Traditional economies, also known as subsistence economies, are small and don’t generate profits because they rely on trade and bartering for 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 in full, 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 beneficial, but its members benefit in several ways. The first of these benefits is that people within society understand what their production roles are. This understanding creates less competition between individuals because they understand what resources they will receive for their services. Since social roles are based on local customs, members of traditional economies accept that their position has helped keep a functioning society for centuries. Furthermore, economic decisions are often made by the community as a whole or by a family or tribal head. Another often overlooked benefit to the traditional economy is that it is less environmentally destructive than industrial societies.
Disadvantages of a traditional economy
As with any economic structure, traditional economies also have numerous disadvantages. Due to its reliance on natural settings, unexpected climate changes can have drastic productivity results. Natural disasters such as drought, floods and tsunami reduce the amount of goods produced. When that happens, the economy not only suffers, but people too. Another drawback 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 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, reindeer hunting and herding are common practices. Hunting is a critical part of society, and when one person is successful on a hunt, the meat is divided among all party members. This ensures that not a person goes without food. The Inuit have held these customs for thousands of years, passing information from one generation to the next. For them, it’s all about survival in one of the coldest climates on earth.
While not a completely traditional economy, around 66% of Haiti’s population continues to practice subsistence farming. The country remains one of the poorest in the Western Hemisphere. Tribes living in the heart of the Amazon in South America also continue to practice traditional economic activities and have little to do with the outside world.
Traditional historical economies
As these subsistence economies are vulnerable to outside influences, they are becoming increasingly scarce around the world. The natives of North America existed in a traditional economy focused on hunting, fishing, and gathering. Once European settlers started arriving, the subsistence economy suffered severe losses. Not only was the European market economy stronger, but the colonizers brought war, disease and genocide. It wasn’t long before the traditional Native American economy gave way to money rather than trade and began to incorporate new technologies and goods, such as metal and weapons.
