In a traditional economy, customs and traditions determine how trade will happen. The belief is that all economies started out as a traditional economy. The traditional economy is fundamentally based on social support and community-oriented activities.
What Does Traditional Economy Mean?
The traditional economy is the most basic form of an economic system. A community engage in different activities individually to produce goods or services that are required by the rest of the community. The activities are typically centralized around agriculture or hunting.
In the modern era, this system is considered underdeveloped since it lacks certain elements that increase the quality of the life of the community participants. The factors include proper medical assistance, essential utilities or even a local currency. Trading activities are usually conducted by bartering, and there is no wealth in terms of capital accumulation since the system aims to fulfil fundamental biological needs and do not chase profits.
Tradition and customers are essential in this environment. The economy is generally ruled by elders or leaders with the expertise to make economic decisions. The decisions usually are around how to properly distribute the available goods
Common Characteristics of a Traditional Economy
- The traditional economic system centres around a family or a tribe.
- Majority of the time they have a primitive occupation like farming, hunting or fishing.
- The community is self-sustained through fishing, hunting and farming.
- The traditional economic system does not trade. The market participants consume the products that are produced/collected, and they rely on bartering to get the products that they want.
- Traditional economies usually emerge because people in the area engage in hunting or fishing activities. They eventually settle down and gradually from a society that follows the conventional economic system.
Advantages of Traditional Economy
- The traditional economy offers less of a threat to the environment than another market system. People in the economy have conventional occupations like farming, fishing, hunting or cattle-rearing.
- There is no wastage in the traditional economy because the people in the economy consumes whatever they produce or gather.
Disadvantages of Traditional Economy
- Seasonal changes can disrupt the economy. If it is an offseason, it will directly affect the hunting and farming in the economy.
- In offseason times, people can starve because there is no food to utilize.
Traditional Economy Example
Countries like Bangladesh, Haiti makes use of primitive agriculture ways. They are, however, not a traditional economy because they do have modern occupations. A characteristic of a traditional economy is that the economy should be self-sustained. The Jarawa tribe of the Andaman Islands use primitive ways to survive.
The Oribu tribe is an example of nomads that live in the Brazilian. The tribe has been studied to see how they run their economy. A close look was given to how they distribute resources amongst each other.
The tribe consists of 1000 members. The Oribu tribe is a farming community that focus on growing fruits and vegetables, they are however skilled fishermen as well.
The tribe distribute the products that they harvested/obtained daily by placing all the food in the middle of the camp. An elder called the Ancient will go to the middle of the camp and bless the food before any of the members can take the food.
The community can then take as much food as they require. In their custom, no one takes more food than what is required for the day. This is a perfect example of a traditional economy because there is no currency required for trading or distribution of goods.
Traditional Economy Conclusion
- A traditional economy is a basic economic system where customs and traditions are the elements that determine the way trade and commerce are performed.
- A community engage in different activities individually to produce goods or services that are required by the rest of the community.
- The activities are typically centralized around agriculture or hunting.
- Common characteristics include family centred, use hunting, fishing or farming to get the required goods, the economy doesn’t trade.
- Advantages include there is no threat to the environment, and there is no wastage.
- Disadvantages include seasonal changes can disrupt the economy, leaving no food for the participant. This could lead to starvation.