Mixed Economy

Most economists would say that there are no examples in the world today of a completely free market or a completely controlled economy. Instead, every country operates a mixture of the two systems. Even in the freest economies, like the USA, there is some government control; even in the strictest planned economy there is some free enterprise.

Economies mix government control and free market values in different ways. One way is to let privately owned businesses exist alongside state run industries. The economy becomes divided between the state sector and the private sector The state sector often includes industries that the government thinks are important and need protection from the risks of the free market These could include public transport, hospitals, schools and the postal service. The state sector can also include large industries that are important for a country's economic health, such as oil, steel or agriculture. These are sometimes called primary industries because they provide basic materials to manufacturers.

These state sector industries use money that the government collects in taxes. Often they do not need to compete with other companies because no other company is allowed to provide the same product or service. However, many countries have recently started a process called deregulation.

Deregulation means reorganization of the economic structure within which private businesses are allowed to compete with state-run industries. The state sector should then run more efficiently in order to compete in the free market and because it now has less government protection

Deregulation of services like telecommunications, transport and banking has happened in many countries in recent years. People have generally accepted these changes. However, generally the public is less happy when governments start talking about deregulation in education and health services. Many people feel that profit motivation will harm these services rather than improve them.

Another way in which economies today are mixed is that governments put limits on free enterprise. For example, governments may decide to ban trade in certain goods if they are dangerous. They may also create laws to make sure companies trade honestly or to prevent monopolies. If a company has a monopoly, normal market forces do not affect it. This is bad for consumers and the economy in general. Governments may also regulate methods of production. They do this to guarantee that products are safe for consumers and to protect the environment

Many economists would argue that the mixed economy is the best system for consumers. This is because consumers have two ways to control the economy: by choosing to buy a company's goods or services and by choosing to give political parties their votes.

1. Complete each sentence with a word or phrase from the box.

agriculture, ban, efficiently, free enterprise, manufacturers, monopoly, private sector, profit motivation, public transport, state sector, telecommunications, trade

1. …… is a concept according to which businesses are able to trade without control from the government.

2. …… industries belong to and are run by the government.

3. …… industries belong to and are run by independent businesses

4. Buses, trains and planes are examples of ……

5. …… is another word for farming.

6. …… produce new goods from raw materials.

7. When a business works ……, it runs successfully without wasting resources.

8. Telephone and Internet systems are part of the …… industry.

9. …… is what drives businesses in the market economy.

10. When the government puts a …… on a commodity, people are not allowed to buy or own it.

11. If only one company controls part of the economy, they have a ……

12. When companies ……, they do business with each other.