (economics), distribution of goods and services within a society or a given geographic area. It includes the combinati ...
blending elements of a
market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...
with elements of a
planned economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, part ...
,
markets Market is a term used to describe concepts such as: * Market (economics), system in which parties engage in transactions according to supply and demand * Market economy *Marketplace, a physical marketplace or public market Geography *Märket, a ...
with
state interventionism Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting market failures and promoting the general welfare o ...
, or
private enterprise A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
with public enterprise. Common to all mixed economies is a combination of free-market principles and principles of socialism. While there is no single definition of a mixed economy, one definition is about a mixture of markets with state interventionism, referring specifically to a
capitalist market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers are ...
with strong regulatory oversight and extensive interventions into markets. Another is that of active collaboration of capitalist and socialist visions. Yet another definition is apolitical in nature, strictly referring to an economy containing a mixture of private enterprise with public enterprise. Alternatively, a mixed economy can refer to a reformist transitionary phase to a socialist economy that allows a substantial role for private enterprise and contracting within a dominant economic framework of public ownership. This can extend to a
Soviet-type planned economy Soviet-type economic planning (STP) is the specific model of centralized planning employed by Marxist–Leninist socialist states modeled on the economy of the Soviet Union (USSR). The post-'' perestroika'' analysis of the system of the Soviet ...
that has been reformed to incorporate a greater role for markets in the allocation of factors of production. The idea behind a mixed economy, as advocated by John Maynard Keynes and several others, was not to abandon the capitalist mode of production but to retain a predominance of
private ownership Private property is a legal designation for the ownership of property by non-governmental Legal personality, legal entities. Private property is distinguishable from public property and Personal property, personal property, which is owned by a s ...
and control of the means of production, with profit-seeking enterprise and the
accumulation of capital Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form of ...
as its fundamental driving force. The difference from a '' laissez-faire'' capitalist system is that markets are subject to varying degrees of regulatory control and governments wield indirect macroeconomic influence through
fiscal Fiscal usually refers to government finance. In this context, it may refer to: Economics * Fiscal policy, use of government expenditure to influence economic development * Fiscal policy debate * Fiscal adjustment, a reduction in the government pr ...
and monetary policies with a view to counteracting capitalism's history of
boom and bust Business cycles are intervals of expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by examini ...
cycles, unemployment, and economic inequality.Pollin, Robert (2007)
"Resurrection of the Rentier"
(July–August). Book review of Andrew Glyn's ''Capitalism Unleashed: Finance, Globalization, and Welfare''. In ''New Left Review'' (46): 141–142. "The underlying premise behind the mixed economy was straightforward. Keynes and like-minded reformers were not willing to give up on capitalism, and 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."
In this framework, varying degrees of public utilities and essential services are provided by the government, with state activity providing public goods and universal civic requirements, including education,
healthcare Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health profe ...
,
physical infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
, and management of public lands. This contrasts with ''laissez-faire'' capitalism, where state activity is limited to maintaining order and security, and providing public goods and services, as well as the legal framework for the protection of property rights and enforcement of contracts. About Western European economic models as championed by conservatives ( Christian democrats), liberals ( social liberals), and socialists ( social democrats) as part of the post-war consensus, a mixed economy is in practice a form of capitalism where most industries are privately owned but there is a number of utilities and essential services under public ownership, usually around 15 to 20 percent. In the post-war era, Western European social democracy became associated with this economic model. As an economic ideal, mixed economies are supported by people of various political persuasions, in particular social democrats. The contemporary capitalist welfare state has been described as a type of mixed economy in the sense of state interventionism, as opposed to a mixture of planning and markets, since
economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources b ...
was not a key feature or component of the welfare state.


Overview

While there is no single all-encompassing definition of a mixed economy, 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 Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting market failures and promoting the general welfare o ...
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, and aims to measure the degree of state influence through public policies in the market. The apolitical definition relates to patterns of ownership and management of economic enterprises in an economy, strictly referring to a mix of public and private ownership of enterprises in the economy and is unconcerned with political forms and public policy. Alternatively, it refers to a mixture of economic planning and markets for the allocation of resources.


