A mixed economy is an economic system in which both the private sector and the public sector play a role in the production and distribution of goods and services.
Mixed economies have some combination of government-owned enterprises (such as healthcare, education, and infrastructure) and private enterprises (such as manufacturing, agriculture, and retail businesses).
This economic system rose to prominence in the early 20th century as a response to the problems of the pure capitalist system that had been shown up by the Great Depression of the 1930s.
Examples of Mixed Economies
1. United Kingdom
Public Sector Size: 21.5% of GDP
The government of the United Kingdom controls the entire healthcare system through the NHS. Their health system is fully socialized, where the government pays the salaries of doctors.
However, the UK also has a thriving private sector. In 2016, the UK had over 3 million private sector businesses. Its capital city, London, is a financial hub of the world and hosts one of the largest global stock exchanges, the London Stock Exchange (LSE).
Public Sector Size: 24% of GDP of GDP
Australia has a mixed economy, with the public sector accounting for about 24% of GDP and the private sector for the remaining 76%.
Unlike the UK, Australia’s healthcare system is also mixed where the government operates most hospitals while GP practices are primarily privatized, with strong government regulation and refunds provided to patients.
The Australian state governments also have a big hand in the education systems. However, as with healthcare, there is also a significant market-based private education system as well as a strong Catholic-run education system.
Many of the Australian government-owned firms, including Qantas (the national airline) and Telecom (the electrical grid) were privatized in neoliberal reforms that occurred in the early 2000s.
Public Sector Size: 28% of GDP
The French government controls economic sectors such as healthcare, education, and some transportation. It’s also actively involved in the childcare system.
The private sector’s strengths include its agricultural sector and its tourism industry. The country is one of the world’s leading producers of wine and cheese, and it is also home to some of the most popular tourist destinations in Europe.
Public Sector Size: 15% of GDP
The German government controls certain industries, such as transportation and utilities, while the private sector dominates others, such as manufacturing and agriculture.
Germany’s healthcare system is strongly regulated and basic healthcare is guaranteed to citizens, but it is operated by non-for-profit private actors.
One of the key strengths of the German economy is its strong export market. Germany is Europe’s largest exporter, and its products are in high demand around the world. Its biggest export is automobiles, and it also exports machinery, chemicals, and electrical equipment.
Public Sector Size: 29.9% of GDP
Some formerly government-owned corporations in Sweden include Vin & Spirit (an alcohol distributor) and Vasakronan (a real estate company).
Like most developed economies, the Swedish economy has been incrementally privatized over the past 5 decades under a neoliberal ideology.
Nevertheless, Sweden still owns several railway corporations such as Infrabord, as well as some airports, research institutes, and pharmaceutical industries.
Public Sector Size: 32.4% of GDP
Norway still has a significant number of state-owned companies. Companies in the hands of the Norwegian government include railway firms (e.g. DSB), broadcasters (e.g. TV2), and the national electricity distributor (Energinet).
The government controls 35% of the value of the companies listed on the national stock exchange and employs just under 10% of the national workforce.
However, there remains an extensive private sector and a liberal market economy.
Public Sector Size: 21.3% of GDP
Greece has historically had many left-wing governments that advocated for a strong role of government in the economy. However, it has also long been a mixed economy with substantial private industry.
Following the Greek debt crisis in the late 2000s and early 2010s, the Greek government implemented austerity measures that included the withdrawal of the government from some sectors of the economy.
The austerity measures were largely forced upon Greece by the European Union which used its lending leverage to encourage reforms such as the privatization of gas companies in the country.
Public Sector Size: 7.7% of GDP
Japan’s private sector has been extremely successful since the 1980s after its strong embrace of technology and advanced manufacturing.
Household names such as Mitsubishi and Toyota come from the Japanese private sector.
However, Japan has also had a hand in several important sectors. For example, it owned the postal service, Japan Post, until it was privatized in 2007. It also has a stake in the Tokyo Metro in what’s known as a public-private partnership.
Public Sector Size: 22.4% of GDP
The federal and provincial governments in Canada have control over a range of strategic industries, while Canada also enjoys a liberal market-based economy.
The province of British Columbia, for example, owns a monopoly stake in ICBC, the car insurance company. While the company helps to ensure all drivers on the roads are insured, it is also criticized for its excessive bureaucratic waste.
Companies not owned by the government in Canada include the Royal Bank of Canada and Lululemon, an apparel firm.
10. United States of America (USA)
Public Sector Size: 13.3% of GDP
While famed for being the quintessentially capitalist and anti-government nation in the world, the USA remains a mixed economy due to its stake in a range of public services such as Medicare, the US postal service, and the National Park Service.
