Mixed economy

Source: Wikipedia, the free encyclopedia.

A mixed economy is variously defined as an

Soviet-type planned economy that has been reformed to incorporate a greater role for markets in the allocation of factors of production.[5]

The idea behind a mixed economy, as advocated by

public lands.[9] 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.[10][11]

About Western European economic models as championed by

public ownership,[13] usually around 15 to 20 percent.[14] In the post-war era, Western European social democracy became associated with this economic model.[15] As an economic ideal, mixed economies are supported by people of various political persuasions, in particular social democrats.[16] 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 was not a key feature or component of the welfare state.[17]


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

public policies in the market.[18]

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.[19]


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.

Ancient China, and the Roman Empire after Diocletian all had the basic characteristics of mixed economies.[26] 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.[27]

medieval communes from the 11th century onward, economic and political power once again became centralized. According to Murray Bookchin, mixed economies, which had grown out of the medieval communes, were beginning to emerge in Europe by the 15th century as feudalism declined.[30] In 17th-century France, Jean-Baptiste Colbert acting as finance minister for Louis XIV attempted to institute a mixed economy on a national scale.[31]


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.[39]

Political philosophy

In the apolitical sense, the term mixed economy is used to describe economic systems that combine various elements of

command economy in varying degrees.[40]

Catholic social teaching

Jesuit author David Hollenbach 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".[41] Hollenbach writes that a socially just mixed economy involves labor, management, and the state working together through a pluralistic system that distributes economic power widely.[42] 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".[43] 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."[44]

Catholic social teaching opposes both

noblese oblige".[45]



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.[46] 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 aimed to "save capitalism" and private property.[47]


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,

private enterprises would be necessary for a long period before capitalism would evolve of its own accord into socialism.[49]

Following the

Marxist–Leninist 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.[51]

In the early post-war era in Western Europe, social democratic parties rejected the

wage labor) under a mixed economy,[53][54][55] and pledge to reform capitalism and make society more egalitarian and democratic.[56]


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.

antitrust laws. Most contemporary market-oriented economies fall under this category, including the economy of the United States.[57][58] 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 markets with an extensive welfare state.[59][60]

The American School is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century.[61] 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.[62][63][64] 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, 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.[65]

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, 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.[66]

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.[67]

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

Thirty Glorious Years of profound economic growth.[65]

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. 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.[68]

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."[69]


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.[70]


the servile state".[73]

accumulation of capital drive the economy or conscious planning and non-monetary forms of valuation, such as calculation in kind, 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.[74]

