The traditional economic system in many respects relies on customs and religion. In such country, new technologies and any changes are not welcomed. Because of it the low standard of living remains, the big list of social and economic problems is created.
What is traditional economy?
In a traditional economic system the main role is played by traditions, customs and ceremonies. They regulate production, consumption of the benefits. Usually such system meets in the underdeveloped preindustrial countries. Command and administrative and market economic systems are considered more developed. The economic role of the person depends on hereditary situation, on belonging to any given class of society. Technical innovations do not correspond to traditional understanding, threaten constancy of a social order. Therefore they are not welcomed.
In traditional economy religious values are on the first place. Manual work and all backward methods of production is widely operated. Owners are separate farms. Each of them in the right to dispose voluntarily of the resources. Owners can will unite with others, to sell them the resources or to offer the ability to work. In the countries with traditional economy an important role is played by country and craft farms, at the same time descendants inherit occupation of ancestors.
Weak points of a traditional economic system
On condition of high birth rate the risk of poverty increases in such country. Therefore to have to give to the state the most part of national income on social support and on development of infrastructure. The foreign capital is very important. In the countries with a traditional economic system usually there are main traditional resources which are used for the solution of economic problems. For example, coffee in Brazil. This system is stable that does it incapable of active changes and progress. The standard of living remains quite low. Income in such country is distributed unevenly. There is a big gap and contrast between different population groups. The policy and economy are unstable, high rates of inflation, a considerable external debt. The economy very much depends on public sector. Noncompetitive goods prices, natural raw materials are used inefficiently. The illiteracy of the population, the small number of qualified specialists, unemployment is characteristic. But if the country with a traditional economic system turns away from the customs, reorganization will happen extremely long. It was proved by experience of a number of the countries forced to make once so under the influence of colonialists. Similar changes still did not lead to increase in the standard of living in these countries.