Economics

What Is A Subsistence Economy?

A subsistence economy is a non-monetary economy wherein basic needs are fulfilled by the acquisition and use of natural resources on the personal, family, or local level.

What Is a Subsistence Economy?

A subsistence economy is one of the oldest approaches to market management. Economic activity under this type of market does not have monetary value. In fact, wealth in a subsistence economy is determined by an individual or family’s ability to provide for themselves. This means that this market approach relies on natural resources. Activities like hunting, fishing, gathering, food cultivation and handmade homes are the primary drivers behind survival. In this type of economy, the goal is to maintain existence rather than create a surplus for investment and growth.

Historically, all humans lived in subsistence economies. This, of course, was before the existence of urbanization and major cities. As civilizations grew and developed, divisions in labor took place, different values were placed on different goods and services, and societies began to evolve into different types of economies.

Characteristics Of A Subsistence Economy

Perhaps the principal characteristic of a subsistence economy is its lack of industry, technology, and profit. These economies are generally small and participate in trade and bartering practices. The principal goods and services of these markets are based on local customs, beliefs, and values. Often a subsistence economy participates in artisan fishing, labor-intensive agriculture, and grazing livestock. Each of these endeavors is performed with handmade, simple tools and traditional techniques. Another characteristic of subsistence economies is the lack of surplus. The goods and services produced are used or traded in their entirety, meaning nothing is left over to be sold for profit. Subsistence economies are commonly found in developing countries with large, rural communities and underdeveloped industry.

Advantages Of A Subsistence Economy

When the success of an economy is typically measured by its profit margin, it may seem that a subsistence economy does not have many advantages. This is, however, far from the truth. This type of economy is self-sufficient, providing members with several different benefits.

The first of these benefits is that people within a subsistence economic society are often born into their roles in the community. The son of the fisherman, for example, goes on to become a fisherman as well. Under this sort of system, people more often understand and accept what their production roles are. This understanding of production roles combined with the lack of surplus creates a less competitive marketplace. The participants know in advance what resources they will receive for their services.

Another benefit of a subsistence economy is that economic decisions are often made by the community as a whole or by one particular family or tribal leader. Under this system and unlike other economic approaches, the people in the society have a voice in future economic plans.

Additionally, an often overlooked advantage to subsistence economies is that they are less environmentally destructive than industrial markets. This is because economic activities are traditional in nature and do not rely on chemicals or fossil fuels, thus not contributing to water and air pollution.

Disadvantages Of A Subsistence Economy

Despite its advantages, many people believe the disadvantages to a subsistence economy outweigh the advantages. The principal disadvantage found in these types of economies is the reliance on what nature can provide. This means that unexpected climate changes can have drastically negative results on the capacity of productivity. Occurrences like drought, temperature variations, flooding, tsunami, hurricanes, and tropical storms can significantly reduce the amount of goods produced. When this happens, the society does not have access to alternative resources because money is unavailable or difficult to obtain. Not only does the economy suffer in this situation, but the people as well.

Along the same lines, human resources within subsistence economies are also scarce. If one or several community members become sick or suffer a physical impairment, they are unable to work. In this case, an insufficient number of goods are produced for its members’ survival.

Another disadvantage of subsistence economies is that they are vulnerable to larger and wealthier countries, which usually work under market economies. These wealthier nations often invade or occupy countries with subsistence economies in order to take advantage of the undeveloped environment. This results in an imposition of their industries, which can be detrimental to the local environment. For example, petroleum exploration and exploitation efforts tend to benefit wealthy nations financially while contaminating the water and soil resources of the subsistence nation. This pollution further reduces the production output of subsistence economies.

Where Do Subsistence Economies Exist?

As previously mentioned, subsistence economies can be found in developing and underdeveloped countries. These are primarily located throughout Latin America, Africa, Asia, and small Pacific islands. Additionally, very few countries today can be considered solely subsistence in nature. Cultures within these countries, particularly indigenous peoples, often continue to rely on subsistence economies for survival.

The Importance Of Subsistence Economies

Subsistence economies are important for cultural preservation. These practices allow cultures to retain traditional knowledge and social identity, which is valuable for understanding human history and development. In fact, a large percentage of the world’s indigenous peoples are able to survive by obtaining their daily necessities directly from subsistence activities.

For example, the Inuit peoples of the Arctic regions continue to practice traditional, subsistence economies. This can be found in Greenland, Alaska, and Canada. Indigenous peoples living in these areas are able to earn a living by trading animal products obtained by hunting or fishing among other indigenous communities in the area.

The importance of subsistence economies has even been recognized by the US federal government and state government of Alaska. In this state, subsistence hunting and fishing has been protected by regulatory measures. This law was enacted in order to protect the culture and lifestyle of Alaska indigenous peoples. Subsistence practices are also carried out on native reservations in the mainland.

Subsistence Economies of the Past

As previously mentioned, subsistence markets are extremely vulnerable to external influences. Because of this vulnerability, these economies are becoming more scarce around the world. In the past, for example, large populations of indigenous peoples lived throughout North America. The continent’s entire economy was reliant on subsistence practices like hunting, fishing, and gathering. Once European colonists began arriving, however, the economic traditions suffered great losses and underwent significant change. The European market economy was stronger, and the subsistent communities were further weakened by war, disease, and genocide. In a relatively short period of time, the subsistence economy of Native Americans gave way to currency over trade and bartering. Additionally, these cultures began to incorporate newer technology and goods, like metal and guns. Today, only small populations of indigenous peoples living on reservations or in rural areas of Alaska continue to practice an altered version of the subsistence lifestyle. The same is true for similar communities around the world.

More in Economics