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What Types of Countries Have a Mixed Economy?

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Nearly any sort of nation may have a mixed economy. A mixed economy blends together elements of private enterprise and collective economic action and falls between the two poles of pure capitalism and pure socialism. Nations such as Norway and Germany are balanced near the middle of this spectrum and are some of the best examples of this style of economy, but both the United States and the People’s Republic of China could legitimately be said to have mixed economies. This sort of economic organization is most often seen in democracies, but a mixed economy may exist under many other types of political system as well.

The idea of the mixed economy is a product of the industrial age. Earlier societies featured different economic structures and arrangements, often based on custom, tradition, religion, or other factors that had little to do with either organized political life or economic forces. Industrialization unleashed tremendous productive forces in the world but also led to misery and hardship. Nations attempted to make the most of the productive forces, while limiting the suffering of ordinary people.

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Bismarck’s Germany is a good example of an early attempt to create a mixed economy. The German Empire’s economic system was basically capitalist, and wealthy industrialists such as the Krupp family became tremendously wealthy. As a form of insurance against a revolution, Bismarck’s government stepped in to regulate working conditions and to fund welfare benefits in an effort to make the lives of workers easier. The German government also oversaw and supported large industrial enterprises, such as the creation of a national railroad system.

In the modern world, mixed economies are very common in democratic societies, although the balance between public control and free enterprise varies widely. Norway has a long tradition of offering a strong social safety net but still protecting property rights and fostering a capitalist economy. The United States has generally shown a stronger commitment to a capitalist economic system but still uses government regulation to limit the marketplace to some degree and provides some services on a social basis rather than through the marketplace.

A non-democratic society may make use of a mixed economy as well. Modern China is a good illustration of this. In the last years of the 20th century, China opted to make use of market economics to foster economic growth and development. The Communist Party retained absolute control over political life in the nation, however, and also kept several types of economic controls in place.

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anon302346
Post 6

@Titan62: That "experiment" is cold war propaganda tossed at high-school students in the 50's and 60's.

backdraft
Post 5

Its interesting to listen to the economic debate that has been raging in this country over the last few years and look at how naive people are about the benefits of a mixed economy. In tough times people pull towards the extremes and we have seen people advocate for both completely free markets and completely collectivized markets. There are major pitfalls to both these approaches.

Adam Smith, the grandfather of free market economics understood as well as anyone that there needs to be control placed on the market or else it will just destroy itself. No nation has an entirely free market, it is a ridiculous idea. All games have rules.

But collectivized economies like what has been

present in communist nations are no more appealing. In many cases these have collapsed under their own weight and failed to produce innovation and efficiency. Competition is a big motivator but when everyone has an assigned role it takes out the incentive to improve. We need both approaches, public and private. Getting the mix right is the tricky part.
jmc88
Post 4

In my economics class, we have been talking a lot about the different types of economies that exist. Our professor challenged us over the next couple of weeks to come up with as many beneficial characteristics of a mixed economy as we can.

I have come up with a couple so far. I think the best one I have is that a mixed economy is needed for things like public goods. Those are things like national parks or national defense. If we had a true capitalist society, we probably wouldn't be able to have things like public lands, because people probably wouldn't be willing to pay the cost to purchase lands and keep them accessible to the general public.

Along the same lines, people can say what they want about being patriotic and supporting the country, but if we didn't force people to pay taxes that went toward national defense, we wouldn't have a military. They tried the same in early American history, where each state was supposed to send volunteer militia members for a national army, and it just didn't happen. Government has to step in and make people pay for their protection through taxes, otherwise, people wouldn't pay on their own volition.

That is my main idea. I would be curious to hear what other people think about this topic.

titans62
Post 3

@TreeMan - Related to your last thought, I read a story not too long ago where a college professor was teaching his class about the advantages and disadvantage of a mixed economy or something along those lines, and a majority of the students felt that socialism was the way to go, because everyone should be equal.

The professor did an experiment where he ran the class like a socialist society, and whatever the average exam grade was, everyone in the class got. At first, the grades were Bs, and then the hard working students got discouraged and stopped working as hard. Eventually the grades went from Ds and then to Fs. According to the story, everyone in the class failed

according to the system. I don't know if the story is true or not, but at the very least, it is a good illustration (however simplified) of the biggest criticism against a purely socialist economy. To top it all off, it's pretty humorous, as well.
TreeMan
Post 2

@Izzy78 - I think you hit the nail on the head. There are very few societies that have been able to succeed with a pure system one way or the other. To me, the real advantage of a mixed economy is that you can let people make a lot of their own decisions through capitalism, but then you can correct certain problems and market failures by government intervention like socialism would do.

I am certainly no expert on socialism, and there aren't really a lot of examples to look at, but I know one of the big problems is that there are really no incentives for individuals to work harder than they have to. With capitalism, there is this idea

that you can be as successful as you want as long as you dedicate yourself and work hard. That's only partially true, of course, but with socialism everyone is given equal distributions, so there is no way to get "ahead of the curve" by working hard.
Izzy78
Post 1

I think, from what I know, mixed economies are really the only way to do things. If you have purely a capitalist or socialist economy, you end up with a lot of problems eventually that are a drain on society as a whole.

I think that is what a lot of the protest movements in the US in 2011 were about. A lot of people think that there are too many people that are too wealthy, and that there needs to be a little bit more distribution of the wealth around. I guess, theoretically, the ability of some people to get extremely wealthy while some people are poor is just one of the disadvantages of a mixed economy or

capitalism in general, depending on what you call the United States.

I am not really all that familiar with socialism, but I think it would be a lot harder for a socialist society to function efficiently. There would just be too much need for regulation of different industries. Does anyone else here know more about the problems or benefits of socialism.

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