A subsistence economy is one of the oldest approaches to market management. Economic activity in this type of market has no monetary value. Indeed, wealth in a subsistence economy is determined by the ability of an individual or a family to provide for itself. This means that this market approach is based on natural resources. Activities such as hunting, fishing, gathering, food cultivation and handmade houses are the main factors behind survival. In this type of economy, the goal is to maintain existence rather than create a surplus for investment and growth.
Historically, all humans lived in subsistence economies. This, of course, was before the existence of urbanization and large cities. With the growth and development of civilizations, divisions in work have occurred, different values have been placed on different goods and services and societies have begun to evolve in different types of economies.
Characteristics of a subsistence economy
Perhaps the main feature of a subsistence economy is the lack of industry, technology and profit. These economies are generally small and participate in trade and exchange practices. The main goods and services of these markets are based on local habits, beliefs and values. Often a subsistence economy participates in artisanal fishing, labor-intensive agriculture and cattle breeding. Each of these efforts is performed with simple, handmade tools and traditional techniques. Another feature of subsistence economies is the lack of surplus. The goods and services produced are used or exchanged in their entirety, which means that nothing is left to be sold for profit.
Benefits of a subsistence economy
When the success of an economy is generally measured by its profit margin, it may seem that a subsistence economy does not have many advantages. This is, however, far from the truth. This type of economy is self-sufficient, providing members with several advantages.
The first of these benefits is that people within a subsistence economic society are often born into their roles in the community. The fisherman’s son, for example, also becomes a fisherman. In this type of system, people understand and accept more often what their production roles are. This understanding of production roles combined with a lack of surplus creates a less competitive market. The participants know in advance what resources they will receive for their services.
Another advantage of a subsistence economy is that economic decisions are often made by the community as a whole or by a particular family or tribal leader. Under this system and unlike other economic approaches, people in society have a voice in future economic plans.
Furthermore, an advantage often overlooked in subsistence economies is that they are less harmful to the environment than industrial markets. This is because economic activities are traditional in nature and do not rely on chemicals or fossil fuels, so they do not contribute to water and atmospheric pollution.
Disadvantages of a subsistence economy
Despite its advantages, many people believe that the disadvantages of a subsistence economy outweigh the advantages. The main drawback found in these types of economies is the dependence on what nature can provide. This means that unexpected climate changes can have drastically negative results on productivity. Occurrences like droughts, temperature changes, floods, tsunamis, hurricanes and tropical storms can significantly reduce the amount of goods produced. When this happens, the company does not have access to alternative resources because the money is not available or is difficult to obtain. Not only does the economy suffer in this situation, but also people.
Along the same lines, human resources within subsistence economies are also scarce. If one or more members of the community become ill or suffer physical disabilities, they are unable to work. In this case, an insufficient number of goods is produced for the survival of its members.
Another disadvantage of subsistence economies is that they are vulnerable to larger and richer countries, which usually work under market economies. These richer nations often invade or occupy countries with subsistence economies in order to exploit the underdeveloped environment. This results in an imposition of their industries, which can be detrimental to the local environment. For example, oil exploration and exploitation efforts tend to financially favor rich nations while contaminating the water and soil resources of the subsistence nation. This pollution further reduces subsistence economy production.
Where do subsistence economies exist?
As mentioned above, subsistence economies can be found in developing and underdeveloped countries. These are located mainly in Latin America, Africa, Asia and small Pacific islands. Furthermore, very few countries today can only be considered subsistence in nature. Cultures within these countries, especially indigenous peoples, often continue to rely on subsistence economies to survive.
The importance of subsistence economies
Subsistence economies are important for cultural conservation. These practices allow cultures to preserve traditional knowledge and social identity, which is valuable for understanding human history and development. Indeed, a large percentage of the world’s indigenous populations are able to survive by obtaining their daily needs directly from subsistence activities.
For example, the Inuit peoples of the Arctic regions continue to practice traditional subsistence economies. This can be found in Greenland, Alaska and Canada. The indigenous peoples living in these areas are able to make a living by trading in animal products obtained from hunting or fishing among the other indigenous communities in the area.
The importance of subsistence economies has even been recognized by the federal government and the state government of Alaska. In this state, subsistence hunting and fishing have been protected by regulatory measures. This law was enacted to protect the culture and way of life of the indigenous peoples of Alaska. Subsistence practices are also conducted on native reserves in the mainland.
Past subsistence economies
As mentioned above, subsistence markets are extremely vulnerable to external influences. Because of this vulnerability, these economies are becoming increasingly scarce worldwide. In the past, for example, large populations of indigenous peoples lived throughout North America. The entire economy of the continent depended on subsistence practices such as hunting, fishing and gathering. Once the European settlers started arriving, however, economic traditions suffered heavy losses and underwent significant changes. The European market economy was stronger and the existing communities were further weakened by war, disease and genocide. In a relatively short period of time, the The subsistence economy of Native Americans gave way to the currency for trade and barter. Furthermore, these cultures have begun to incorporate newer technologies and assets, such as metal and guns. Today, only small populations of indigenous peoples living in reserves or in rural areas of Alaska continue to practice an altered version of the subsistence lifestyle. The same applies to similar communities around the world.