History

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. The oldest documented mixed economies in the historical record are found as early as the
4th millennium BC The 4th millennium BC spanned the years 4000 BC to 3001 BC. Some of the major changes in human culture during this time included the beginning of the Bronze Age and the invention of writing, which played a major role in starting recorded history. ...
in the Ancient Mesopotamian civilization in city-states such as Uruk and Ebla. The economies of the Ancient Greek city-states can also best be characterized as mixed economies. It is also possible that the Phoenician city-states depended on mixed economies to manage trade. Before being conquered by the Roman Republic, the Etruscan civilization engaged in a "strong mixed economy". In general, the cities of the
Ancient Mediterranean The history of the Mediterranean region and of the cultures and people of the Mediterranean Basin is important for understanding the origin and development of the Mesopotamian, Egyptian, Canaanite, Phoenician, Hebrew, Carthaginian, Minoan, Greek, ...
in regions such as North Africa, Iberia, and
Southern France Southern France, also known as the South of France or colloquially in French language, French as , is a defined geographical area consisting of the regions of France that border the Atlantic Ocean south of the Marais Poitevin,Louis Papy, ''Le midi ...
, among others, all practiced some form of a mixed economy. According to the historians Michael Rostovtzeff and
Pierre Lévêque Pierre Lévêque (; 11 August 1921, in Chambéry – 5 March 2004, in Paris) was a 20th-century French historian of ancient and Hellenistic Greece. Biography Training The son of an engineer, he spent his youth in the port of Bordeaux. Readi ...
, the economies of Ancient Egypt, pre-Columbian Mesoamerican, Ancient Peru,
Ancient China The earliest known written records of the history of China date from as early as 1250 BC, from the Shang dynasty (c. 1600–1046 BC), during the reign of king Wu Ding. Ancient historical texts such as the '' Book of Documents'' (early chapte ...
, and the Roman Empire after
Diocletian Diocletian (; la, Gaius Aurelius Valerius Diocletianus, grc, Διοκλητιανός, Diokletianós; c. 242/245 – 311/312), nicknamed ''Iovius'', was Roman emperor from 284 until his abdication in 305. He was born Gaius Valerius Diocles ...
all had the basic characteristics of mixed economies. After the collapse of the Western Roman Empire, the Byzantine Empire in its eastern part continued to have a mixed economy until its destruction by the Ottoman Empire. Medieval Islamic societies drew their primary material basis from the classical Mediterranean mixed economies that preceded them, and the economies of Islamic empires such as the Abbasid Caliphate dealt with their emerging, prominent capitalistic sectors or market economies through regulation via state, social, or religious institutions. Due to having low, diffuse populations, and disconnected trade, the economies of Europe could not have supported centralized states or mixed economies and instead a primarily agrarian feudalism predominated for the centuries following the collapse of Rome. With the recovery of populations and the rise of medieval communes from the 11th century onward, economic and political power once again became centralized. According to
Murray Bookchin Murray Bookchin (January 14, 1921 – July 30, 2006) was an American social theorist, author, orator, historian, and political philosopher. A pioneer in the environmental movement, Bookchin formulated and developed the theory of social ec ...
, mixed economies, which had grown out of the medieval communes, were beginning to emerge in Europe by the 15th century as feudalism declined. In 17th-century France,
Jean-Baptiste Colbert Jean-Baptiste Colbert (; 29 August 1619 – 6 September 1683) was a French statesman who served as First Minister of State from 1661 until his death in 1683 under the rule of King Louis XIV. His lasting impact on the organization of the countr ...
acting as finance minister for Louis XIV attempted to institute a mixed economy on a national scale. The American System initially proposed by the first United States Secretary of the Treasury,
Alexander Hamilton Alexander Hamilton (January 11, 1755 or 1757July 12, 1804) was an American military officer, statesman, and Founding Father who served as the first United States secretary of the treasury from 1789 to 1795. Born out of wedlock in Charlest ...
, and supported by later American leaders such as
Henry Clay Henry Clay Sr. (April 12, 1777June 29, 1852) was an American attorney and statesman who represented Kentucky in both the U.S. Senate and House of Representatives. He was the seventh House speaker as well as the ninth secretary of state, al ...
,
John C Calhoun John Caldwell Calhoun (; March 18, 1782March 31, 1850) was an American statesman and political theorist from South Carolina who held many important positions including being the seventh vice president of the United States from 1825 to 1832. He ...
, and Daniel Webster, exhibited the traits of a mixed economy combining protectionism, '' laissez-faire'', and
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
spending. After 1851, Napoleon III began the process of replacing the old
agricultural Agriculture or farming is the practice of cultivating Plant, plants and livestock. Agriculture was the key development in the rise of Sedentism, sedentary human civilization, whereby farming of Domestication, domesticated species created food ...
economy of France with one that was mixed and focused on
industrialization Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...
. By 1914 and the start of World War I, Germany had developed a mixed economy with government co-ownership of infrastructure and industry along with a comprehensive social welfare system. After the
1929 stock crash The Wall Street Crash of 1929, also known as the Great Crash, was a major American stock market crash that occurred in the autumn of 1929. It started in September and ended late in October, when share prices on the New York Stock Exchange col ...
and subsequent
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
threw much of the global economy into a severe economic decline, British economists such as John Maynard Keynes began to advocate for economic theories that argued more government intervention in the economy.
Harold Macmillan Maurice Harold Macmillan, 1st Earl of Stockton, (10 February 1894 – 29 December 1986) was a British Conservative statesman and politician who was Prime Minister of the United Kingdom from 1957 to 1963. Caricatured as "Supermac", he ...
, a British politician in the
Conservative Party The Conservative Party is a name used by many political parties around the world. These political parties are generally right-wing though their exact ideologies can range from center-right to far-right. Political parties called The Conservative P ...
, also began to advocate for a mixed economy in his books ''Reconstruction'' (1933) and ''
The Middle Way Middle Way is the term that Siddhartha Gautama used to describe the character of the path he discovered that leads to liberation. Middle way or Middleway may also refer to: *''Doctrine of the Mean'', a doctrine of Confucianism *Golden mean (philos ...
'' (1938). Supporters of the mixed economy included
R. H. Tawney Richard Henry Tawney (30 November 1880 – 16 January 1962) was an English economic historian, social critic, ethical socialist,Noel W. Thompson. ''Political economy and the Labour Party: the economics of democratic socialism, 1884-2005''. 2nd e ...
, Anthony Crosland, and
Andrew Shonfield Sir Andrew Akiba Shonfield (10 August 1917 – 23 January 1981) was a British economist best known for writing ''Modern Capitalism'' (1966), a book that documented the rise of long-term planning in postwar Europe. Shonfield's argument that plann ...
, who were mostly associated with the Labour Party in the United Kingdom. During the post-war period and coinciding with the Golden Age of Capitalism, there was general worldwide rejection of ''laissez-faire'' economics as capitalist countries embraced mixed economies founded on economic planning, intervention, and welfare.


