Mixed Economy Brought Great Changes to China

The centrally planned economy has proven to be a failure due to the collapse of the Soviet Union. In 1979, the economic situation in Laos further proved that central planning is a dead duck. Throughout the century, most countries have forgone the system of centrally planned economies and are undergoing a process of transition to mixed economies. Such phenomena are taking place all around the world because the transition could bring great changes to their countries. Mixed economy is actually an economic system directed by both the state and the private sector. In this system, the centrally planned economy and market economy co-exist. Such a hybrid system is introduced simply to overcome the impuissance of both the former and the latter system.
Before knowing why mixed economy is favored by most countries, let us have a brief concept on the centrally planned economy and market economy.
The centrally planned economy is an economic system where all decisions are made by the central government to control the production of goods and services and the allocation of resources. State-owned enterprises undertake all production and price is kept under control by the state government to ensure every citizen manages to consume goods and services. It had been a norm in many countries in the past and even now there are still several countries that are having such an economic system in practice, for example North Korea, Libya, Cuba and etc.
On the other hand, the market economy is an economic system in which the aggregate interaction between consumers and businesses exclusively direct all the economic decision and price of goods and services. The laissez-faire economy strongly contradicts any government intervention in business affairs because market forces are assumed to be the clinchers in determining the best for the nation’s upbeat. People are free to own private property and this property right motivated people to work hard to achieve maximum profit.
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