UK Mixed Economy: Advantages and Disadvantages

UK Mixed Economy: Advantages and Disadvantages OBJECTIVES England is a country of 63.7 million people. Her economy is the largest economy of the four countries of the UK. UK has importance in textiles and chemical products, beside these the automobiles, locomotives and aircrafts are also the important industrial products. UNITED KINGDOM has the the 3rd in the Europe and 6th largest national economy in the world by the nominal GDP. ENGLAND is a mixed economy’s country, beside other country such as ICELAND, SWEDEN, FRANCE UNITED STATES, RUSSIA, CHINA and HONG KONG. These are the countries’ economy is mixed, in those economy society some of the part is manged by the government and the rest it controlled by the private firms and the individuals. Being the mixed economy the ENGLAND has to face some advantage and the some disadvantage. In below we will find its total idea. Definition of pure command, free market and the mixed economy Pure command economy: When any economy is fully controlled by the government, the government decide the allocation of the resourses and they answer the three questions of allocation. This type of economy is theoretical extreme example of economy, it the real world it does not exits, we just use this type of theoretical example for the comparison of the real world economy. Through laws, restrictions, regulations and the involuntary taxes the government force all allocation. In this type of economy the Government set the rules for the people, and if they do not follow the rules they will be punished. The communistic CHAINA and the former SOVIET UNION are the good example for the pure command economy. Five characteristics of the pure command economy According to the need of the nations the government provides the goods The government regulated the all price and moreover the public good will be the available for the public needs The salaries, wealth will be the same for every body There will be common goals, the technology will be seen the greater advantage because of the resources are being allocated correctly to achieve the goal No unfinished project, no inflation and the low unemployment. Free market: This type of economy is based on with the little or without any government control on the supply and the demand. In this type of economy market, the buyers and the sellers are allowed to business freely, where the mutual understanding on price is found and we will not find any form of taxes, subsides or regulations. In the simple way a full free market is summary term for an array of exchanges that take place in society, here the agreement is free and mutual understanding for service or good between two parties . Mixed economy: In the mixed economy system we will see variety of the government and the private control, its looks like the combination of the socialism and the capitalism. We can’t find a single mixed economy’s definition, where we will find a degree of the government regulation of the markets and the a degree of the economy freedom. We can describe the mixed economy as the market economies with the strong administrative overlooking. England as a mixed economy England has the one of the biggest economics of the world, in this economy the Private and the Public contribution is same. Here the public ownership has been reducing since last two decades. While England was first industrialization in the 1800, the economy of England has shifted towards the service sectors over the years.While the industrialization was growing up rapidly, the service sectors were also developing significantly. Under the government of Margaret Thatcher in the 1980s, the most of the state owned enterprises in the service and the industrial sectors were privatised since it was nationalised at 1940s. Now UK government owns very few of the industries such as the Royal mail. Advantages of Mixed Economy There are many reasons why many country choose the mixed economy for the economic development. In below we can see some discussion about that. (1) Job security To maximise the profits is the aim of the private firms, they are sensitive to the market.During the boom time, when the demand of service and the goods are going up, the employment of the job market rise quickly, but when the market is down like the recession period the private company will not keep the excess labour as it will increase the production cost, for this reason the private workers works in a higher risk of unemployment. On the other hand the government sector, they have to follow the labour and the laws, in the government sector they have to appointment new employees every year, and the certain number of workers will get the promotion every year. As in the government invested company the chance of unemployment is very slim, people are not in risk in the retrenched. Therefore in the mixed economy, it is very important to have the part of government involvement for the security of the people’s life style. (2) Avoid exploitation As we know that, the private enterprise is always oriented for the profit, so they never give the priority about the basic rights of human being, such as education, health care, may be they give very few concentrations about those matters. If this problems and negligence always continuing, it will widen the gap of literacy rate and income inequality between the two society of lower and the upper social class. For this reason in the mixed economy society, the government setup the many facilities such as NHS and the various higher institution to narrow the gap. (3) Regulation of monopoly firms When there is a single seller for the service or the goods in the market we called it monopolist, if a company has the control on the market over than 25% we can consider it as a monopoly, it is the example of the classic market failure, by the business sense. The cost efficient has less of incentive as in the monopoly market the monopolist don’t have that much competition or no competitions, to over come this problems the government can make the product market bigger. To do this, the government can breaking down the barriers to entry and to make the other firms encourage the government can make contest in the market, this type of tape can boost the market supply and in this way the consumers can get the service or the goods in the cheaper price, the competitions, productivity and the investment can be increase by this type of actions. In UK there are some regulators such as Ofwat.ORR, Ofcom who are doing the privatising . (4) Economic policy In many responsibilities of government the economic policy is the one of the biggest. As  the Government and the state economic advisers are overlooking the economic conditions of the country, they can propose or invest more money for the public sectors, such as they can invest money for the road constrictions, repairing or making building or the bridge, in these ways they can make more job opportunities for the betterment of the public economy or we can say to make more jobs. On the other hand the government can lower the tax for the increase the buying power of the people. We can give here a good example, THE BANK OF ENGLAND has reduced the interest rate for the people as they can borrow more money and can setup more business, that will be increase the job sector. On the other side we can see that the private sectors