Mixed economy

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A mixed economy is an economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics.

There is not one single definition for a mixed economy, but relevant aspects include: a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include intervention for environmentalism and social welfare, or state ownership of some of the means of production).

For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies in states ranging from the United States to Cuba have been termed mixed economies.

History

The term "mixed economy" arose in the context of political debate in the United Kingdom in the postwar period, although the set of policies later associated with the term had been advocated from at least the 1930s. Supporters of the mixed economy, including R.H. Tawney, Anthony Crosland and Andrew Shonfield were mostly associated with the British Labour Party, although similar views were expressed by Conservatives including Harold Macmillan.

Critics of the British mixed economy, including Ludwig von Mises and Friedrich von Hayek, argued that what is called a mixed economy is a move toward socialism and increasing the influence of the state.

Philosophy

The term mixed economy was coined to identify economic systems which stray from the ideals of either the free market, or various planned economies and "mix" with elements of each other. As most political-economic ideologies are defined in an idealized sense, what is described rarely if ever exists in practice. Most would not consider it unreasonable to label an economy that, while not being a perfect representation, very closely resembles an ideal by applying the rubric that denominates that ideal. However, when a system in question diverges to a significant extent from an idealised economic model or ideology, the task of identifying it can become problematic. Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a perfectly even mix, mixed economies are usually noted as being skewed towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees.

Which economies are mixed?

There is not a consensus on which economies are capitalist, socialist, or mixed. It may be argued that the historical tendency of power holders in all times and places to limit the activities of market actors combined with the natural impossibility of monitoring and constraining all market actors has resulted in the fact that, as we understand a "mixed economy" being a combination of governmental enterprise and free-enterprise, nearly every economy to develop in human history meets this definition.

Elements of a mixed economy

The elements of a mixed economy typically include a variety of freedoms:

to possess means of production (farms, factories, stores, etc.)
to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
to sell (same as buy)
to hire (to create organizations that create wealth)
to fire (to maintain organizations that create wealth)
to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
to communicate (free speech, newspapers, books, advertisements, make deals, create business partners, create markets)
to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)

with tax-funded, subsidized, or state-owned factors of production, infrastructure, and services:

libraries and other information services
roads and other transportation services
schools and other education services
hospitals and other health services
banks and other financial services
telephone, mail and other communication services
electricity and other energy services (eg oil, gas)
water systems for drinking, agriculture, and waste disposal
subsidies to agriculture and other businesses
government-granted monopolies to otherwise private businesses
legal assistance

and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as:

welfare for the poor
social security for the aged and infirm
government subsidies to business
mandatory insurance (example: automobile}

and restricted by various laws, regulations:

environmental regulation (example: toxins in land, water, air)
labor regulation including minimum wage laws
consumer regulation (example: product safety)
antitrust laws
intellectual property laws
incorporation laws
protectionism
import and export controls, such as tarrifs and quotas

and taxes and fees written or enforced with manipulation of the economy in mind.

Relation to form of government

The mixed economy is most commonly associated with social democratic forms of government. However, given the broad range of economic systems that can be described by the term, most forms of government are consistent with some form of mixed economy.

Historic examples

American School (also known as the National System) is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century as the country's policies evolved in a free market direction. It consisted of a three core policy initiatives: protecting industry through high tariffs (1861-1932) (changing to subsidies and reciprocity from 1932-1970's), government investment in infrastructure through internal improvements, and a national bank to promote the growth of productive enterprises. During this period the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the first half of the 20th century .

Dirigisme is an economic policy initiated under Charles de Gaulle of France designating an economy where the government exerts strong directive influence. It involved state control of a minority of the industry, such as transportation, energy and telecommunication infrastructures, as well as various incentives for private corporations to merge or engage in certain projects. Under its influence France experienced what is called "Thirty Glorious Years" of profound economic growth.

Social market economy is the economic policy of modern Germany that steers a middle path between socialism and liberalism and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, public welfare and public services by using state intervention. Under its influence Germany has emerged from desolation and defeat to become an industrial giant within the European Union.

Modern U.S. economy

The U.S. is considered a mixed economy. Some examples of this include:

People can own their own businesses, but political leaders make policies concerning these.
The government controls the mail system.
The government controls most of the road networks.
Waste collection and treatment are usually provided as a service by the local government.
The government has a virtual monopoly on the provision of policing.
Intercity passenger rail (Amtrak) is a nationalized industry, as are almost all local trains.
All American airports are government operated but all American airlines are private.
The government tells manufacturers what to make if something is in need during war time.
The FDA bans certain drugs.
The government has created a minimum wage law.
The government provides social welfare payments to some citizens.
A sizable part of pre-college education is government-provided.

"Third way" politics

This section is about a political philosophy; for other uses, see Third way (disambiguation).

The Third Way, or Radical center, is a centrist political philosophy of governance that embraces a mix of market and interventionist philosophies. The Third Way rejects both socialism and laissez-faire approaches to economic governance, but chiefly stresses technological development, education, and competitive mechanisms to pursue economic progress and governmental objectives. Third way philosophies have been described as a synthesis of capitalism and socialism by its proponents.

Past invocations of a political 'third way' have included the Fabian Socialism, Keynesian economics, Franklin Roosevelt and Harold Macmillan's 1950s One Nation Conservatism. The third way has been criticized by some conservatives and libertarians who advocate laissez-faire capitalism. A "Third Way" approach has been adopted by some social democrats and social liberals in many Western liberal democracies.

Origins

The use of the term extends back at least as far, to when Pope Pius XI called for a Third Way between Socialism and Capitalism at the end of the 1800s. These ideas were implemented by both progressives and fascists in the early 20th Century.

