Main Features of Mixed Economy
Main Features of Mixed Economy
Having understood the meaning of mixed economy, we are now in a position to bring out the main features or characteristics of such an economy. It will also be clear from these characteristics how a mixed economy functions. The following are the main characteristics of a mixed economy:
(i) Co-existence of the Public and Private Sectors. The chief characteristic of a mixed economy is that in this economy both public as well as the private sector work mutually. They co-exist. Generally, the basic industries, the industries concerned with the production of defence equipment, atomic energy, engineering industries, etc., are put in the public sector. On the other hand, the consumer goods industries, small and cottage industries, agriculture, etc., are generally given to the private sector. It may be borne in mind that the government does not work against the private sector. On the contrary, the government helps and encourages the private sector by providing them several incentives and facilities so that the industries in the private sector are able to develop properly and make the country's economy efficient and strong.
(ii) Role of Price structure and Government Directives. Another characteristic of mixed economy is that it is operated both by the price system and government directives. So far as the public sector is apprehensive financial decisions linking to prices, manufacture and asset are made by the management or the system selected by the government. But the private sector in the mixed economy is operated by price-mechanism.
(iii) Government Regulation and Control of Private Sector. In a mixed economy, the administration implements required methods to control and control the private sector, so that it may work in the interest of the state rather than completely for profit making motives. For this purpose, it introduces the licensing system according "to which government approval or license is essential for setting up a factory. If the government considers that in a certain industry already there is excessive investment or excess capacity, no new licenses are issued for setting up factories in that industry. Licensing system is the instrument by which the government controls and regulates industrial investment and output. The government also controls and regulates the private sector through appropriate monetary and fiscal policies. For this purpose, the government gives rebates and tax concessions and credit facilities at low and reasonable rates so that the private entrepreneurs are induced to invest in those industrial lines.
(iv) Consumers Sovereignty Protected. In a mixed economy, the sovereignty of the consumers is protected. Like socialism, the mixed economy does not put an end to consumer's sovereignty. It is clear that in spite of some restrictions imposed by the government, the consumers are free to purchase the goods they like. It is their demand or preferences which guide production in the private sector.
(v) Government Protection of Labor. In a mixed economy, government protects the weaker sections of society especially labor. That is, it saves labor from abuse by the capitalists. In the developed countries, in the beginning of Industrial Revolution, the greed and selfishness of the factory owners inflicted untold hardships on male labor, women and children. Social conscience was roused on seeing the pitiful and miserable working and living conditions of such labor. The government realized its responsibility for protecting labor from exploitation by industrialists and factory owners.
(vi) Reduction of Economic Inequalities. Extreme inequalities of income reduce social welfare. Income inequality creates inequalities of opportunities for education and training in favor of high-income groups. The extreme inequalities of income create class distinctions and generate class-conflict which splits the whole society into two-warring camps—the rich and the poor or the 'haves' and the 'have-nots'. The rich exploit the poor. For this purpose, government levies progressive taxation, wealth tax, death duties, gift tax, etc. On the other hand, free education, free medical aid and old-age pensions, for the poor, stipends for poor students are some of the remedies adopted for distributing the extra income of the rich among the poor.
As a result of the above-mentioned measures which have been adopted by the governments of different countries like the U.S.A., the U.K., Norway and Sweden, inequalities of income and wealth have been some-what reduced. The Government of India also has decided to introduce a socialistic pattern of society and for that purpose reduce inequalities of income and wealth. This is a major objective of our Five-Year Plans. But so far the Government has not succeeded in achieving this desirable objective. In fact, it is said that in India economic inequalities have increased instead of decreasing in the planning era. The fruits of economic development are concentrating in the hands of a few rich people. Our Government is now fully seized of the problem of growing economic inequalities and it may be hoped that in future strong measures will be adopted for reducing economic inequalities. In this way, it will be fulfilling one of the main purposes of a mixed economy.
(vii) Control of Monopoly. In a mixed economy, the government tries to control and regulate monopolies. The monopolist uses his monopoly power to exploit the consumers. He fixes a price which is above the marginal cost of production and in this way reduces consumers' welfare. Such a price-output policy results in misallocation of productive sources of the society. Excessive profits made by monopolies result in accentuating economic inequalities in the country. Moreover, monopoly creates unemployment by reducing output and thus hampers-industrial growth.