What is the Traditional Economy?

Traditional Economy – A traditional economy is an economic system that relies on cultural customs and age-old traditions to determine what is produced, how it is produced, who has it, and how it is distributed.

It is considered the most basic form of an economic system. In it, a specific community or group is dedicated to different activities individually to produce goods or services necessary for the rest of the group. They are mainly basic activities such as agriculture, hunting, gathering, fishing, etc.

Because of this, social support and community-oriented activities are critical in a traditional economy.

On the other hand, tradition and customs are also crucial in this environment. They are usually governed by elders or leaders with enough experience to judge and decide on the policies or economic decisions the tribe must carry out.

Currently, this system is considered underdeveloped since it lacks certain elements that increase the quality of life of the community participants. These factors include adequate health care, essential public services such as quality education, or even a local currency. Commercial activities are carried out through barter, and there is no “wealth” in capital accumulation since the system aims to satisfy the most fundamental basic needs.

Characteristics of the Traditional Economy

• Traditional economies are centred around a family or tribe. They use the traditions gained from the elders’ experiences to guide daily life and economic decisions.

• A traditional economy tends to occur in nomadic hunter-gatherer communities. These societies travel vast areas to find enough food for their sustenance. Although, they follow the herds of animals that sustain them, and migrate with the seasons.

• Most traditional economies produce only what they need. There are rarely surpluses or leftovers. It makes the creation of money as we know it unnecessary.

• If some trade is carried out, they carry it through the barter system, which we already explained in the video I left you in the labels. For example, a tribe that depends on hunting trades food with a group dedicated to fishing. Since they only trade meat for fish and, as we said before, they rarely produce a surplus. There is no need to create a currency.

• Traditional economies begin to transform when they start farming and settle down. Since, they are more likely to have a surplus, such as a bountiful harvest, which they use to trade. Although, When that happens, the groups create some form of money. From here, the traditional system begins declining and transforming into planned or capitalist economic systems.

Advantages of the Traditional Economy

Among its advantages, we find that:

1. It attitudes less of a threat to the environment than any other economic system. They tend to live in harmony with the environment because they subsist off the land rather than trying to control or benefit from natural resources.
2. There is no waste of resources since the inhabitants of the economy consume almost everything they produce or collect.
3. They generate strong and united communities in which each member plays a role in the production of goods and services. Well-defined links between individuals provide comfort and guidance. Also, people understand their importance within the group by relying so much on human relationships. Everyone feels that their efforts are worthwhile and appreciated by the group. This perspective helps ensure that your knowledge and skills are passed on to future generations.

Disadvantages of the Traditional Economy

Like everything in this life, traditional economies also have disadvantages. Among them:

1. They are highly exposed to changes in nature, especially the weather.  Because of this, traditional economies tend to go through times of famine with relative frequency. Severe droughts or floods can wipe out the harvest or game for that season.
2. Social roles are highly rigid in these societies, so the circumstances of their birth essentially limit individuals.

For example, you would be if your father were a hunter too. Consequently, change and innovation are rejected as a threat to the survival of society.

3. Lower efficiency than other economic systems. Compared to market economies like capitalism, a traditional economy is much less efficient and less likely to achieve a virtuous quality of life for its people.
4. They are vulnerable to capitalist or planned economies. These societies often consume the natural resources on which traditional economies depend. For example, Russian oil exploitation in Siberia has damaged streams and tundra. It has reduced traditional fishing and reindeer herding for traditional economies in those areas.

History of the Traditional Economy

Historically, traditional economies date back to Cro-Magnon man, that is, to the beginning of humanity.

Back then, tasks such as hunting, farming, gathering, and shelter-seeking were shared among the group as a proper way to build an economic system.

An excellent example of an early origin of the traditional economy comes from the Maasai tribe of East Africa. There, tribal leaders designed an economic model in which decisions about work, production and distribution of products and goods were based on the tradition and customs of the community.

Like most of the traditional economies that go back in time and that lead to the traditional economies of today, the Maasai are indigenous peoples who live in the same way as in the past. Generation after generation they have dedicated themselves to herding cows, sheep and goats.