In economics, there are the concepts of "natural economy" and "commodity economy". What do they mean?
Facts about subsistence farming
Subsistence farming is one that is conducted by a small group of people, provided that they produce the bulk of the products they consume for themselves. This association can be a family or a community. As a rule, subsistence farming is associated with agricultural activities, as well as with small crafts - for example, with the production of clothing, dishes, and tools.
The bulk of subsistence production is consumed within the association that produces it. Very little of it goes for sale or exchange. Therefore, economic ties between subsistence farming communities are very weak. Each of the corresponding groups of people becomes extremely dependent on their own capabilities, as well as on specific working conditions - weather, quality of raw materials, working capacity and skills of workers of community members.
Subsistence farming is a rather rare phenomenon for the modern period of human development. As a rule, it is found in remote corners of the planet, where age-old traditions of tribal relations are preserved and the innovations introduced by civilization are accepted with difficulty.
Of course, you can find examples of subsistence farming in developed countries. In those states where the percentage of the rural population is significant - including Russia, many families living in villages prefer to build family life on the basis of just the same subsistence economy. At the same time, they often see it as a more comfortable and promising activity in comparison with hired work or moving to the city.
Facts about the commodity economy
Above we noted that the natural economy is characterized by the release of products not intended for sale. In turn, if this or that community or family begins to produce food or things for sale, a commodity economy is already formed. That is, it is focused not on satisfying one's own needs, but on making a profit through the sale of products.
The commodity economy is characterized by intensive economic ties between communities. They can unite, learn from each other's experience, provide mutual assistance, improve the technologies for the release of goods. Individual families who become subjects of a commodity economy feel more economically stable, since the missing resources or crop failure can be compensated for by the money savings received as a result of the sale of manufactured goods.
With the development of economic ties between communities, production activities are able to separate from everyday life. Firms are emerging focused on the production of certain goods. Stores appear - specialized trade institutions, as well as intermediaries who are ready to facilitate the establishment of links between manufacturers of goods. There is simply no place for them in subsistence farming - everyone needs to work, there is absolutely no time and there is no need to establish additional economic ties.
The economic systems of most modern countries of the world are “commodity economies” on a national scale. Moreover, the more actively the state carries out trade with others (or expands the domestic market), the more successful and stable it becomes.
The main difference between a subsistence economy and a commodity economy is for the purpose of production. In the first case, food and things are produced by humans to meet their own needs. In the second - mainly for the purpose of subsequent sale.
This difference predetermines other criteria for the dissimilarity of natural and commodity economy - the difference in the intensity of economic ties, the stability of economic communities, in the emergence of firms and intermediaries.
So, now we know what is the difference between subsistence and commodity farming. Let's display the basic facts about this in a small table.
|Natural economy||Commodity economy|
|Assumes human production of food and products for their own needs||Assumes the release of products for sale|
|Characterized by weak economic ties between economic communities||Characterized by active and constantly developing ties between economic communities|
|Production is part of the daily life of a person||Production is represented by specialized firms|
|Sales, if any, are carried out directly||Trade is carried out in stores, more intensive sales can be facilitated by intermediaries|