Political philosophy

In the apolitical sense, the term mixed economy is used to describe economic systems that 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, diverges to a significant extent from an idealized economic model or ideology, the task of identifying it can become problematic, and 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 Private property is a legal designation for the ownership of property by non-governmental Legal personality, legal entities. Private property is distinguishable from public property and Personal property, personal property, which is owned by a s ...
or public ownership, toward capitalism or socialism, or a
market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...
or command economy in varying degrees.Vuong, Quan-Hoang
''Financial Markets in Vietnam's Transition Economy: Facts, Insights, Implications''
. , VDM Verlag, February 2010, 66123 Saarbrücken, Germany.


Catholic social teaching

Jesuit author
David Hollenbach Rev. David Hollenbach, S.J. (born October 6, 1942 in Philadelphia, PA.) is a Jesuit priest, professor, author, and moral theologian currently serving as the Pedro Arrupe Distinguished Research Professor of the Walsh School of Foreign Service at ...
has argued that
Catholic social teaching Catholic social teaching, commonly abbreviated CST, is an area of Catholic doctrine concerning matters of human dignity and the common good in society. The ideas address oppression, the role of the state (polity), state, subsidiarity, social o ...
calls for a "new form" of mixed economy. He refers back to
Pope Pius XI Pope Pius XI ( it, Pio XI), born Ambrogio Damiano Achille Ratti (; 31 May 1857 – 10 February 1939), was head of the Catholic Church from 6 February 1922 to his death in February 1939. He was the first sovereign of Vatican City fro ...
'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 labor, management, and the state working together through a pluralistic system that distributes
economic power Economic power refers to the ability of countries, businesses or individuals to improve living standards. It increases their ability to make decisions on their own that benefit them. Scholars of international relations also refer to the economic p ...
widely. Pope Francis has criticised neoliberalism throughout his papacy and encouraged state welfare programs for "the redistribution of wealth, looking out for the dignity of the poorest who risk always ending up crushed by the powerful". In '' Evangelii gaudium'', he states: "Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting." Catholic social teaching opposes both
unregulated capitalism Economic liberalism is a List of political ideologies, political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial wr ...
and state socialism. Subsequent scholars have noted that conceiving of
subsidiarity Subsidiarity is a principle of social organization that holds that social and political issues should be dealt with at the most immediate or local level that is consistent with their resolution. The ''Oxford English Dictionary'' defines subsidi ...
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 ''Noblesse oblige'' (; ; literally “nobility obliges”) is a French expression from a time when French (more specifically, Anglo-Norman) was the language of the English nobility, and retains in English the meaning that nobility extends beyo ...
''".


Fascism

Although fascism is primarily a political ideology that stresses the importance of cultural and social issues over economics, it is generally supportive of a broadly capitalistic mixed economy. It supports state interventionism into markets and private enterprise, alongside a
fascist corporatist Corporatism is a collectivist political ideology which advocates the organization of society by corporate groups, such as agricultural, labour, military, business, scientific, or guild associations, on the basis of their common interests. The ...
framework, referred to as a third position that ostensibly aims to be a middle-ground between socialism and capitalism by mediating labor and business disputes to promote national unity. 20th-century fascist regimes in Italy and Germany adopted large public works programs to stimulate their economies and state interventionism in largely private sector-dominated economies to promote re-armament and national interests. During World War II, Germany implemented a war economy that combined a free market with central planning. The Nazi government collaborated with leading German business interests, who supported the war effort in exchange for advantageous contracts, subsidies, the suppression of trade unions, and the allowance of cartels and monopolies. Scholars have drawn parallels between the American
