MIXED ECONOMY SYSTEM

BY
AMIRUL DZAKY CEMERLANG
PUTRA & OMER ALI IBRAHIM

ECONOMICS /IFB1054
What’s in this Article
 What is a mixed economic system?
 What are the policies of a mixed economy system?
 How did the mixed economic system develop?
 What are the advantages and disadvantages of a mixed economic system?

Purpose
 Knowing how the development of the mixed economic system so far
 Know the characteristics of these economic systems.
 Knowing the advantages and disadvantages of the economic system.

Hopefully this paper can be useful as one of the information or literature review material to
briefly know the basics of economics. This paper can also be used to add to our knowledge base in the
basic knowledge of economics and the development basis for other economic materials.
Mixed Economy System
A mixed market economy is a combination of market and centralized economic systems,
where the government and the private sector interact with each other in solving economic
problems.
According to Griffin, there is not a single country in the world that actually implements a
market or planned economy, not even a country like the United States. Although known to be very
free, the United States government still issued several regulations that limited economic activity.
For example the prohibition to sell certain goods to minors, controlling advertising (advertising),
and others. The same applies to planned economies. Currently, many Eastern Bloc countries
have carried out privatization (change the status of government companies to private companies).
Mixed Economic System is generally established in developing countries. In this case the
private sector and the government are equally recognized. This means that in addition to the
private sector, there is also a state planning agency that plans the direction and development of
the economy.
The mixed economy system is a market economy system and is centralized, where the
government and the private sector interact with each other in solving economic problems. The
characteristics of a mixed economy system are: It is a combination of a market economy system
and a centralized system. Capital goods and vital resources are controlled by the government.
The government can intervene by making regulations, setting fiscal, monetary policies, assisting
and supervising private activities..

Values and Principles

The characteristics of a mixed economic system are as follows:
1. There is Goverment intervention
The reason for the need for government intervention
 Prevent big companies from influencing political and economic policies
 Preventing (joint) labor organizations from pressuring employers in
determining the price of goods
 2. Capital goods and vital resources are owned by the government.
3. The government can intervene by making regulations, establishing fiscal and monetary
policies, assisting and supervising private activities.

4. The role of the government and the private sector is balanced in economic activities.

5. The government's role is to make regulations, establish fiscal, monetary policies, assist and
supervise private sector activities.
6. This system varies from one country to another, depending on the country's economic
situation.
The mixed economic system is a combination of the capitalism system and the
socialism system, which draws a middle line between freedom and control, which means
also the middle line between the absolute role of the state/collective and the prominent role
of the individual. the situation and the environment is very giving color to the system blend /
mixture.

Objectives and Policies

Resource Ownership Government and private

Price The Government can intervene

Competition Open to private industry

Individual Ownership Yes

The application of a mixed economic system will reduce the various weaknesses of
the market economic system and is aimed at improving the welfare of the people. France is
a country with a mixed economic system. For hundreds of years, France combined socialism
policies with a market economy. The banking, automobile, aviation, steel and rail industries
were run as state property. Meanwhile, industries that are not so vital are controlled by the
private sector. Over the last two decades, France has begun to release state-owned
companies to the private sector through privatization.
The Development of a Mixed Economic System
These days, no country is purely embracing a command economy system or a
market economy system. All countries run an economy between a market economy and a
command economy. In other words all countries currently run mixed economies. But some
are leaning towards a command economy (China and Russia) and some are leaning
towards a Market economy (United States, Western Europe, Japan).
Mixed economic systems are generally applied by develop countries or Third World
countries. Some of them are quite consistent in concocting their mixed recipes; in the sense
that the level of capitalism is higher (eg. the Philippines), or the weight of socialism is always
greater (eg. India). Many developing countries are also faltering in concocting a mixture of
these two systems. The mixed economic system he applies is like a pendulum (pendulum
wall clock); sometimes it tends to be capitalistic, while at other times it tends to be socialistic,
following the regime in power. It should be noted that when communism was still victorious,
not all countries that implemented a socialism economic system were communist countries.
Likewise, a number of Scandinavian countries on the European mainland, despite their
liberal-democratic political system, implement an economic system of socialism. It's just that
socialism in liberal-democratic countries is not exactly the same as socialism in Eastern Bloc
countries.
A mixed economic system with controlled competition seems to be the right
economic system to manage the World economy. The swift currents of globalization along
with the dissolution of a number of major communist countries with a socialist economic
system have led some of countries to be dragged into the currents of capitalism..
Developing countries except Cuba, China, North Korea and several others, can
basically be classified as adherents of a mixed economic system, capitalism and socialism.
The level of private ownership of resources still exists side by side with the main ownership
by the government (the State) as well as participation in economic activities. Resources are
often shared to serve public and private interests. A number of countries such as Brazil,
Mexico, Lebanon, Kenya, Taiwan and South Korea have a fairly large private sector. While
other countries such as Peru, Ecuador, Zaire, Tanzania, Uganda, India, Algeria, Libya,
Egypt, and Bangladesh have a larger and more powerful state sector. Overall, governments
in third world countries play a much more decisive role in all areas of the economy than
governments in more developed capitalist societies.
 Another major element of a mixed economy in developing countries is the alignment
of resources and allocation of production by the market at prices determined by the
government and the existence of centralized planning guided by the overall economic
activity managed by the government or the state. So most developing countries have
combined the characteristics of a planned socialism economy and a capitalism market
economy. However, the results are often unsatisfactory.
As has been pointed out by leading Asian economists. In many ways such a choice a
mixed economy has combined the worst, not the best, of capitalism and socialism. This often
prevents developing countries from using economic incentives based on honesty for the
good and implementing a price system in order to achieve a level of efficiency as in the
capitalist system, otherwise equality as in the socialist system. In reality there is quite a lot of
control. inefficient administration and deviations from the prevailing price provisions. At the
same time, the choice of a mixed economy has prevented the peoples of developing
countries from pursuing their goals in the framework of a truly socialistic economic system,
because the institutions of a mixed economy are often more capitalistic than the other way
around. Therefore, in the end they often fall between two systems, namely combining weak
economic incentives with bureaucratic socialist incentives.
The advantages of a mixed economic system
 Distribution of goods and services will be provided to places where they are most needed. So that
it is able to affect the price and the level of supply and demand in the market.

