Advantages and Disadvantages of Traditional Economies
- According to economic theory, the traditional economy is defined as one where resources are allocated among the society's members through the principle of inheritance. In some areas of the world, this deep-rooted social and economic structure remains unchanged, particularly in parts of South America, Asia, Africa and Papua New Guinea, The Pygmy tribe of the Congo region in Africa is an example of a traditional economy. According to Economy Watch, about 400 million indigenous people globally still live in a traditional economy.
- One advantage of a traditional economy is that its members are close-knit and, by necessity, support each other. This reduces feelings of hostility that arise from competition for resources. The people feel secure because their roles are well-defined, giving them a psychological stability that other economic forms often lack. Also, everyone in the economy is employed in some activity. With full employment, there is little, or no, criminal activity. Food production is tailored to meet demand, but surplus food is never wasted and is used for trading.
- One of the main disadvantages of a traditional economy is resistance to change. Members tend to cling to methods of production that have been used for generations and feel that what was good enough for their ancestors is good enough for them. As a result, production is lower than it could be, and this holds back the society's development. It may also affect development in the rest of the country. The members have a lower standard of living than in other economies. Also, the negative aspect of everyone having an allocated role is that some members may not like the role they have, and this lack of choice leads to lower productivity.
- The Inuit people of Canada are an example of a traditional economy that has incorporated change yet retained their identity. Traditionally, the Inuit survived by hunting and fishing. At the beginning of the 20th century they abandoned traditional hunting weapons in favor of guns. Houses replaced the traditional igloo, and snowmobiles took the place of dogs and sleds. In the 1950s the Inuit formed a cooperative movement that allowed them to control commercial activities in their region and also introduced Inuit arts and crafts to an international market.