Merits and Demerits of Mixed Economy
Merits and demerits of Mixed Economy
Till recently, the world knew only two main economic systems, viz., capitalism and socialism. But, in recent years, a new system lying midway between the two has been taking shape. It is called 'Mixed Economy' or the "Middle-of-the-Road" economic system. It is neither wholly capitalistic nor wholly socialistic; on the other hand, it is a mixture of 'he two. Under it, the economy has both the public and the private sectors existing and functioning side by side and there is the joint responsibility of the individual enterprise and the State to undertake the entire work of production and distribution. The public sector stands for the socialistic element in the economy and the private sector for the free-enterprise element in it.
This trend is observable in practically all the capitalist countries. In the United Kingdom, the Bank of England and the steel industry were nationalized after World War II. In the U.S.A., the staunch supporter of free enterprise, about l/5th to l/4th of the Gross National Product is disposed of by the public sector. Most countries of Western Europe have also, in recent years, been moving towards mixed economy.
This trend has been all the more pronounced in the case of underdeveloped countries like India which have embarked on ambitious programmes of economic development.
Accordingly, in its Industrial Policy statements made in 1948 and 1956, the Government of India has divided industries in the following three categories:—
1. Special liability of the State, such as atomic energy, armaments, railways, mineral oils, iron and steel, generation and distribution of electricity;
2. Industries which will be gradually State-owned. The State will take the scheme in instituting new enterprises in such industries, but in them private venture will be expected to complement the attempt of the State, e.g., machine tools, fertilizers, road and sea transport, aluminum;
3. Industries left to the inventiveness and venture of the private segment. All the remaining industries are included in this category. However, in respect of these industries, the private sector will function in agreement with, the programmes created in the consecutive five-year plans and subject to rules by the State under the Industries (Development and Regulation) Act of 1951. It will be seen from the above classification of industries that India has adopted a system of mixed economy, although it has declared democratic socialism as its aim. Obviously, it is not feasible to socialize all means of production at a single stroke. Thus, mixed economy, for India and similarly for other developing countries, is the most practical proposition under the circum stances.