Download Key Features of a Mixed Economy.

Key Features of a Mixed Economy.
Co-existence of public and private sectors:
Both public and private enterprises exist in this economic system. The role and areas of both the
sectors arc well defined.
In the mixed economy the two sectors are not rivals. The two sectors are partners in the process of
development, because for the efficient working of this system the co-operation between the two
sectors is necessary.
The public sector is government owned organisations that are used to provide a service to the public.
The private sector is expected to supplement the efforts of public sector and to take advantages of
investment opportunities enhanced by public enterprises.
Economic planning:
Generally a mixed economy is a planned economy. Public sector enterprises have to work according
to a definite plan to achieve certain predetermined aims and objectives. Similarly the private sector is
not left to develop in its own way.
The growth of private sector is also regulated through various controls and incentives to achieve the
objects of plans.
To ensures faster economic growth, the developmental programmes of both the sectors are
coordinated in such a way that growth in one sector complements the growth in the other sector.
Division of industrial undertakings:
There is division of industrial enterprises in a mixed economy. The division of industrial
sector may differ from economy to economy. Generally, the industrial economy is divided
into following:
(i) Exclusively State Monopoly. In it same strategic and basic industries are included.
(ii) Private Sector Industries. In it industries of lesser importance are included such as
consumer goods industries, small scale industries, etc.
(iii) Joint Sector Industries. The industries included in this sector are developed jointly by
public and private sector.
(iv) Common Industrial Sector. Both public and private sector can establish industrial units in
this sector.
Existence of social welfare and private profit motive:
In mixed economy public sector works as the principle of social welfare motive. Public sector
tries to reduce regional economic inequalities and to increase employment opportunities.
The basis of price policy of public sector is social welfare instead of private profit. Whereas
the operations and price policy of private sector is guided by private profit motive.
But the private profit motive is controlled by government through fiscal and monetary policies,
direct controls, etc.
Individual freedom:
The people have freedom of consumption and to choose their occupations in this economic system.
Private entrepreneurs are to choose technique of production.
From the above discussion, it is clear that mixed economy is a marriage between capitalism and
socialism.
It is an attempt to have the merits of both capitalism and socialism Therefore, it is said and rightly too
that mixed economic system a golden path between capitalism and socialism.
Advantages:
•
•
•
A mixed economy can create greater equality and provide a ‘safety net’ to prevent people
living in absolute poverty. At the same time, a mixed economy can enable people to enjoy the
financial rewards of hard work and entrepreneurship.
Mixed economies allow many more freedoms than command economies, such as the
freedom to possess the means of production; to participate in managerial decisions; to buy,
sell, fire, and hire as needed; and for employees to organize and protest peacefully.
Mixed economies have a high level of state participation and spending, leading to tax-funded
libraries, schools, hospitals, roads, utilities, legal assistance, welfare, and social security.
Disadvantages:
•
•
•
Heavy taxes reduce incentives to work hard or make profits
Less efficient than private sector
Excessive control over business activity can add costs and discourage enterprise