New Deal The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. Major federal programs agencies included the Civilian Cons ...
and public works programs promoted by fascism, arguing that fascism similarly arose in response to the threat of socialist revolution and aimed to "save capitalism" and private property.


Socialism

Mixed economies understood as a mixture of socially owned and private enterprises have been predicted and advocated by various socialists as a necessary transitional form between capitalism and socialism. Additionally, several proposals for socialist systems call for a mixture of different forms of enterprise ownership including a role for private enterprise. For example,
Alexander Nove Alexander Nove, FRSE, FBA (born Aleksandr Yakovlevich Novakovsky; russian: Алекса́ндр Я́ковлевич Новако́вский; also published under Alec Nove; 24 November 1915 – 15 May 1994) was a Professor of Economics at the ...
'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 Eduard Bernstein (; 6 January 1850 – 18 December 1932) was a German social democratic Marxist theorist and politician. A member of the Social Democratic Party of Germany (SPD), Bernstein had held close association to Karl Marx and Friedric ...
advocated a form of a mixed economy, believing that a mixed system of
state-owned enterprise A state-owned enterprise (SOE) is a Government, government entity which is established or nationalised by the ''national government'' or ''provincial government'' by an executive order or an act of legislation in order to earn Profit (econom ...
s, cooperatives, and
private enterprise A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...
s would be necessary for a long period before capitalism would evolve of its own accord into socialism.Steger, Manfred B. ''The Quest for Evolutionary Socialism: Eduard Bernstein And Social Democracy''. Cambridge, England, UK; New York, New York, USA: Cambridge University Press, 1997. pg. 146. Following the Russian Civil War, Vladimir Lenin adopted the New Economic Policy in the Soviet Union; the introduction of a mixed economy serving as a temporary expedient for rebuilding the nation. The policy eased the restrictions of war communism and allowed a return of markets, where private individuals could administer small and medium-sized enterprises, while the state would control large industries, banks and foreign trade. The Socialist Republic of Vietnam describes its economy as a
socialist-oriented market economy The socialist-oriented market economy (Vietnamese: ''Kinh tế thị trường theo định hướng xã hội chủ nghĩa'') is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as a ...
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. The People's Republic of China adopted a socialist market economy, which represents an early stage of socialist development according to the Chinese Communist Party (CCP). The CCP takes the
Marxist–Leninist Marxism is a left-wing to far-left method of socioeconomic analysis that uses a materialist interpretation of historical development, better known as historical materialism, to understand class relations and social conflict and a dialect ...
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. In the early post-war era in Western Europe, social democratic parties rejected the
Stalinist Stalinism is the means of governing and Marxist-Leninist policies implemented in the Soviet Union from 1927 to 1953 by Joseph Stalin. It included the creation of a one-party totalitarian police state, rapid industrialization, the theory o ...
political and economic model then current in the Soviet Union, committing themselves either to an alternative 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 and a minority of essential utilities and public services under public ownership. As a result, social democracy became associated with Keynesian economics,
state interventionism Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting market failures and promoting the general welfare o ...
, and the welfare state. Social democratic governments in practice largely maintain the capitalist mode of production (
factor market In economics, a factor market is a market where factors of production are bought and sold. Factor markets allocate factors of production, including land, labour and capital, and distribute income to the owners of productive resources, such as wage ...
s,
private property Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property and personal property, which is owned by a state entity, and from collective or ...
, and
wage labor Wage labour (also wage labor in American English), usually referred to as paid work, paid employment, or paid labour, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labour power under a ...
) under a mixed economy, and pledge to reform capitalism and make society more egalitarian and democratic.


