The traditional economy is one of the types of economic systems of farming. The traditional economy differs from other ways of the economy in that in it the practice of using resources is determined by traditions and customs.
For countries whose economies are traditional in nature, the existence of different forms of farming based on different forms of attitude to property is characteristic. Quite often, in this way, the communal form of ownership is preserved, which is characterized by a natural-social form of management.
The traditional economy also presupposes the existence of small private property, which, as a rule, acts as the foundation for the creation and development of small-scale production (which are represented by artisans and peasant farms).
Fundamental decisions in a traditional economy can be made in different ways. This is influenced by the type of existing economic structure. In the conditions of a natural-community way of life, the adoption of major economic decisions is carried out by a small group of members of the society (council of elders) or by the head of the clan. As for the artisans and peasants, they make such decisions on their own.
The traditional economy has various stimulating levers that spur economic development. The natural-communal system mainly operates with material incentives in relation to labor relations. They are associated with the need to meet basic necessities of life.
In the conditions of the predominance of small-scale production, the economic leverage is the incentive: the excess of income over expenses. Of course, given the fact that such an economy is based on the personal work of the participants, the size of such incomes is not very large.
The traditional economy is based on backward technology, manual labor, and agricultural production. The existence of established traditions holds back the expansion of technology and the dissemination of advanced information.
In general, such an economy can be characterized as an underdeveloped, inactive, stagnant system. Today in the world there are no countries that operate in a purely natural form. Almost every national economy has already penetrated market relations.
Moreover, today a fairly significant percentage of the world's population lives in conditions of the development of economic relations, which are characterized by the term “sub-economy”. First of all, we are talking about third world countries. One of the satellites of such systems is poverty. Available wealth is concentrated in the hands of a few.
A traditional economy may not even have an official currency and work through barter.
The centralized economy is governed by state bodies, on the basis of directive programs and plans, direct hierarchical subordination to subordinate higher bodies, with state ownership of all means of production.
The modern economy of Russia is characterized by a close relationship with the process of establishing new business conditions, the transition from a centralized economy to a market one. Before the reforms in Russia, state ownership accounted for about 90% of production assets and about 80% of those employed in the economy.
Bureaucratization and monopolism, state regulation of prices led to a decrease in economic incentives to work and, on the whole, impeded technological progress. This led to the reforms of the 90s, during which state property gradually began to pass into private hands.
To date, the Russian economy has undergone such transformations as overcoming nationalization of the economy, competitive relations have developed in the market, and the market infrastructure is undergoing intensive development.