are only invest for make the money, they are not involving their money for the economy development of the society, in the other way they are not capable to over come the government’s financial capability. (5) Regulation of water and air pollution In aspect environmental matter, the private companies are acting as â€Å" Environmental Villain†, for their own profit the private enterprise always using the dear natural resources, continuously. They are consuming the natural resource and then eject the smoke, dumping the polluted solid wastes insensibly and also pouring out the nature destroying liquid . This type of private enterprise producers are said to be only concern about the MPB (Marginal Private Benefits) and the MPC (Marginal Private costs) in their decision making. This way the government should be mediate, could be set some type of the agreements with the private companies. For paradigm, the UK government is in a agreement to the Global and the European for the reducing target of the emergence of carbon dioxide by 80% in the time of 2050. In the year 2002 the European government introduced a scheme named ETS (Emission carbon trading), in the aim of limiting the outflow of the carbon from the big industries such as the energy, glass, brick making, steel and others. As this emission carbon trading has the positive effect on the nature, many other countries are introducing this type of the program in there country. (6) Narrowing income inequality If we see the in the pure capitalist economy society, we will see that the rich people are getting more richer and the poor are getting more poor. As less or no intervention in this type of economy after a certain time we will see the pyramid of the income distribution, in this pyramid, a large proportion of the people’s wealth and the GDP is control by the very few of the rich people. The income can be distributed by the involving of the state, first is the introduction of the dynamic tax system, where the rich people have to pay greater amount of the tax, beside this the national minimum wage also have the great effects on the economic development. In UK the minimum wage is increasing every year, on the other hand the unemployment, sickness benefits also help to reduce the distance and the bad effects of the economic deference between the poor and the rich people. More over this type of the government involvement can balance the national economy in the mixed economic states. (7) Provision of public goods dynamic there are two features of the public goods, the 1st one is the non rivalry, it means that the amount of the goods for the other users will not decrease even though whatever the consumption of the public goods. Beside this non-excludability is the another one. If one time this type of facility provided, no one will be slipped from the benefit. The private company will not be interested fro this type of the benefits of the free riders or the publics. For the definition of the free rider we know that he who get the benefits from a area but not doing any contribution to it, actually if we count the end result of having the benefited, no one will pay for the facilities. Here the government has to pay it from the money of the taxpayers’, for the example of this type of the benefits is the public road, bridge, lighting on the streets and also we can mention here national defense. Disadvantages of Mixed Economy Even though there are many economic facilities in the mixed economy policy but besides this we can see some of the economic crisis what England have to face for being mixed economy country. In below there is some discussion about the coming disadvantage What collisions could be happen In the mixed economy we can see the balance between the capitalism and the socialism, the mixed economy tries to help for the advantage of the capitalism and the socialism, this aim can be understood if there is good combination and the understanding but the real situation is, there is continuous encounters going on between the two sectors. This can make the situation more bitter and the noncompliance. Some time the private sectors can think that the public sectors are having more priority than them. It could be happen some time that the public sectors tries to avoid their worthleness and the wastefulness to the private sectors. In a one word the faithfulness and the mutual understanding none can really works perfectly in this situation, Insubstantial The mixed economy is base on the two inimical ideologies, those are absolutely opposite to each other. Though the mixed economy tries to combine the two different ideology together but mixed economy can be find doing less to both of them. For the conflict in terms, the mixed economy has been criticized. For detail, there can’t be the middle way in between the central direction and the atomistic competition. For the mixed economy there will be the mixed of the central direction and the competition but the mixed economy can not works good. If they are incomplete, the competition and the central direction become poor, and than they used the inefficient tools. After this, they used the alternative principles to minimized the problems, and the mixer of the two meaning that none of them will work properly. If the two systems relays on each other the result will be worse. Nature of short live From the above discussions we can see that the mixed economy always runs on the risk of the nature of the short lived. As the time passes by, a violent struggle chases between the two sectors for the name of the supremacy. The state may be fall into fail to regulate the private sector properly when this sector is flourishing. On the other hand if the public sector loses the power, the mixed economy can turn in to a capitalist economy, and it can be a socialist economy if the public sectors become more powerful. The symbol of the weakness Some people says that the mixed economy has a disease as the capitalist, and the â€Å"Socialisation of investment† is one of the attempts to restore it. In this way of view the mixed economy is the diseased phase of the capitalist economy, for this reason it called as â€Å" Capitalism in the oxygen tent. By this sense the mixed economy is the spurious capitalism. Endangers freedom Capitalism. It could be happen that a mixed economy can go into or lead to abridgement of freedom of the individual. It also feared that the control of the economic life and the problems into the planning can lead the mixed economy in such a position where the individual could lose the identity. Inefficiency of the public sector There is a record of the poor performance in the mixed economy. Redtapism, waste, corruption and the inefficiency is the main point ; by those, the mixed economy suffers with. Therefore the public sectors suffer from two reason, To increase production volume or Reducing the cost. Failure for pluck up the economic inconstancy The theory of mixed economy has become popular in many countries, spatially in the capitalist; as this economic policy is believe to be the good solution for pluck up the economic inconstancy, but somehow the economic problem still goes all the way. The economic inconstancy can be cut out only when the central plan can cover the entire economy, but in the mixed economy, the kind of regimentations those are assigned on the private sector leaves much to be intention.