The economic systems of modern states, as well as those that have historically been built in different countries, are presented in three main models - traditional, command, and market. Each of the noted systems of economic management is characterized by specific features. Consider the features of the traditional economy as historically the earliest. What are its most noteworthy characteristics?
The essence of the economic system
What is an economic system? There are quite a few approaches to the definition of this concept. According to one version, the economic system should be understood as a set of laws, norms, traditions, values and institutions through which society solves the problems associated with economic management, and also answers questions about what to produce, how and for whom.
Regarding the classification - there is a traditional economic system, command and market. We study the specifics of each of them in more detail.
Features of the traditional system
The traditional economic system is characteristic, if we talk about the modern period, for underdeveloped states in the economic plan. It is based on conservative norms and attitudes regarding methods of managing the economy, understanding the laws of supply and demand, and the interaction of subjects of economic activities. If we talk about the history of the development of mankind, the traditional economic system was characteristic of the early feudal periods, when the basis of the economic systems of states and societies were craftsmanship, agriculture, and elementary forms of trade.
Apart from conservative attitudes at the level of rules and norms, a rather slow introduction of new technologies is observed in it. The first factor - the strong role of traditions - determines the unwillingness of citizens to develop new industries, to modernize the economic structure of society. The second - the slow introduction of new technologies - becomes the reason that even if people want to bring something new to the economy, there are few actual opportunities for this.
Social Inequality in Traditional Systems
The traditional economic system is characterized mainly by the authoritarian principle of distribution of public goods. The main resources are received by a certain elite. If we talk about tribal relations - the leader or group of those. The standard of living of most of the subjects of society is low, since economic resources concentrated in the hands of the ruling elite. At the same time, this may not be of practical importance, since conservative attitudes at the ideological level can predetermine the lack of interest of people in any excesses, social protection, and entrepreneurship. Therefore, the traditional type of economic system in some cases is characterized by very high stability. There are not many factors under the influence of which changes can occur in farms of this type. The mechanisms of revolutionary changes from within, as a rule, are not formed due to conservative ideology.
The likelihood of the emergence of external entities interested in the transformation of the economic model in a particular state with a traditional economy is small. First, major players in the international business arena do not always want competitors to appear.Secondly, it may be more profitable for them to interact specifically with the traditional economy - as a rule, the location of industries there, albeit technologically simple, is often much cheaper than in developed countries.
Social characteristics of a traditional economy
The most important aspect that is useful to consider when studying a phenomenon such as the traditional economic system is the characteristic of this model in a social context. The first thing worth mentioning is that the basis of management is community labor. The release of goods is carried out jointly. The proceeds from their sale are distributed among the people who participated in the creation of the respective products. The sale of goods is carried out, as a rule, at the lowest possible prices due to high competition, as well as the relatively small purchasing power of citizens who purchase them. In some cases, the economy of local farms may include service industries - for example, those related to repairs.
Labor productivity in traditional communities is not the highest. We noted above that public goods can largely be concentrated in the hands of the ruling elites. At the same time, in many cases, states build institutions for social protection of citizens, since the incomes brought by local farms can be extremely low, which poses a threat to political instability.
Sectoral structure of traditional economies
The main industry in traditional economies is agriculture. In order to organize production, we need, firstly, investments in the necessary infrastructure, and secondly, the desire of people to do something else, which can differ significantly from traditional occupations, perhaps, to acquire new knowledge, skills, and competencies. In communities of the type under consideration, both may be absent in the required size.
The agricultural industry is also usually not characterized by innovation. Often this is due to a warm climate, in which there may be no need for significant modernization of technologies for growing and harvesting fruits. In addition, direct purchasers of relevant products may not be interested in improving agricultural operations. The fact is that, thanks to the warm climate and other positive conditions for growing fruits, agricultural producers can be spared the need to use chemical fertilizers, genetically modify products, and use substances that accelerate the growth of vegetables and fruits. Buyers, therefore, are beginning to get used to the fact that agricultural products coming from a particular market will be completely environmentally friendly. They may lose interest in acquiring fruits that are grown using innovative approaches.
As for the manufacturing sectors of the traditional economy, most often these are small artisan workshops. The technology for releasing goods in them is also, as a rule, quite conservative. And this may also be due to the wishes of potential buyers of the goods. Many of them prefer to purchase products manufactured by masters of the corresponding profile - utensils, interior items, furniture - which are handmade and using natural materials.
So, the main features of the traditional economic system: the community economy, the predominance of agricultural products in the structure of manufactured goods, the presence of conservative norms in social behavior, limited access to new technologies. The corresponding model of economic management, in general, allows for free trade, and this makes it possible for citizens to provide an acceptable standard of living for themselves and their family. In some cases, the social role of the state becomes significant.
Team Economic System
Having studied the characteristic features of the traditional economic system, we also examine the specifics of the command model of managing the national economy. Its main feature is the minimum intensity of free market relations. Key economic processes are managed by the state. If we talk about the early historical periods - the feudal lord or slave owner. Although it should be noted that even in the corresponding historical stages of the development of mankind, free trade rarely had restrictions. If we consider the positive features of the traditional economic system, then we can highlight primarily the unpopularity of the prohibitions on the sale of goods by citizens. Therefore, practical examples of building a team economic model at the state level, before it appeared in the USSR, China, Warsaw Pact countries, North Korea, Albania, Cuba, are difficult to find in history.
In most countries, the economy of the corresponding type has been fully or partially transformed into a market economy. Regarding assessments of this fact in the expert community are the most active discussions. There are experts who are confident that the command economic system has not settled in the world due to low efficiency. Others, drawing, in particular, attention to the experience of China, say that the corresponding model in many aspects is superior to any others, especially if we talk about the social orientation of the national economy. The refusal of states from the command economy was thus dictated rather by political reasons.