Typology


Mix of free markets and state intervention

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 Labour laws (also known as labor laws or employment laws) are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship between employee, ...
, a standardized welfare system, and
economic competition In economics, competition is a scenario where different economic firmsThis article follows the general economic convention of referring to all actors as firms; examples in include individuals and brands or divisions within the same (legal) firm ...
with
antitrust laws Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
. 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 The Nordic model comprises the economic and social policies as well as typical cultural practices common to the Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden). This includes a comprehensive welfare state and multi-level coll ...
practiced by the
Nordic countries The Nordic countries (also known as the Nordics or ''Norden''; literal translation, lit. 'the North') are a geographical and cultural region in Northern Europe and the Atlantic Ocean, North Atlantic. It includes the sovereign states of Denmar ...
, which combine free markets with an extensive welfare state. The
American School American School may refer to: Schools * American School (economics) * American School (Panama) * American School (Yemen) * American School of Correspondence * American School of Bombay * American School in Japan * American Schools and Hospitals A ...
is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century. It consisted of three core policy initiatives: protecting industry through high tariffs (1861–1932; changing to subsidies and reciprocity from 1932–the 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 by 1880. The 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 Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
, low inflation, low levels of unemployment, good working conditions, and 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.


Mix of private and public enterprise

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 can also refer to a mixture of state capitalism with private capitalism. Examples include the economies of
China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, Norway, Singapore, and Vietnam—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 enterprises. Following the Chinese economic reforms initiated in 1978, the Chinese economy has reformed its state-owned enterprises and allowed greater scope for private enterprises 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 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.


