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What Are the Characteristics of a Mixed Economy?

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  • Last Modified Date: 17 October 2014
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A mixed economy is one in which there is a presence of both public and private sectors. While government agencies have a role in developing the financial system in this environment, so too does private enterprise, which includes businesses that may be owned by public investors. Primary characteristics of a mixed economy tend to include traces of capitalism, which encourages businesses to create their own wealth, in addition to socialism. With socialism, the government has control over the amount of resources that are distributed and the manner in which those funds and efforts are directed.

Some of the most developed countries in the world operate under a mixed-economy system. These regions still may face challenges in creating and maintaining opportunities, and it may be difficult to strike the ideal balance between government and private control. Nonetheless, economically advanced places have achieved some of the greatest breakthroughs that the world uses across many industries.

Other nations that are seeking to expand out of rural conditions might seek to create an environment where there are characteristics of a mixed economy. It can be especially overwhelming for a country that has relied largely on either the public sector or private businesses to integrate the traits of a mixed economy. A nation that has failed to grow a financial system adequately through a series of different approaches may determine that both federal and corporate involvement is needed in order for business and citizens to flourish as desired.

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Another of the characteristics of a mixed economy is the government being heavily involved with infrastructure development in a region. This could include the construction of public schools, highways, and local roads. A government is likely to use proceeds from the taxes charged to a country's citizens in order to finance such development. When public agency budgets become especially strained, however, the improvement of a nation's infrastructure could become delayed.

The investment of private capital into a country's roadway and building development could support the continuation of construction projects, and is included among the characteristics of a mixed economy. It is often large, institutional investors that become involved in funding building projects in a region because of the high costs associated with these projects. The participation of both public and private sectors in economic development leads to a greater probability for the creation of jobs and expansion. In a country that is still developing, the involvement of private business can also advance the integration of health-related initiatives, including water purification and medical procedures, for instance.

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miriam98
Post 4

@MrMoody - Actually I think the United States is a mixed economy too. A mixed economy just means that you have both public and private business.

The government is involved in construction projects here and so under that definition America is a mixed economy. I think that’s really all that it takes to qualify as such.

MrMoody
Post 3

@nony - Well you’re talking about whether infrastructure spending will really help the economy. That may seem intuitive but that whole notion is debatable, at least in terms of long term benefit. Short term there is likely to be some immediate gain, provided the projects can be implemented quickly. Governments are notoriously slow in implementation compared to the private sector.

It’s important to note however that all economies engage in infrastructure spending, whether they are mixed or free market economies. The difference is that I suspect in the free market economies there is probably a lot more involvement from private sector forces than in the mixed economy, where the government still plays with a heavy hand in my opinion.

nony
Post 2

@allenJo - I believe in capitalism too but I do believe that the government needs to be heavily involved in infrastructure spending. Our nation’s bridges and roads have become too worn over time and many of them are in real need of repair.

That’s why I support stimulus spending that focuses heavily on building our infrastructure. You have to realize that when the government invests in infrastructure it puts people to work, because they have to utilize the services of private contractors to get the job done. So it’s a win-win in my opinion.

allenJo
Post 1

China is definitely a mixed economy – a largely communist nation with capitalist business practices. China found out that the government could not control all the means of production and compete in the global marketplace and the former Soviet Union discovered the same thing.

I think countries invariably revert to a capitalist market structure when they see their command and control approaches fail; in my opinion, nature favors capitalism. It’s the free market, where an invisible hand guides and directs production instead of the government.

I think it works great and it’s the only system that has ever worked really. Of course I favor a pure capitalist economy, not one that is mixed.

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