Mixed Economy Advantages and Disadvantages

A mixed economy as the name suggests is an economy where all the activities related to production and other activities are carried out by the participation of both government and private enterprises and a mixed economy tries to blend the benefits of private enterprises and government enterprises together to shape the economy of the country. In order to have a better understanding of this concept one should look at some of the advantages and disadvantages of a mixed economy –

Advantages of Mixed Economy

Cocktail of Both

Since this economy involves both government and private enterprises it has the advantage of taking the benefits of the capitalist nature of private companies and the socialist nature of government and hence one can say that it is like a cocktail just like a cocktail gives a superior taste due to mixing of two drinks in the same way mixed economy gives the economy a boost due to involvement of both government enterprises as well as private enterprises.

Balanced Economic Growth

There is less inequality of income because the intent of the government is to have a balanced economic growth of an economy because attention is given not only to private profits but also to social equality and growth of less privileged ones by ensuring that both government enterprises, as well as private companies, do their job of ensuring that all people get social security and equality.

Social Responsibility of Private Companies

It allows individuals to run their business and make profits but at the same time, it places some responsibility on these companies by inducing them to contribute towards the welfare of society.

Disadvantages of Mixed Economy

Social Welfare

Since the welfare of society is important in a mixed economy it leads to lower than optimum use of the resources because government mobilizes the resources towards the production of those goods and services which are beneficial for the society as a whole rather than producing those goods and services which in economic terms are more beneficial for an economy.

Government Loopholes

Under this economy, private enterprises have to face a lot of difficulty because of various government loopholes like favoritism and bureaucratic nature which is prevalent in the mixed economy as the government interference is there in this type of economic structure unlike capitalist economy where there is no government interference and the private company gets a free hand as far as operating and doing business is concerned.

Gap between Rich and Poor

Under this economy, the gap between the rich and poor is quite substantial as private entities are allowed in almost every sector of the economy which sometimes leads to few people accumulating huge sums of money while the majority of people are living a miserable life leading to frustration in the minds of the people of the country.

As one can see that this economy like socialist and capitalist economies has both advantages and disadvantages and therefore it will be always debatable whether a country should follow the mixed economy structure or not.