In a race if there are 5 people are running and if you tell them no matter who come first or last all will get the same prize then racers will run at their own leisure as they know they will get the prize no matter what their ranking is and in another scenario if before the race you tell that individual who comes first will get the best prize and an individual who come last will get nothing then the racers will put their best effort to win the prize. Now the first scenario is an example of socialism and the second scenario is an example of mixed economy. Mixed economy and socialism 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 socialism –
- A mixed economy is that type of economic system in which government and private companies both carry out the activities in the economy while socialism it is that type of economic system in which it is only the government which carries out the various activities in the economy and private parties have no role to play in the economy.
- Mixed economy tries to achieve two objectives one is profit objective with the help of private entities or companies and other is to help socially weak sections of society while in the case of socialism it tries to achieve only one objective and that is the equal status for all citizens of the country.
- In case of mixed economy since there are private companies also there is competition among companies for business which results in greater efficiency whereas in case of socialism since all people know that they will get something from the government in the form of subsidies without doing anything and hence there is no incentive to do hard work which results in socialism economic system being less efficient than mixed economy and capitalism.
- In case of mixed economy since private companies are there it gives chance to creative people and young entrepreneurs to show their talent to the world as they can start business and earn handsome rewards for the same but as far as socialism is concerned there is no such scope for creative people and young entrepreneurs which in turn deprive the nation of great ideas and business.
- In case of mixed economy there is gap between rich and poor although not as big as in the case of capitalism but in the case of socialism government tries to narrow down the gap between rich and poor to minimum extent possible as the objective in case of socialism is to achieve equal status for all the citizens of the country.
As one can see from the above that both mixed economy and socialism are different from each other, although mixed economy borrows some characteristics from socialism but it also has some characteristics of capitalism and that is the reason why the mixed economy is more common and widespread than socialism in many countries of the world.