 A mixed economic system can provide benefits to product producers or producers who are able
to create efficiencies in their business. This means that consumers can get good value or service
for every money they spend

 A mixed economic system can also encourage innovation to meet consumer needs more
efficiently, creatively, and affordably.

 The mixed economic system is also able to minimize losses that come from the market economy
mechanism. This is because the market economy can ignore other fields such as defense,
technology, and aerospace. In this case, the government plays an important role and allows for
rapid mobilization to prioritized areas.

 By using a mixed economic system, a country's economic development tends to move faster.
This happens because of free competition which will create many variations of products that
appear on the market with good quality and product details. Coupled with the development of
technology.

Disadvantages of a mixed economic system

A mixed economic system can also bear all the disadvantages of other types of economy,
depending on which characteristics the mixed economic system emphasizes. For example, if the
market has too much freedom, it can leave the less competitive members of society without
government support. Government industrial center planning can also create problems. The
defense industry can be a government-subsidized monopoly or oligarchy system. That could
increase the country's debt, slowing economic growth in the long run. Successful businesses can
lobby the government for more subsidies and tax breaks. The government can protect the free
market in such a way that it is not sufficiently regulated. For example, a business that is too big to
fail can be bailed out by the government if it starts to go bankrupt.

The disadvantages of this economic system are as follows:

 If the degree of freedom that occurs in the market mechanism is too large. So it is likely that
less innovative producers will be left behind without government support
 In a mixed economic system, the government has more responsibility in regulating all
economic activities than the private sector.
 The existence of centralized industrial planning created by the government can also create
problems. For example, an industry that is engaged in the defense sector, where the
industry has a monopolistic nature. So it is feared that it will increase government debt and
slow down the pace of the economy in a fairly long period of time.
 With the implementation of this mixed economic system, the private sector cannot maximize
their profits. This is because there is intervention from the government.
 Although the government plays an active role in this mixed economic system, economic
problems such as inflation and unemployment cannot be avoided.
 Mixed economic systems tend to have slower economic growth rates than liberal economic
systems.
 The existence of a system of limiting production sources owned by the government and the
private sector will be difficult to determine.
 Equitable income that is realized in the field will be difficult to do.
Examples of Mixed Economy System
Share of government spending as a % of GDP

 Iceland (57%)
 Sweden (52%)
 France (52.8%)
 United Kingdom (47.3%)
 United States (38.9%)
 Russia (34.1%)
 India – (27%)
 China – (20%)
 Hong Kong (18.6%)

All the above economies are mixed. The government manages a section of the economy, and
private firms and individuals operate the rest.

There are different degrees of state intervention. European economies such as Sweden and
France have a generous level of social security spending; in western Europe, education and healthcare
are free at the point of use. However, in the US, government spending as a share of GDP is lower, but
health care has to be paid for.

As economies develop, the government often take a higher share of total spending. Developed
countries, such as in Western Europe, often choose to provide state welfare support, and greater
government regulation of business and the environment. Developing economies, such as Cameroon
and Uganda have government sector which spends less than 20% of GDP
Conclusion
The mixed economic system is a combination of the capitalist system and the socialist
system, which draws a middle line between freedom and control, which means also the middle
line between the absolute role of the state/collective and the prominent role of the individual. the
situation and the environment is very giving color to the system blend / mixture
Mixed Economic System is generally applied to developing countries. In this case the
private sector and the government are equally recognized. This means that in addition to the
private sector, there is also a state planning agency that plans the direction and development of
the economy. Where a mixed economic system has the following characteristics:

1. There is Government Intervention

The reason for the need Goverment intervention
 Prevent big companies from influencing political and economic policies
 Prevent (joint) labor organizations from pressuring employers in determining the price of
goods
2. Capital goods and vital resources are controlled by the government.

3. The government can intervene by making regulations, setting fiscal, monetary policies,
assisting and supervising private activities.
4. The role of the government and the private sector is balanced in economic activities.

5. The role of the government is to make regulations, establish fiscal, monetary policies, assist
and supervise private sector activities.
6. This system varies from country to country, depending on the economic situation of the
country concerned.