See also

Sources and notes

  1. ^ Gorman, Tom. The Complete Idiot's 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. ^ 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.
  3. ISBN 9780195551273. Retrieved 12 November 2018.[need quotation to verify
  4. ^ Hendricks, Jean and Gaoreth 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".
  5. ^ a b Young, Greg. "Mixed Economy". Encyclopædia Britannica Online. Retrieved 30 December 2021. Alternatively, a mixed economy can emerge when a socialist government makes exceptions to the rule of state ownership to capture economic benefits from private ownership and free-market incentives. A combination of free market principles of private contracting and socialist principles of state ownership or planning is common to all mixed economies.{{cite web}}: CS1 maint: url-status (link)
  6. .
  7. . 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.
  8. ^ a b Pollin, Robert (2007). "Resurrection of the Rentier" Archived 12 April 2019 at the Wayback Machine (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."
  9. .
  10. ^ "Laissez-faire" Archived 1 October 2019 at the Wayback Machine. Encyclopædia Britannica Online. 2 March 2021. Retrieved 14 October 2022.
  11. ^ Wu, Yu-Shan (1995). Comparative Economic Transformations: Mainland China, Hungary, the Soviet Union, and Taiwan. Stanford University Press. p. 8. In laissez-faire capitalism, the state restricts itself to providing public goods and services that the economy cannot generate by itself and to safeguarding private ownership and the smooth operation of the self-regulating market.
  12. ^ "Mixed economy". Britannica.com. Retrieved 5 February 2022.
  13. .
  14. ^ Batson, Andrew (March 2017). "The State of the State Sector" Archived 12 November 2020 at the Wayback Machine. Gavekal Dragonomics. p. 4. Retrieved 19 August 2020. "While some may find these estimates low, they are not. Even in the statist 1960s–70s, SOEs in France and the UK did not account for more than 15–20% of capital formation; in the 1980s the developed-nation average was around 8%, and it dropped below 5% in the 1990s. SOEs' role in China is many times larger."
  15. . 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.
  16. ^ "Social democracy". Jason P. Abbot. Routledge Encyclopedia of International Political Economy. Ed. R. J. Barry Jones. Taylor & Francis, 2001. 1410
  17. . The welfare state emerged in the twentieth century as one institutional form of this socially protective response. In the 1930s, the responses of emerging welfare states to the Great Depression were to the immediate circumstances of massive unemployment, lost output, and collapse of the financial and trading systems. Planning was not a key element in the response to the crisis of capitalism. Instead, the character of welfare state intervention can best be described as an 'interventionist drift', reflecting the spontaneous, uncoordinated reactions of the protective response.
  18. . 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 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.
  19. . 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.
  20. .
  21. .
  22. .
  23. .
  24. .
  25. .
  26. .
  27. .
  28. .
  29. .
  30. .
  31. .
  32. ^ Fels, Rendigs (1961). Challenge to the American Economy: An Introduction to Economics. Allyn and Bacon. p. 39.
  33. .
  34. .
  35. .
  36. ^ .
  37. .
  38. .
  39. .
  40. VDM Verlag
    , February 2010, 66123 Saarbrücken, Germany.
  41. ^ Pius XI (15 May 1931). Quadragesimo Anno Archived 1 June 2020 at the Wayback Machine. Paragraph 79. Retrieved 12 August 2018. The papal text refers to "every social activity", not only to government.
  42. ^ Hollenbach, David (1984). "Unemployment and Jobs: A Theological and Ethical Perspective". In Houck, John; Williams, Oliver (eds.). Catholic social teaching and the United States economy: working papers for a bishops' pastoral. University Press of America. pp. 132–133.
  43. ^ "Pope: Taxation should favor wealth redistribution for public services". Vatican News. 31 January 2022. Retrieved 1 March 2022.
  44. ^ "Pope Francis understands economics better than most politicians". The Guardian. 27 November 2013. Retrieved 1 March 2022.
  45. ^ Denis O'Brien (2014). "Subsidiarity and Solidarity". In Booth, Phillip (ed.). Catholic social teaching and the market economy. The Institute of Economic Affairs. p. 454.
  46. ^ Scherner, Jonas (2006). "Industrial Investment in Nazi Germany: The Forgotten Wartime Boom". Archived 27 November 2021 at the Wayback Machine Yale University. Retrieved 14 October 2022.
  47. ^ Gupta, Dipankar (18 June 1977). "The Political Economy of Fascism". Economic and Political Weekly. 12 (25): 987–992.
  48. ^ Nove, Alexander. "Feasible Socialism: Market or Plan – Or Both". Archived 25 September 2017 at the Wayback Machine What Next Journal. Retrieved 14 October 2022.
  49. ^ 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.
  50. ^ "The New Economic Policy (NEP)" Archived 6 December 2022 at the Wayback Machine. Alpha History. Retrieved 2 March 2022.
  51. ^ "Socialist Market Economic System". Ministry of Commerce of the People's Republic of China. 25 June 2004. Retrieved 8 February 2018. 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 the 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
  52. ^ Adams 1993, pp. 102–103: "The emergence of social democracy was partly a result of the Cold War. People argued that if the Stalinist Soviet empire, where the state-controlled everything, showed socialism in action, then socialism was not worth having. ... The consensus policies of a mixed and managed economy and the welfare state, developed by the post-war Labour government, seemed in themselves to provide a basis for viable socialism that would combine prosperity and freedom with social justice and the possibility of a full life for everyone. They could be seen as a compromise between socialism and capitalism."
  53. ^ Miller 1998, p. 827: "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."
  54. ^ Jones 2001, p. 1410: "In addition, particularly since World War II, distinctions have sometimes been made between social democrats and socialists on the basis that the former have accepted the permanence of the mixed economy and have abandoned the idea of replacing the capitalist system with a qualitatively different socialist society."
  55. ^ Heywood 2012, pp. 125–128: "As an ideological stance, social democracy took shape around the mid-twentieth century, resulting from the tendency among western socialist parties not only to adopt parliamentary strategies but also to revise their socialist goals. In particular, they abandoned the goal of abolishing capitalism and sought instead to reform or 'humanize' it. Social democracy, therefore, came to stand for a broad balance between the market economy, on the one hand, and state intervention, on the other."
  56. ^ Weisskopf 1992, p. 10: "Thus social democrats do not try to do away with either the market or private property ownership; instead, they attempt to create conditions in which the operation of a capitalist market economy will lead to more egalitarian outcomes and encourage more democratic and more solidaristic practices than would a more conventional capitalist system."
  57. ^ "U.S. Economy - Basic Conditions & Resources" Archived 20 October 2017 at the Wayback Machine. U.S. Diplomatic Mission to Germany. "The United States is said to have a mixed economy because privately owned businesses and government both play important roles." Retrieved 24 October 2011.
  58. ^ (4)Outline of the U.S. Economy – (2)How the U.S. Economy Works. U.S. Embassy Information Resource Center. "As a result, the American economy is perhaps better described as a "mixed" economy, with the government playing an important role along with private enterprise. Although Americans often disagree about exactly where to draw the line between their beliefs in both free enterprise and government management, the mixed economy they have developed has been remarkably successful." Retrieved 24 October 2011.
  59. .
  60. .
  61. ^ "The Progressive Movement" Archived 23 May 2011 at the Wayback Machine. United States History. Retrieved 12 February 2011.
  62. Pugh, Martin.The Making of Modern British Politics.[page needed][ISBN missing
  63. ^ O'Brien, Robert; Williams, Marc. Global Political Economy.[page needed][ISBN missing].
  64. ^ See the following sources:
  65. ^ a b Gardner, Martin (1991). Whys of a Philosophical Scrivener. St. Martin's Press.[page needed]
  66. . 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 collaboration 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.
  67. ^ Fan, He (9 January 2015). "The long march to the mixed economy in China". East Asia Forum. East Asia Forum. Retrieved 9 February 2018.
  68. ^ "The Green New Deal Explained" Archived 27 April 2022 at the Wayback Machine. Investopedia. Retrieved 2 March 2022.
  69. ^ Zombie Economics: How Dead Ideas Still Walk among Us Archived 6 December 2022 at the Wayback Machine, John Quiggin, Princeton University Press, 2010, p. 78. The author made this statement in his chapter which is sharply critical of the strong version of "The efficient-market hypothesis", especially as it pertains to financial markets.
  70. ^ "Mixed Economic System" Archived 1 May 2022 at the Wayback Machine. Investopedia. Retrieved 1 March 2022.
  71. . 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.
  72. . 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 labor, 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.
  73. ^ Gardner, Martin (1991). Whys of a Philosophical Scrivener. St. Martin's Press. p. 126.
  74. ^ Mattick, Paul (1969). "State-Capitalism and The Mixed Economi". The Limits of the Mixed Economy. Boston, Massachusetts: Extending Horizons Books/Porter Sargent Publisher. Retrieved 17 January 2014 – via Marxists Internet Archive. 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.

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