Mixed economic systems are not laissez-faire systems, because the government is involved in planning the use of some resources and can exert control over businesses in the private sector.
Governments may seek to redistribute wealth by taxing the private sector and using funds from taxes to promote social objectives. Trade protection, subsidies, targeted tax credits, fiscal stimulus, and public-private partnerships are common examples of government intervention in mixed economies.
These unavoidably generate economic distortions, but are instruments to achieve specific goals that may succeed despite their distortionary effect.
Countries often interfere in markets to promote target industries by creating agglomerations and reducing barriers to entry in an attempt to achieve a comparative advantage.
This was common among East Asian countries in the 20th-century development strategy known as Export Led Growth, and the region has turned into a global manufacturing center for a variety of industries.
Some nations have come to specialize in textiles, while others are known for machinery, and others are hubs for electronic components.
These sectors rose to prominence after governments protected young companies as they achieved competitive scale and promoted adjacent services such as shipping. India is a good example of a mixed economy.
From the Book – ‘ Know Everything about Corporate Social Responsibility ‘
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- What Is Capitalism?
- What is Socialism?
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- What is the Fourth World?
- What is Sustainable Economic Growth?
- What is Inclusive Growth?