The Third Way philosophy was developed in the 1950s by German ordoliberal economists such as Wilhelm Röpke, resulting in the development of the concept of the social market economy.

The term was later used by politicians in the 1990s who wished to incorporate Margaret Thatcher and Ronald Reagan's projects of economic deregulation, privatization, and globalization into the mainstream centre-left political parties (following the crisis of socialism after the fall of the Berlin Wall).

A leading defender of the spread of Third Way influence in modern democracies has been British sociologist Anthony Giddens. Giddens regularly expounds on Third Way philosophy through contributions to progressive policy think tank Policy Network. Robert Putnam, Ian Winter (Latham cites Winter's "Social Capital and Public Policy in Australia" on p. 13 of the Latham diaries), and Mark Lyon are amongst a range of academics who have recently contributed key academic theory behind Third-Way politics.

Examples

The Third Way is currently prominent in Europe, but has adherents in the Americas and Asia. It is endorsed by some European social democratic parties, as well as by some members of the Democratic Party of the United States (see below). Former Australian Prime Minister Paul Keating is often cited as a key proto-Third Way leader.

Australia

Under the centre-left Australian Labor Party from 1983 to 1996, the Bob Hawke and Paul Keating governments pursued many economic policies associated with economic rationalism, such as floating the Australian Dollar, privatisation of Qantas and Commonwealth Bank, reductions in trade tariffs, taxation reforms, changed from wage-fixing to enterprise bargaining, deregulated the banking system and and other economic deregulation.

United Kingdom

Former Prime Minister Tony Blair of the United Kingdom is cited as a Third Way politician. Blair is a particular follower of the ideas of Anthony Giddens.

Harold Macmillan's book The Middle Way, first published in 1938, is also written from broadly this centrist position.

United States

In the United States, Third Way adherents emphasize fiscal conservatism, some replacement of welfare with workfare, and a stronger preference for market solutions to traditional problems (as in pollution markets), while rejecting pure laissez-faire economics and other libertarian positions. The Third Way style of governing was firmly adopted and partly redefined during the Administration of President Bill Clinton.

After Tony Blair came to power in the UK Clinton, Blair and other leading Third Way adherents organized conferences to promote the Third Way in 1997 at Chequers in England. The Democratic Leadership Council are adherents of Third Way politics.

In 2004, several veteran U.S. Democrats founded a new Washington, DC organization entitled Third Way, which bills itself as a "strategy center for progressives.

Other

Other leaders who have adopted elements of the Third Way style of governance include François Bayrou of France, Gerhard Schröder of Germany, Ferenc Gyurcsány of Hungary, and Zafarullah Khan Jamali of Pakistan, whose book's preface was written by Anthony Giddens.

Criticism

In the 1920s, Ludwig von Mises, a libertarian Austrian School economist and classical liberal thinker, accused the "middle way" of mixing capitalism and socialism. In his book Liberalism Mises wrote, "There is simply no other choice than this: either to abstain from interference in the free play of the market, or to delegate the entire management of production and distribution to the government. Either capitalism or socialism: there exists no middle way. Advocates of laissez-faire capitalism continue to be staunch opponents of a mixed economy, the "third way." In 1990, after the fall of his country's communist government, Czechoslovakia's finance minister, Václav Klaus, declared, "We want a market economy without any adjectives. Any compromises with that will only fuzzy up the problems we have. To pursue a so-called Third Way is foolish. We had our experience with this in the 1960s when we looked for a socialism with a human face. It did not work, and we must be explicit that we are not aiming for a more efficient version of a system that has failed. The market is indivisible; it cannot be an instrument the hands of central planners. More recently, a critic of capitalist-socialist hybridization wrote, "Third-Way economics is merely another political trial balloon. The politicians are still simply trying to twist fattened, round socialism into a lean, square, free-market hole, mainly to solicit our vote.

Third way is sometimes described as an idea of former social-democrats which replaces socialism with capitalism and a minimum of socialism, and a strategy to bring the social-democratic parties back to power where they have lost elections. For example, Slavoj Zizek argues that the notion of the Third Way emerged as the only alternative to the victorious global capitalism and its notion of liberal democracy when the Second Way crumbled. Critics argue that third way politicians are in favour of ideas and policies that ultimately serve the interests of corporate power and the wealthy at the expense of the working class and the poor. Some also classify the Third Way as neosocialism or "neoliberalism with a social touch".

Sources and notes

Gill: "By 1880 the United States of America had overtaken and surpassed England as industrial leader of the world.: (from "Trade Wars Against America: A History of United States Trade and Monetary Policy" Chapter 6 titled "America becomes Number 1" pg. 39-49 - published 1990 by Praeger Publishers in the USA - ISBN 0-275-93316-4)

Lind: "Lincoln and his successors in the Republican party of 1865-1932, by presoding over the industrialization of the United State, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side...the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." (from "Hamilton's Republic" Introduction pg. xiv-xv - published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)

Lind: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism...The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods...The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." (from "Hamilton's Republic" Part III "The American School of National Economy" pg. 229-230 published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)

Richardson: "By 1865, the Republicans had developed a series of high tariffs and taxes thar reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded..."Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes...for ordinary expenses of Government." (from "The Greatest Nation of the Earth" Chapter 4 titled "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pg. 136-137 published 1997 by the President and Fellows of Harvard College in the USA - ISBN 0-674-36213-6)

Boritt: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leornard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate cariety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" (from "Lincoln and the Economics of the American Dream" Chapter 14 titled "The Whig in the White House" pg. 196-197 published 1994 by University of Illinois Press in the USA - ISBN 0252064453

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