Mixed Economies Comparing the Dominant Mixed Economy

Mixed Economies

Comparing the Dominant Mixed Economy Models

Most of the world's economies today operate according to some form of mixed capitalism. The two extremes of the past centuries' world economies (Adam Smith's free-market economy and the Marxist-Leninist communist economy) have exerted enough pressure on the middle to create to some degree a mixed economy in nearly every nation. There are numerous terms for and ways to describe these mixed economies. One may call them socialist, fascist, corporatist, welfare states, command capitalist, etc. The fact is that no single term really captures the essence of today's main economic models. This paper will compare the dominant models of mixed economies that nations of the world have adopted.

The dominant models of mixed economies may be seen in the American School (or "National System"), the Nordic Model (or "universal" system), the French Dirigisme Model, and the Japanese Post-War Model. Each of these models has its own particular history and its own particular structure. Each has also had some impact on the rest of the world and served as an economic model for other countries. The first is the American School, which has in a way always been latently corporatist.

For about a century after the Civil War, America's economic policy was somewhat mercantilist. Its main objectives were to protect industry through tariffs, to improve roads and other means of transportation through taxes, and to establish a national bank. The latter two objectives were important for creating both a physical and a financial infrastructure in America. The first objective could be called protectionist in the sense that the government would support "infant industries" rather than allow the free-market to determine which business would succeed ("American School"). Free-market principles were very British (Adam Smith's Wealth of Nations, for instance). America's Henry Clay ("Father of the American System") promoted the Hamiltonian vision of economics, which favored the North but not the South (which was hurt by high tariffs). The American School basically promoted centralization, unity and corporate cronyism ("American School"). It was not much different from the system of economics adopted by Mussolini in Italy.

The Nordic Model is more welfare based. While welfare systems are in place in America, they do not dominate the American School system. The Nordic Model applies the principles of liberty, equality and fraternity to its economics. All the Nordic states (Iceland, Sweden, Norway, Finland and Denmark) have their own economic policies, but overall their policies are characterized by liberal principles. The Nordic Model values the individual and thus provides public services, pensions, solid property rights, mostly free-trade, insistence upon transparency, labor unions. The downside to the Nordic Model is that taxes are much higher than in other countries ("Nordic Model"). Obviously in nations that subscribe to the American School, which does not place primary importance upon social services, tax rates will be lower. As American policy changes and shifts in some ways towards the Nordic Model, Americans will see tax rates go up.

The French Dirigisme Model is basically one in which the government takes direct control of the economy. In a sense, mixed economies follow some form of the Dirigisme Model, because in each the government will provide some directives concerning the economy. Subsidized programs, government contracts (as in the military-industrial complex), and even Chinese economic dictatorship are forms of dirigisme. The French Dirigisme Model formed in the wake of WWII and was an attempt to correct the nation's fragmented market. The government under De Gaulle supported "the formation of 'national champions,' large industry groups backed by the government" ("Dirigisme"). Essentially socialistic, French Dirigisme was offered to the public as a compromise between laissez-faire capitalism and totalitarianism. In reality, it was something of a contradictory combination of both.