A mixed economy is a system that combines features of both socialism and capitalism. Two examples of a mixed economy are the U.S and France where both private and public sectors co-exist and work towards economic growth. The private entities work for the maximization of profit whereas the government sector works for the welfare and benefit of all citizens. It is a blend of both socialist and capitalist economy and countries have adopted such an approach to accelerate the economic growth of countries.
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India too is a mixed economy and it has adopted this approach post-independence. The industrial policies implemented in the year 1948 and 1956 have helped the private and the public sector to co-exist. Also with the liberalization of the Indian economy, the opportunities for the expansion and growth of the private sector are enhanced. Also after the economic stagnation during the imperial rule, India has adopted policies for economic growth and lay the foundation for technological, scientific and industrial development.
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Listed below are the main advantages of a mixed economy:
Encourages the growth of the private sector:
The mixed economy provides an atmosphere that allows private sectors to grow. It leads to an increase in new opportunities and leads to the formation of capital within the country.
Citizens in a mixed economy can enjoy both economic and occupational freedom which exists in a capitalist system. Individuals can take what occupation to pursue and can take decisions regarding production and consumption.
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Optimum use of resources:
In a mixed economy, the public sector works for the benefit of the citizens whereas the private sector makes maximum use of resources for the maximization of profit.
The government takes measures to battle inflation and devises measures to control economic fluctuations.
Lesser economic disparity:
Here, the government takes measures to reduce economic disparity by implementing taxes on income and wealth. The Government provides subsidies to support low-income group and give facilities like free education and free medical facilities so that they can sustain alongside the high-income group.
There are also several disadvantages of a mixed economy which are as follows:
Lack of stability:
Some experts believe that the mixed economy lacks stability as the public sectors get maximum profit whereas the private sector is supervised and controlled.
Under this system, the private sector is believed to be over-regulated. Therefore, in a mixed economy both the sectors remain ineffective since one enjoys the freedom and the other is rigorously regulated.
Since mixed economies lack comprehensive planning so large sectors of the economy remain outside the government control
Under the mixed economy, the government sector lacks efficiency due to lower restrictions whereas the private sector underperforms due to excessive restrictions imposed in the form of control, license, and permits.
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The Threat of nationalism:
Mixed economies pose a constant threat of nationalization of private sector entities.
Another problem of the mixed economy is the money that is allocated to fund various government projects end up into the pockets of intermediaries leading to misuse and wastage of resources.
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