Mix of markets and economic planning

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's Goulash Communism, which 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 that 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.
Dirigisme Dirigisme or dirigism () is an economic doctrine in which the state plays a strong directive (policies) role contrary to a merely regulatory interventionist role over a market economy. As an economic doctrine, dirigisme is the opposite of ''lai ...
was an economic policy initiated under
Charles de Gaulle Charles André Joseph Marie de Gaulle (; ; (commonly abbreviated as CDG) 22 November 18909 November 1970) was a French army officer and statesman who led Free France against Nazi Germany in World War II and chaired the Provisional Government ...
in France, designating an economy where the government exerts strong directive influence through indicative 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 ''Les Trente Glorieuses'' (; 'The Glorious Thirty') was a thirty-year period of economic growth in France between 1945 and 1975, following the end of the Second World War. The name was first used by the French demographer Jean Fourastié, who ...
of profound economic growth.Gardner, Martin (1991). ''Whys of a Philosophical Scrivener''. St. Martin's Press. Green New Deal (GND) proposals call for social and economic reforms to address climate change and economic inequality using economic planning with market forces for the guiding of production. The reforms involve phasing out fossil fuels through the implementation of a carbon price and emission regulations, while increasing state spending on
renewable energy Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
. Additionally, it calls for greater welfare spending, public housing, and job security. GND proposals seek to maintain capitalism but involve economic planning to reduce carbon emissions and inequality through increased taxation, social spending, and state ownership of essential utilities such as the
electrical grid An electrical grid is an interconnected network for electricity delivery from producers to consumers. Electrical grids vary in size and can cover whole countries or continents. It consists of:Kaplan, S. M. (2009). Smart Grid. Electrical Power ...
. Within political discourse, mixed economies are supported by people of various political leanings, particularly the centre-left and centre-right. Debate reigns over the appropriate levels of private and public ownership, capitalism and socialism, and government planning within an economy. The centre-left usually supports markets but argues for a higher degree of regulation, public ownership, and planning within an economy. The centre-right generally accepts some level of public ownership and government intervention but argues for lower government regulation and greater privatisation. In 2010, Australian economist John Quiggin wrote: "The experience of the twentieth century suggests that a mixed economy will outperform both central planning and laissez-faire. The real question for policy debates is one of determining the appropriate mix and the way in which the public and private sectors should interact."


Criticism

Numerous economists have questioned the validity of the entire concept of a mixed economy when understood to be a mixture of capitalism and socialism. Critics who argue that capitalism and socialism cannot coexist believe either market logic or economic planning must be prevalent within an economy. In '' Human Action'', Ludwig von Mises argued that there can be no mixture of capitalism and socialism. Mises elaborated 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 as they would have to acquire
capital good The economic concept of a capital good (also called complex product systems (CoPS),H. Rush, "Managing innovation in complex product systems (CoPS)," IEE Colloquium on EPSRC Technology Management Initiative (Engineering & Physical Sciences Researc ...
s through markets, strive to maximize profits, or at the least try to minimize costs, and utilize monetary accounting for economic calculation. Friedrich von Hayek and Mises 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 Belloc called " the servile state". Classical and
orthodox Marxist Orthodox Marxism is the body of Marxist thought that emerged after the death of Karl Marx (1818–1883) and which became the official philosophy of the majority of the socialist movement as represented in the Second International until the Firs ...
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 The law of the value of commodities (German: ''Wertgesetz der Waren''), known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic ''The Poverty of Philosophy'' (1847) against ...
and
accumulation of capital Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form of ...
drive the economy or conscious planning and non-monetary forms of valuation, such as
calculation in kind __NOTOC__ Calculation in kind or calculation in-natura is a way of valuating resources and a system of accounting that uses disaggregated physical magnitudes as opposed to a common unit of calculation. As the basis for a socialist economy, it was ...
, ultimately drive the economy. From the Great Depression onward, extant mixed economies in the Western world are still functionally capitalist because the economic system remains based on competition and profit production.


See also

* Corporatism * Distributism * Political economy * Public–private partnership *
Social corporatism Social corporatism, also called social democratic corporatism, is a form of economic tripartite corporatism based upon a social partnership between the interests of capital and labour, involving collective bargaining between representatives of em ...
* Social credit * Third Way * Tripartisme *
Types of capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, priva ...


Sources and notes


Further reading

* Buchanan, James M. (1986) ''Liberty, Market and State: Political Economy in the 1980s'' New York University Press. * Buckwitz, George D. (1991) ''America’s Welfare State: From Roosevelt to Reagan.'' The Johns Hopkins University Press. * Derthick, Martha and Paul J. Quirk (1985) The Politics of Deregulation. Washington, D.C.: The Brookings Institution. * Gross, Kyle B. (1991) The Politics of State Expansion: War, State and Society in Twentieth-Century Britain. New York: Routledge. * Rosin, Kirk (1992). "Economic theory and the welfare state: a survey and interpretation". ''Journal of Economic Literature''. 30 (2): 741–803. A review essay looking at the economics literature. * Sanford Ikeda (1997). ''Dynamics of the Mixed Economy: Toward a Theory of Interventionism''. London: Routledge.


External links


Mixed economy
at '' Encyclopædia Britannica'' Online {{DEFAULTSORT:Mixed Economy Capitalism Economic ideologies Economic systems Political philosophy Social democracy Welfare economics Welfare state