What is a traditional economy?

What is a traditional economy?

Traditional economies, also known as subsistence economies, are small and do not generate profits because they rely on trade and the bartering of goods and services. These goods and services are influenced by local values, beliefs and customs, consisting mainly of traditional activities such as fishing, agriculture and hunting. The products of these industries are generally used completely, which means that there is no surplus or surplus. Traditional economies are typically found in developing countries with large rural areas and underdeveloped industry.

Advantages of a traditional economy

It may seem that this type of economy is not very advantageous, but its members benefit in different ways. The first of these benefits is that the people within the company understand what their production roles are. This understanding creates less competition among individuals because they understand what resources they will receive for their services. Since social roles are based on local uses, members of traditional economies accept that their position has helped to keep a society functioning for centuries. Furthermore, economic decisions are often made by the community as a whole or by a family leader or tribe. Another advantage often overlooked by the traditional economy is that it is less destructive from an environmental point of view than industrial companies.

Disadvantages of a traditional economy

As in any economic structure, traditional economies also have numerous disadvantages. Because of its dependence on natural settings, unexpected climate changes can have drastic productivity results. Natural disasters such as drought, floods and the tsunami reduce the amount of goods produced. When that happens, the economy not only suffers, but also people. Another disadvantage of traditional economies is their vulnerability to larger and richer countries, which usually have market economies. These richer nations can often impose their industries within the countries of traditional economies, which can have a negative impact on the environment. For example, oil drilling efforts can benefit the rich nation and contaminate the water and the soil of the traditional country. This contamination can further reduce production.

Where do traditional economies exist?

The Inuit peoples of the Arctic (Greenland, Canada and Alaska) continue to practice traditional economies. In Greenland, for example, fishing and shrimp are important economic activities. In other areas, hunting and reindeer breeding are common practices. Hunting is a critical part of society, and when a person is successful in a hunt, the meat is divided among all party members. This ensures that not one person goes without food. The Inuit have held these customs for thousands of years, passing information from one generation to another. For them, everything revolves around survival in one of the most rigid climates on earth.

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