Nevertheless, the US economy has an extensive free market, including some of the largest tech and aeronautical companies in the world. Its famed Silicon Valley is home to enormous companies such as Apple, Alphabet (Google), and Meta (Facebook).
Public Sector Size: 28% of GDP
While China under Chairman Mao was a command economy, controlled liberalization in the 1980s opened up more space for the private sector.
China’s embrace of capitalism has led to it becoming an economic superpower, with a huge range of industries now under private control.
However, the Chinese government still plays a role in strategic industries such as energy, telecommunications, and banking. Furthermore, the iron grip of the Chinese government means private companies can be coerced into exercising the will of the government whenever necessary.
Public Sector Size: 5% of GDP
The Indian economy is a mixed economy, with the public sector accounting for about 5% of GDP and the private sector for the remaining 95%.
The public sector in India is large and includes companies such as Coal India, Bharat Heavy Electricals, and Neyveli Lignite Corporation. However, there are also many successful private sector companies in India, such as Tata and Reliance.
The Indian government has been slowly privatizing some of its companies, such as Air India and Bharat Petroleum. It has also been encouraging public-private partnerships in several sectors.
Public Sector Size: 18% of GDP
The Italian economy is a mixed economy, with the public sector accounting for about 18% of GDP and the private sector for the remaining 82%.
Italy is the 8th-largest nominal GDP in the world, and the 3rd-largest in Europe. It has a high level of human development and is ranked 6th in the world for life expectancy.
Agriculture and industry still play an important role in the country’s private sector – with tourism being one of the fastest growing sectors, which is almost entirely private.
Public Sector Size: 29.6% of GDP
As with the other Scandinavian countries, the Danish economy is a mixed economy but has a substantial public sector. The public sector accounts for about 29% of GDP and the private sector for the remaining 71%.
The country has a strong tradition of cooperative enterprises and public-private partnerships. For example, the state-owned energy company, Dong Energy, is majority-owned by the Danish government (it owns a 50.1% stake).
15. New Zealand
Public Sector Size: 13% of GDP
New Zealand has a diversified, market-based economy with a strong focus on export trade. The economy is heavily reliant on agriculture and tourism, both of which are primarily run by private industries.
The postal, electricity, and railway services in New Zealand are owned by the government. These are seen as essential services that should be protected from market forces.
Air New Zealand, the only national airline, has been in and out of government hands in recent decades. Currently, the government holds a 53% stake.
Pros and Cons of Mixed Economies
Debates over mixed economies often revolve around whether the government’s involvement in the economy causes inefficiencies or provides protections from the excesses of the market. Below are some common debate points.
Mixed Economy Advantages
- Regulation – One of the primary goals of government involvement in a mixed economy is to protect citizens and businesses from the harmful effects of laissez faire capitalism. For example, the government may create government-run competitors to prevent monopolies from forming or to ensure that businesses do not pollute the environment.
- Stabilizing Influence – Another advantage of government involvement in the economy is that it can provide a stabilizing force during difficult economic times. For example, the government may use stimulus spending to jumpstart the economy during a recession.
- Social Safety Net – A mixed economy can help to provide a social safety net for citizens who are unable to care for themselves. For example, the government may provide healthcare or unemployment benefits.
- Self-Sufficiency during Wartime or Pandemics – Government involvement in the economy is often a means for ensuring the country has a domestic industry that can sustain the nation if supply chains break. If supply chains break, government-run industries (that are too inefficient for the market during good times), can help sustain the basic good and services for the citizenry.
Mixed Economy Disadvantages
- Unfair Advantage – Government subsidized and owned industries have less of a profit motive, which warps the natural functioning of the free market. Private competitors do not have the awesome power of the government to back them.
- Inefficiency – One of the primary criticisms of government involvement in the economy is that it can lead to inefficiencies. For example, the government may create an artificial market for a good or service that would not otherwise exist. This can lead to higher prices and less consumer choice.
- Compromised Economic Liberty – Government regulations and ownership of industry can limit people’s freedom of choice. For example, in the UK, people are not able to ‘shop’ for their choice of health provider. Everyone must use the NHS.
- Tax Burdens – In a mixed economy, citizens are often taxed at higher rates to pay for the government’s involvement in the economy. However, advocates say that the extra taxes paid for government services like transit and healthcare will save people money because they don’t have to pay at the point of service.
See Also: Traditional Economy Examples
Mixed economies are the most common economic systems across the world. They allow for some government involvement in the economy that are in the public interest while still allowing for a large amount of economic freedom.
The advantages and disadvantages of mixed economies are often debated. The main advantages are that the government can help to regulate industry and provide a stabilizing force during difficult economic times. The main disadvantages are that government involvement can lead to inefficiencies and higher taxes.