A characteristic feature of the traditional economic system is inequality in society. With a command economic model, it is not so pronounced. Therefore, in many states the corresponding economic management system was very popular, and in many modern countries - China, Cuba, and to a large extent in Belarus - it still works.
Economic Management Team Principles
As we noted above, a sign of the traditional economic system is the presence of conservative norms by which economic processes are managed. How does the state solve the corresponding problems when building a team model?
The key economic entity in this case, a certain political institution stands. Its task is to formulate economic development plans, as well as ensure their implementation. The relevant political institution determines:
- what are the likely needs of people and society for certain resources;
- how many products of one type or another should produce specific enterprises;
- what technologies should be used when releasing goods;
- how products will be distributed.
The state also resolves issues with the optimal location of production facilities, supply and distribution channels. Under a command economic system, the government sets salaries, allowances, and desired profitability indicators.
In some cases, the principles of self-regulation may be introduced in the economic systems of states. As a rule, this is expressed in permission to engage in entrepreneurial activities for certain categories of citizens, provided that the corresponding activities will be mainly associated with the satisfaction of personal needs, rather than the desire to receive the greatest possible profit. In this sense, traditional and command economies may have some similarities. In the first case, those farms that operate at the local level — private workshops, small shops, and the individual release of goods — become the basis of social production. In the case of the command economy, the permitted forms of entrepreneurial activity are likely to be the same.
Market economy
So, we investigated what a command and traditional economic system is. The characteristic of the second predetermines its pronounced dissimilarity with the first. Mainly because the subjects of society and management under it have the right to conduct economic activity relatively freely. In this sense, the signs of the traditional economic system make it closer to the market one, which, first of all, is characterized by almost unlimited freedom of citizen participation in the sale and purchase relations. The level of government involvement in the regulation of these processes is minimal.
The market economic system in the country involves developed social institutions, primarily the participation of citizens in political management. The model of economic development under consideration requires the protection of private property. The traditional, command, market economic systems are dissimilar in terms of the mechanism of distribution of public goods. In the first case, the main resources, as we noted above, are concentrated in the hands of the ruling circles. Under the command system, they are distributed by the state.
Distribution of public goods in a market economy
A market economy suggests that public goods will be distributed in society based on self-regulating mechanisms of supply and demand. The best public goods should thus be acquired by citizens who have the necessary capital. In turn, no one forbids other people to invest their work, establish their own business, develop as an economic entity and acquire the same status - a person with capital. While, for example, a characteristic feature of the traditional economic system is an extremely complex mechanism for raising citizens' social status. Despite the fact that the corresponding model of economic development does not prohibit market relations, in practice, the possibilities for a person to develop his own business or capitalize on his work are greatly complicated by a lack of access to technology, an underdeveloped legal framework, and often disapproval of entrepreneurial activities by others.
The compatibility of economic systems
The most important point to which attention should be paid: the types of economic system that we have examined (traditional, command, market) can, firstly, be mutually combined, and secondly, if we talk about the modern stage of human development, they practically do not occur in their pure form at least at the level of the national economy of the state. Even in developed countries, there may be communities in which business communications may have signs of a traditional economy. For example, in Russia, as well as in many countries of Western Europe, a significant percentage of GDP is provided by agriculture. From the point of view of technology, this industry may well be assigned to segments developing within the framework of the traditional economic model.
The command principles of economic management are preserved in many states - China, North Korea, Cuba, and to a large extent - in Russia, if we talk about state-owned enterprises that are leaders in many industries. Thus, in practice, in most countries of the world, a virtually mixed model of the economy has been formed. It can combine the features of each of us considered.
What determines the predominance of one or another element in the states, which is most characteristic of the types of economic systems that we have examined? Traditional, command, market, mixed models, as a rule, are established due to social factors, the historical specifics of the country's development, the influence of other states, and geopolitical position.It is difficult to single out a set of criteria that states can always be guided by in choosing the optimal economic management models.
There are approaches according to which the compatibility of the country's economic system with market, team or traditional principles should be determined on the basis of the civilization of the state. There are many formally independent countries that have their own language and culture, but if you follow similar points of view that form a single civilization. In this case, even with noticeable differences in political priorities, it makes sense for them to practice similar approaches to managing the economy. Even if such theories are not considered as guiding, it can be seen that in many countries that are close in culture, very similar principles of building economic relations are observed. For example, many researchers attribute the economic successes of Asian states — Japan, South Korea, Taiwan, Singapore — primarily to a developed culture of discipline and hard work among citizens. If there was no corresponding basis, Western investors, who are often attributed a decisive role in the economic successes of these countries, probably would not invest in the development of new high-tech industries in territories that are not too infrastructurally developed and do not have significant natural resources.
The noted discipline of Asian peoples, according to researchers, is primarily associated with the huge role of conservative attitudes in socialization, education, perception of the world, in communication with other people that have developed in the respective societies. A similar characteristic is a hallmark of the traditional economic system. However, in the case of national economies of the mentioned Asian states, we are talking about a successful combination of conservative approaches and full-fledged market mechanisms.
Thus, several forms of management have developed on the world market. This economy is traditional, market, command and mixed economies. The first is based on small-scale production, retail trade, and individual entrepreneurial activity with low turnover. In a command economy, the leading role in economic management belongs to the state, in some cases certain forms of private business are allowed, allowing citizens to satisfy their personal needs.
Under the market model, the management of economic processes is carried out with minimal government intervention. Commercial communications are based on the laws of supply and demand. However, in its pure form, if we talk about the national economy of a single country, the traditional, command or market economy is practically not observed. There may be some basic model of economic management, but in most cases it will include elements of other systems.
