What is a Mixed Economy?

Definition: A mixed economy is an economic system that combines both private enterprise with active government intervention. The State participates actively but allows individuals and companies to pursue their self-interest.

What Does Mixed Economy Mean?

A mixed economic system can be described as a hybrid. It is a combination of the laissez-faire principle, which means enough room for private enterprise to grow and flourish, but it also includes a fair degree of government participation and monitoring. The government is normally concerned with maintaining equality among society participants and transparency within the business environment.

In this kind of system companies are allowed to be profitable but the State might consider them as a public-interest business if the good or service they provide is essential or strategic for the nation. This may lead to nationalization procedures or more strict controls and regulations. A mixed economy aims to encourage private endeavor but it is highly concerned with the protection of national interests.

Some economist argue that free market systems are more productive than mixed ones but in modern days most economies are inclined to be somehow mixed, since country’s are very careful with proper safeguarding of their strategic resources.

Example

For many years Bolivia had a planned economic system. The State controlled many of the major economic fields through a huge network of state-controlled companies. The productivity level of those companies was very low and there was a lot of corruption happening at different organizational levels.

The new elected President of Bolivia designated a Financial Commissioner to transition the country’s economic system towards a mixed economy. In order to do that, the new Commissioner will open some bidding procedures where private individuals and corporations will present their proposals to acquire specific state-owned businesses to relief the economy from its previous centralized approach. This will be the first step towards a new economic system that will benefit Bolivians greatly.