Difference between Mixed Economy and Capitalism

If one goes to sea beach which is open for all and there you find 2 restaurants one is government owned and other is privately owned and it is your choice where to eat food and now take another scenario where the whole beach is privately owned and one has to stay at hotel in order to go to the beach. Now the first scenario is an example of the mixed economy while the second scenario is an example of capitalism. Mixed economy and capitalism both are types of economic system but there are many differences between the two; Let’s look at some of the differences between mixed economy and capitalism –

Mixed Economy and Capitalism Differences

Meaning

The first and foremost difference between mixed economy and capitalism is that while mixed economy is that type of economic system in which both private institutions and government together carry out various activities in the economy whereas capitalism is that type of economic system where only the private institutions carry out various activities in the economy while government does not intervene in the economy.

Government Interference

Another difference is that while in case of mixed economy government allows individuals or private entities to carry out business but business of strategic importance like railways, military-related and other such business which affect the poor are handled by the government itself whereas in case of capitalism there is no such segregation as all businesses are done by the private entities only.

Competition

In a case of the mixed economy, competition is between private entities and government companies whereas in a case of capitalism competition is between private entities only and that is the reason why its competition is fiercer.

Monopoly

In the case of the mixed economy, private companies cannot create a monopoly and charge the higher price from the consumer easily due to the presence of government restrictions and control whereas in the case of capitalism chances of companies becoming a monopoly and exploiting the consumer by charging a higher price for products is high.

Bureaucracy

In case of mixed economy due to government intervention and government keeping certain industries for itself there is bound to be some bureaucracy creeping into the system which in turn results in mixed economy being less efficient whereas in case of capitalism since the only objective of companies is to earn profit they tend to be very efficient and workaholic and therefore they are more efficient than their counterparts in mixed economy.

Subsidies

In case of mixed economy there is scope of government doing something to the needy section of society by giving subsidies to the poor and needy people whereas in case of capitalism all companies and individuals have this one objective and that objective is to earn maximum profit which leaves no scope for these companies doing anything for the poor or needy people.

As one can see from the above that both mixed economy and capitalism are different from each other and it is the mixed economy which is more practical and prevalent in many parts of the world whereas the extreme form of capitalism is rarely seen in the world economies.

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