Mixed Economy Pros and Cons List

What is a mixed economy? It is an economic system that features the characteristics of both socialism and capitalism. This system provides a level of private economic freedom in the use of capital and seeking profit, but it also allows the government to interfere in economic activities in order to achieve social goals. The government will also monitor profit levels and is involved in the planning of resources. It can redistribute wealth by taxing the private sector, and may nationalize companies that go against the public good. Many countries use the mixed economic system, such as the United States, the United Kingdom, France, China, Russia, and Sweden. These countries’ economies are considered to be some of the biggest in the world, so does this mean that a mixed economy is the most effective system? Before you answer that question, consider the benefits and disadvantages of a mixed economic system.

List of Pros of a Mixed Economy

1. It allows a more equal amount of control.
Because the government has less control over the private market, companies can expand and thrive more freely. And since the private sector will take care of the private economy, the government can focus on public facilities and services, such as schools, libraries, hospitals, roads and social security.

2. It permits private businesses to grow on its own.
Companies have the freedom to hire who they want, terminate who they want, dictate the path of their business growth, and choose their own management method.

3. It makes the government a more reliable watchdog.
Since the government won’t meddle with business processes, they can instead focus on being a referee among companies. They can monitor the practices and regulations of businesses and make sure these are beneficial to the economy and the whole nation.

List of Cons of a Mixed Economy

1. It gives the government opportunities to interfere excessively.
Critics of mixed economic systems argue that since governments are influenced by short-term political factors, they may meddle too much in the affairs of the private market in order to meet their own goals. Also, Libertarians believe that a government doesn’t know how to manage an economy properly so it shouldn’t be involved in economic affairs.

2. It risks the balance between economic freedom and wealth equality.
Some opposing parties to a mixed economy believe that this system is the reason why there is an unbalanced distribution of wealth and resources. This is why there is a lack of social mobility and a growing spread of poverty.

3. It can increase taxes and limit companies.
With anti-trust and monopoly laws in place, the government can limit the size of companies, stunting their goals to grow or expand. Aside from that, the government can impose heavy taxes on businesses in order to gain more resources for other economic projects. This means workers will also be heavily taxed, resulting to lower net income and demotivation. This can cripple the commercial sector and limit the opportunities for employees.

Do you believe that a mixed economy is the most effective and fairest system available today? If not, what could be the best alternative to ensure there is a balance between the private sector and the government and there is equal opportunity for growth for everyone?