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) Cu-cxix tenure of the Public and Private Sectors. The chief characteristic of a mixed economy is that in this economy both public sector and the private sector function together. They co-exist. The industries of the country arc divided into two parts. In one part arc the industries the responsibility for the development of which is entrepreneurs to the State and they arc owned and managed by the State. Other industries arc left under the authority and control of the private entrepreneurs. The private sector is free to develop develop them and start new enterprise, tillS sector.Generally, the basic and heavy industries., the industries concerned with the production of defence equipment, atomic energy heavy engineering industries, etc., are put in the public sector. On the other hand, the consumer goods industries. small and cottage industries, agriculture, etc.. arc generally assigned to the private sector. It may he home III 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 pu private sector are able to develop properly and make the country’s economy efficient and strong.
characteristic of mixed economy is that it is opcr atcd both by the price system and thc government directives. So far as the public sector is concerned economic decisions relating to production prices and investment are made by the government or authorities appointed by the government. But the private sector in the missed economy is operated by price-mechanism. In other words.the industries in the private sector the decisions regarding investment, production, prices, etc arc made by private entrepreneurs capitalists and industrialists with the object of making maximum profits on the basis of the price system. It is clear that in the mixed economy the allocation of productive IC. our ccs is partly determined by the price system and partly by the government directives.
Private Sedor. In a mixed economy. the govcnctn adopts dopts necessary measures to regulate and influence the private sector, so that it may function in the interest of the nation rather than exclusively in the interest of the private entrepreneurs. For thrs purpose. it introduces the licensing system according to which government approval or licence is essential fur setting up a factory. If the government considers that in a certain industry already there is excessive investment or excess capacity no ncw licences arc issued to setting up factories in that industry. Licensing system is the instrument 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) Consumers’ Sovereignty Protected. In mixed economy, the sovereignty of the consumers is protected. Like socialism, the mixed economy docs
not put an end to consumer’s sovereignty. The consumers are free to buy commodities of their choice and the private entrepreneurs produce commodities
according to consumers’ demands or preferences, although the government can control their prices in public interest so that they can be prevented from rising unduly high. In fact, the aim of price control is to protect the consumers from exploitation by private producers and capitalists. Besides, the government can also ration the commodities in short supply so that the limited available quantities can be fairly distributed. It is clear that, in spite of some consumers arc free to purchase the goods they like. It is their demand or preferences which guide production in the private sector Protection of Labour. In a mixed economy, government protects the weakcr sections of society especially labour. That is, it saves labour from exploitation by the capitalists. In the developed countries beginning of Industrial
Revolution, the greed and selfishness of the factory owners inflicteduntold hardships on male labour. women and children. Social conscience was roused on seeing the pitiful and miserable working and living conditions of suchlabour. The government realised its responsibilityor protecting labour from exploitation by industrialistsand factory owners. Now several factory Acts have been passed to regulate the working conditions oflabour. Minimum wages and the working hours havebeen fixed. Restrictions have been imposed on the employment of small children ill factories, Labour is paid compensation for accidents while at work. The government also tales necessary steps to prevent industrial disputes. These things are done even in mixed economies of ‘controlled capitalism’ type.(I’i) Reduction of Inequalities. The government in mixed economies take necessary steps for the reduction of of income and wealth.Extreme inequalities of income and wealth are socially unjust, politically undesirable and economically harmful. Extreme inequalities of income reduces social welfare. Income inequality creates inequalities of opportunities for education and training in favour of high-income groups. The extreme inequalities of income create class distinctions and generateclass-conflict which splits the whole society into two warring camps-the rich and the poor or the ‘haves’ and the ‘have-nets’. The rich exploit the r,lor. Modern governments try to reduce economic inequalities for promoting social justice, and soc-ul stability and social welfare, increasing production .ind for providing equal opportunities for all. 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 pour students arc some of the remedies adopted adopted for distributing the extra income of the rich among 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 somewhat reduced. The Government of India also has decided to intro-s ducc a socialistic pattern of society and for that purpose reduce inequalities of income and wealth. This is a major objective of Five- Year Plans. But so fare the Government has not succeeded in achieving this desirable objective. In fact, it is said that in India economic inequalities have increased instead instead (‘I decreasing the planning era. ‘The fruits of economic development are concentrating in the hands of a few rich people. 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 inequali In this way, it will be fulfilling one of the main purposes of a mixed economy.
A mixed economy The government tries to control and regulate monopolies.A charge against monopolies is that they reduce output and raise prices in order to get maximum profit. The monopolist thus uses his monopoly power to exploit the consumers. He fixes a price which is above he marginal cost of production and in this way reduces consumers’ welfare. Such a price-output policy results in misallocation of productive resources of the community. Besides, the excessive profits made by monopolists result in accentuating economic inequalities in the country. Moreover, monopoly creates unemployment by reducing output and thus hampers industrial development. The government tries to control and regulate monopolies in order to remove the above evils and them function in public interest. It appoints an ad hoc or permanent commission to fill a fair price of the monopolised products. Only a reasonable return is permitted on investments made by monopolists. In other words, a monopolist can earn only a filled rate of dividend. Also, when the government considers it necessary in public interest, it take over monopolies and operates them in public interest. Moreover, some governments have passed legislation to prevent the establishment of busine. s combinations which lead to the creation of monopolic . Conclusion. have studied a we that in a mixed economy public sector and private sector operate side by side. In the pubic sector, the development of industries is directly under the government: hence it is possible to make sure of their operation according to plan and with proper organisation. In the private sector, however, there is need for controls and incentives so that they are also pet according to plan, price controls, influencing them by means of proper investment, licensing of new iodu tries control over capital issues, control over imports prevention of concentration of economic power and creation of monopolies etc.