There are quite a few terms that are frequently used in terms of debates under political and economic contexts. Capitalism and Mixed economy are two of the few terms that people repeatedly use to describe the economic models of different countries.
The concept of capitalism and the mixed economy is more profound and vast.
- Capitalism promotes a free market with minimal government intervention, while mixed economies combine elements of capitalism and socialism.
- Capitalism relies on private ownership of resources, whereas mixed economies involve private and public ownership.
- Mixed economies aim to balance the benefits of capitalism with social welfare policies and economic equality.
Capitalism vs Mixed Economy
The difference between capitalism and a mixed economy is that the concept of capitalism is based on the individual ownership of the means of production, while a mixed economy stresses state intervention in a planned economy. Capitalism encourages a free market without any regulation and role played by the government. A mixed economy encourages regulations by the government.
Capitalism is based upon the idea of private ownership, meaning the private owners control the means of production. All the businesses are privately held and run for profit.
Simply put, private owners own the land and means of production. The government won’t get involved here. Capitalism is one type of economic system.
A mixed economy is a combination of both capitalism and socialism, meaning they both operate within the same economy. Here, both the government and the private operate mutually.
Many countries use the mixed economy concept. A mixed economy allows personal freedom.
It helps in yielding a profit for private as well as concentrates on social welfare.
|Parameters of Comparison||Capitalism||Mixed Economy|
|Meaning||It is based on private ownership and means of production.||It is a combination of both capitalism and socialism.|
|Ownership||Private ownership.||Private and public ownership.|
|Economic decision||Decisions are considered by price or market mechanism.||Both government and private consider decisions.|
|Motive||Here, the consumer is king.||It helps in protecting individual freedom.|
|Focus||It focuses on profit motive for private.||It focuses on social welfare as well as profit for private.|
What is Capitalism?
The word capitalism is regularly used in debates and political contexts. Though an average person is familiar with the idea of capitalism, the word’s precise meaning is much more profound.
The term capitalism is derived from the Latin word “Capitalis”. L. Blanc first used the word in 1850.
The ideology of capitalism is based on the private ownership of the factors or means of production. In simple terms, the concept of capitalism believes in the individual or businesses owning the capital goods, resources, and labour.
Companies can run their businesses with the means of production that they own. The essence of capitalism is about making profits for individuals and companies.
The word is used to denote the economic system of private ownership and making profits. The supply and demand in the market determine the prices and production of goods.
Capitalism played a significant role in the economic boom during the Industrial Revolution. The idea of capitalism was the successor to feudalism.
Though capitalism has been preached before, Adam Smith’s book “Wealth of Nations” was the crux of this economic model. There are different types of capitalism, like welfare and free-market capitalism.
The USA identifies itself as a capitalistic economy.
What is the Mixed Economy?
The term mixed economy is used when describing a few countries worldwide. Capitalism and socialism are the popular economic systems that people around the world are familiar with. In simple terms, the mixed economy is a new financial system that combines the values and ideas of both capitalism and socialism.
Though the economic system has been in practice for ages, the term mixed economy first came into use in the United Kingdom during the 1930s, after the first World War. This system defines the market economy with a few critical elements like a planned economy, public and private enterprises, and state intervention.
Regulatory control of the market by the State is an essential aspect of the mixed economy that differentiates it from free-market capitalism. The government in a mixed economy acts as a principal player by serving the public with education and healthcare.
Unlike capitalism, the government and its public enterprises are administered to assist the people without stressing about making profits. Welfare capitalism comes close to a mixed economy but still stresses profit-making for its institutions.
This economic model is supported by the centre-left and centre-right population, by both simple liberals and conservatives. Countries like India, Sweden, and Iceland are examples of this economic model.
Main Differences Between Capitalism and the Mixed Economy
- Capitalism is based on private ownership and means of production, while a mixed economy combines socialism and capitalism.
- Under capitalism, economic decisions are taken by considering price or market mechanism, whereas, in the mixed economy, economic decisions are made by considering private and government.
- Under capitalism, the consumer is the king. On the other hand, a mixed economy helps in protecting individual freedom.
- Capitalism is based on private ownership, whereas a mixed economy is based on private and public ownership.
- Capitalism focuses mainly on the profit motive for private owners, whereas mixed economy focuses on social welfare as well as profit for private owners.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.