Mixed economy, also known as “Planned” or “Regulated” economy is the middle vice between freedom and totalitarian slavery. The mainstream economists supporting Interventionism often exhorts that they do not intend to enforce totalitarian slavery against freedom; rather they are regulating the freedom. However, it is not the intentions but the end results, which decide the success or failure of an organized system.

Burden on Consumers

In an economic system as long as only certain means of productions are controlled by the government or municipalities, the nature of market economy determining economic activities remains unchanged. The Government owned sectors and ventures must fit into the market mechanism of market economics while buying raw material, equipments, labour, and as sellers of goods and services. They are subject to laws of market, as they need to attempt for profits, at least to avoid losses.¹ When government intervenes to eliminate this dependence on market by covering the losses of such enterprises with subsidies or bailouts out of public funds the losses shifts to somewhere else and subsidies are raised by collecting confiscatory taxes. However, the burden of the taxes affects the citizens, not the government collecting the tax.
In a free market, where the market laws either purges out the failed enterprises incurring losses and replace them with other enterprisers to provide better products and services, or force those enterprises to improve their working, production and management, the problem solves out by itself as the malinvestment in enterprises incurring losses gets a reality check. Yet, because of government interventions in mixed economy, such check is impossible as the government keeps promoting the failure by punishing the citizens, burdening them with superfluous taxes and wasting thus collected wealth in failed or meant to be failed enterprises and services in the form of bailouts and subsidies.² In absence of check, these enterprises, instead of improving and curing themselves, keep fomenting further and causes further burden. The government interventions at one hand, supports malinvestment in the failed or mismanaged enterprises, on the other hand, government punishes the profitable private enterprises by further cutting out their profits by means of corporate taxes. As the profits of private enterprises reduces, their rate of progress and production also decreases, causing retardation in progress of citizens.

Poverty and Unemployment

It is a fact that the only way to reduce poverty is to increase the productivity of individuals.³ However, the interventionists’ suggests that government can raise the standard of living of the common man partly at the expense of entrepreneurs and capitalist, and partly at expense of common citizens. They suggests restrictions on profits and equalization of incomes and fortunes by reservations,⁴ confiscatory taxations,⁵ lowering of interest rates by fiat money policy and credit expansion and raising the standards of living of workers by the enforcement of minimum wage rates.
As subsidies and taxation decreases the productivity of workers and the system, the results of interventions comes out exactly opposite to what government intends to achieve so. Fiat currency brings upon cycles of inflation and the arbitrary lowering of interest rates, credit expansion results in depression, and the random minimum wage rates restrictions than creates mass unemployment.
In a free market system, the wage rates are fixed by the interaction of demand and supply, at a level at which all those willing to work can finally find a job, and thus the unemployment remains temporary only as there remains a continuous tendency of the free market to remove the unemployment. However, with government interventions in form of fixed minimum wage rates, things changes. When the government fixes wage rates above the normal rate that could have been fixed by the free market, the potential of market to provide employment decreases that causes unemployment. Furthermore, as the wage rates are fixed in general, those, who looses their job because of fixed minimum wage rates, fails to find another job and their unemployment is prolonged. Thus at one hand, government intervention may increase the income of some workers, at other hand, it forces some other workers to suffer unemployment and hence no income. Also, because of minimum wage rate laws and thus produced unemployment, productivity of enterprises reduces to great extent causing further poverty and unemployment.

Price Control and decrease in productivity

Interventionists further support lavish spending on behalf of government; they support arbitrary low prices for consumers’ goods and high prices for agricultural products. The lavish public spending by government further excruciates the situations. If the government provides funds required by taxing the citizens or by borrowing from the public, it abolishes on one hand as many jobs as it creates on the other, most of the times such jobs created prove to be unproductive and hence are similar to malinvestment and wastage of resources. If commercial banks finance the government spending, it means credit expansion and inflation, further causing grounds to depression, loss of productivity, malinvestment, unemployment and poverty.
Price control is another asset of interventionists through which they actually intend to help the common man but ends in hurting the common man to much extent. Government believes that the price of certain consumer commodity (say wheat) is too high; it wants all poor consumers to be able to have more wheat. Thus, it resorts to price fixing and fixes the price of wheat at a lower rate than that prevailing in the free market. As a result, the marginal producers and dealers of wheat, now incurs loss. As no individual farmer, producer or businessperson can keep producing at a loss, these marginal producers stop producing wheat, the dealers and sellers stop selling wheat in the market. They start using their resources to produce commodities not controlled by arbitrary price fixing (say soya been, or onion). As a result, the quantity of available wheat in market reduces significantly, and hence now, not only poor but also everyone suffers the lack of supply of wheat. The government thus is forced to borrow money from public to buy wheat from other producing countries. On the other hand, the extra supply of other commodities reduces demand and causes further resource mismanagement and wastage. If, in order to keep price of wheat fixed, yet not let the producers to suffer losses, government decides to control the prices of commodities necessary in production of wheat, the same story repeats itself, and ultimately, the end result of price fixing comes out to be deficiency of all productive units, producers, wastage of resources and means of production and overall deficiency of products causing poverty and starvation.

The Only Possible Solution

Irrespective of their supposedly good intentions, interventionists through their planning of mixed economy results in chaos and exact opposite results to their interventions. The middle path between the good (capitalism) and bad (socialism) proves to be an ugly vice (mixed economy).⁶ There is no alternative to totalitarianism than liberty, there is no possible profitable planning for freedom and common welfare than to let the market system work freely, There is no other means to attain full employment, rising real wage rates and an always improving standard of living of the common man than private initiative and free market.⁷

1. Refference::Planned Chaos, Ludwig Von Mises [↩]
2. Burden of debt and loss, Reason for Liberty [↩]
3. Population, Poverty and production, Reason for Liberty [↩]
4. Such Interventions creates Forced Economic Inequalities, Economic inequality based on freedom of individuals to exploit their own intelligence and talent is significantly less visible than the economic inequality that results because of forced planning or government coercion, Freedom Versus Egalitarianism [↩]
5. What really are Taxes, Reason for Liberty [↩]
6. Laissez-Fairre Free market capitalism is right, communism, socialism, collectivism is wrong, and the Mixed Economy system is Evil., The Middle Vice! [↩]
7. Refference::Planned Chaos, Ludwig Von Mises [↩]