Most countries adopt a mixed economy. A free market economy has its weaknesses, as does a command economy. As a result, mixing the two economic systems is a sensible choice. But, is it completely successful, try to conclude after reading the points below.
Characteristics of a mixed economy
In this system, companies and the government jointly run the wheels of economic activity. Thus, market forces and government decisions determine the production and distribution of goods and services in the economy.
Government-owned companies are a representation of government intervention. They usually operate in strategic sectors such as infrastructure, utilities and defense.
Here is a summary of the characteristics:
- The public and private sectors both play a role in economic activity
- Governments and individuals both have economic resources
- The existence of a joint sector, namely public-private partnerships
- Market forces prevail but are closely monitored by the government.
- The government does not have commercial interests, but rather social ones
- Market forces (demand-supply) and government intervention determine resource allocation and prices.
- Profit is the motive of business and welfare is the government’s motive in providing goods and services.
Among the existing economic systems, in my opinion, a mixed economy is the best. At least, the reason is that many countries choose to adopt it.
Each country has different mixed economic characteristics. Certain countries lean more towards a market economy, such as the United States and England. While others lean more towards command economies such as China, Venezuela and Argentina.
Apart from government-owned companies, intervention can also take the form of adopting economic policies. The government implements monetary and fiscal policies to ensure macroeconomic goals are achieved. Such policies are intended to avoid the adverse effects of business cycles, such as recessions and depressions.
Government regulations also seek to ensure that the economy operates close to efficiently. An example of this is through strict external policies such as pollution and antitrust regulations.