An overview of the traditional economic system

Do you believe the people of the world have gradually evolved through time and improved their lifestyle with every passing year? Think again. An in-depth analysis of traditional economy reveals an interesting fact. Societies started relying on tradition to shape their economic life 10,000 years ago. However, this statement does not hold true on a global aspect.

Anthropologists confirm that the traditional economic system has not changed much since the time people started to depend on hunting and gathering as the primary modes of survival. A significant part of society still struggles to imbibe the primitive models of economic structure.

Even in this era of capitalism, the core and essential needs of survival in various communities are satisfied by an archaic and ancient mode of practice. This blog aims to shed light on the practices followed by a traditional economy. Keep reading for relevant insights.

What is a traditional economy?

Traditional economy is a rural and farm-based economic system where traditions, beliefs, and customs shape the basic modes of survival and production.

The economy that is based on traditional modes of living is known as a traditional economy. A significant portion of today’s population functions under an economic system that depends solely on agriculture, cattle herding, fishing, and such ancient traditional practices.

Each member of a traditional economy has specific and pronounced roles. It comprises of multiple small units of production. Each of the units relies on ancient practices like trading and barter system of goods and services. 

How does a traditional economy work?

Every society produces goods and distributes them accordingly to ensure the survival of its people. The same goes for a traditional economy as well. Traditional economy, also known as a subsistence economy, consists of extremely small units of production that rely on ancient practices like trading and barter system of goods and services.

Society needs to answer three basic questions to decide what form of economic system it will employ.

• What will be produced to satisfy the core needs of survival?

• How will it be produced?

• How will it be distributed?

• And most importantly, for whom will it be produced and distributed?

In the case of a traditional economy, the primitive modes of survival govern the modes of production and distribution.

For example, let us consider the case of a society that has always migrated to follow deer herds and depend on hunting deer or gathering berries.

They will continue to answer the “for whom”, “what” and “how” of the production system in the following manner as long as that society survives:

These societies are extremely close-knit and don’t follow the principles of private property. Therefore, a hunter may have killed more than one deer, but that doesn’t necessarily mean he is entitled to consuming the kill alone.

The community determines the share he will receive and the tradition compels him to deliver his gains to the community instead of hoarding or selling them. All these rules and customs are enforced by social pressure or the beliefs of the community, clan, family or tribe. 

What are the characteristics of a traditional economic system?

The expert economists and anthropologists believe that every economy had started as a traditional economy and later evolved into a corporate market in the developing countries. The popularity of the corporate markets gave rise to increasing demand for commodity fetishism that shook the traditional economies to the very core.

With the neoliberal economy vehemently trying to imbibe the worldwide population within its fold, the production roles of traditional economies are shifting as well. Though the existing traces of this primitive mode of living are changing at a rapid rate, some of its core characteristics still remain the same.

The basic characteristics of a traditional economy are as follows:

• Traditional economy is based on how a community lives, depends on geography, hierarchy, tradition, and culture,

• A traditional economy is modeled upon ancient means of production, such as agriculture, fishing, hunting, and gathering.

• In a traditional economy, a community or society doesn’t live in a particular geographical location but keeps moving. For example, the Maasai tribe follows their cattle, or the Cro-Magnon man took to following herds of animals to hunt.

• A traditional economy doesn't depend on currency exchange and does not believe in property ownership. It relies on a system of trade and barter.

• It depends on the products produced. Nothing is wasted in a traditional economy.

• The system of class and caste play a dominant role as it mainly constitutes the marginalised and less privileged sections of the population (most prominent in the third world countries)

• While the fundamental features of a traditional economy have its own benefits, they often become vulnerable as the bigger and richer countries control the market economy. The modern technologies hinder their modes of production time and again.

For example, oil-drilling efforts that benefit the rich enterprises contaminate water and soil of the traditional country. This contamination further reduces production output and proves to be disastrous for the traditional communities. 

What is the goal of a traditional economy?

It is important to remember that in any type of economic system, the socially accepted and appreciated methods of lifestyle are not solely decided by the individual members of society.

The neoliberal economy focuses on investments and deregulation of governmental control over industries, hospitals, job pools and every taxable source of income. But, the goals of a traditional economy are vastly different. They preserve the old ways of running an economic system where the capitalist structures have still not been able to reach out.

Most traditional economies, owing to their existence amidst nature, find ways to preserve the latter. Their rituals make them worship, conserve and preserve nature and exploit it within limits. Thus, the goal of a traditional economy is to sustain a peaceful social order driven by needs and not demand and supply curves. 

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