how mixed economies develop
mixed economies are still relatively young and theories around them have only recently been codified the wealth of nations adam smith s pioneering economic treatise argued that markets were spontaneous and that the state could not direct them or the economy 6later economists including jean baptiste say f a hayek milton friedman and joseph schumpeter would expand on this idea however in 1985 political economy theorists wolfgang streeck and philippe c schmitter introduced the term economic governance to describe markets that are not spontaneous but have to be created and maintained by institutions 7 to pursue its objectives the state needs to create a market that follows its rules historically mixed economies have followed two trajectories the first trajectory assumes that private individuals have the right to own property produce and trade state intervention has developed gradually usually in the name of protecting consumers supporting industries crucial to the public good in fields like energy or communications providing welfare or other aspects of the social safety net most western democracies such as the united states follow this model the second trajectory relates to states that evolved from pure collectivist or totalitarian regimes individuals interests are considered a distant second in importance to state interests but elements of capitalism are adopted to promote economic growth china and russia are examples of the second model private businesses now produce more than half of china s gross domestic product gdp and most of its exports 8socialist countriestoday very few countries are close to pure socialism perhaps china is the most prominent example with a communist government that effectively nationalizes many of the nation s key industries state owned enterprises are a key feature of the chinese economy although several steps toward capitalism and liberalization have created certain economic zones e g in shanghai where private corporations can co exist and profit 8cuba remained closer to a marxist leninist socialist economy following its communist revolution in 1959 and the installation of fidel castro as its leader after castro s death however cuba too saw some liberalization in 2019 cubans voted for a new constitution that granted private property rights and greater access to free markets while preserving the socialist political system 9the last remaining marxist leninist socialist economy that has not seen any reforms is that of north korea the country remains ruled by a communist dictatorship and a closed command economy governed by strict central planning laos another country in asia is also a socialist state but is more open than north korea transitioning from socialisma nation needs to transfer the means of production to transition from socialism to free markets the process of transferring functions and assets from central authorities to private individuals is known as privatization privatization occurs whenever ownership rights transfer from a coercive public authority to a private actor whether it is a company or an individual different forms of privatization include contracting out to private firms awarding franchises and the outright sale of government assets or divestiture in some cases privatization is not really privatization case in point private prisons rather than completely ceding a service to competitive markets and the influence of supply and demand private prisons in the united states are actually just a contracted out government monopoly the scope of functions that form the prison is largely controlled by government laws and executed by government policy it is important to remember that not all transfers of government control result in a free market cuba has moved toward privatizing many aspects of its economy incorporating more capitalism into its society in early 2021 it began allowing people to work in jobs in over 2 000 private sectors up from 127 10privatizing a socialist economysome nationwide privatization efforts have been relatively mild while others have been dramatic the most striking examples include the former satellite nations of the soviet bloc after the collapse of the ussr and the modernization of the post mao chinese government the privatization process involves several different kinds of reforms not all of them completely economic the logistical problems associated with these actions have not been fully resolved and several different theories and practices have been offered throughout history 