In the intricate tapestry of global economics, what is a traditional economy? It's a system deeply rooted in cultural heritage, where customs and long-standing beliefs are the bedrock of production and exchange. According to the United Nations, traditional economies are predominantly found in rural areas, where agriculture remains the cornerstone of livelihood for a significant portion of the world's poor—nearly 80% in sub-Saharan Africa. These economies operate on the principles of barter and trade, eschewing modern financial systems. The United Nations Development Programme highlights that in these settings, surplus is rare, and any excess is often allocated to community leaders or landowners, reflecting a subsistence lifestyle that supports just over a quarter of the global population. This economic model, while less prevalent in the face of globalization, continues to influence the lives and choices of millions, offering a window into the enduring power of tradition in shaping economic landscapes.
Hunting, gathering, and cultivation are the main tasks for workers in a traditional economy. There are big parts of the world's population that still work in traditional economies, primarily in third-world countries with larger indigenous populations. Underdeveloped areas of South America, Africa, and Asia still rely on this type of economy for survival.
In many cases, a traditional economy may have no official currency whatsoever, with any available wealth going to the upper classes. As neighboring countries and influences permeate a traditional economy, the economic system can morph into a mixed, command, or market economy. In command economies, prices and supplies are determined by the government, while, in contrast, prices in a market economy are set by supply and demand. A mixed economy includes both private enterprise and some degree of government control.
One advantage of a traditional economy is that each person has a function in society. Social bonds are thus deepened, people typically feel more unified with the society, and a sense of worth often increases. Also, because goods are only made for survival, the country's natural resources may not as compromised as in other types of economies.
The downside is that individuals tend to remain in set roles in a traditional economy, and their financial well-being rarely increases. Indeed, most of those living in this type of economy find themselves mired in poverty for their entire lives. In his book titled Capitalism at the Crossroads, Stuart L. Hart writes that four billion people may exist in traditional economies.
The Inuit tribe of northern Canada is one example of a society that still uses a traditional economy. Families teach their children the same customs and allocation of resources that have been practiced for hundreds of years. Children in this society are taught how to hunt, fish, make tools, and build shelter.
Technology and independence are shunned in favor of traditions that have been refined over the years. For example, if a bear is caught for food, the main hunter would receive the first piece and the remaining heads of family in the tribe would receive their appropriate portion of the animal for food and clothing. The custom of sharing and collaborating for the good of the society defines a traditional economy. Basic necessities are sometimes traded, but goods are rarely bought and sold.