Introduction to Sociology

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The Development of Economic Systems

LEARNING OUTCOMES

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  Describe types of economic systems and their historical development
  
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  Use primary, secondary, tertiary, and quaternary sectors of an economy to compare types of economies
  

Economy is one of human society’s earliest social structures. In sociology, economy refers to the social institution through which a society’s resources are exchanged and managed. The earliest economies were based on trade, which was often a simple exchange in which people traded one item for another. Our earliest forms of writing (such as Sumerian clay tablets) were developed to record transactions, payments, and debts between merchants. As societies grow and change, so do their economies—the economy of a small farming community is very different from the economy of a large nation with advanced technology.

While today’s economic activities are more complex than those early trades, the underlying goals remain the same: exchanging goods and services allows individuals to meet their needs and wants. In 1893, Émile Durkheim noted the change in the way society was held together and was interested in how the division of labor in modern society impacted social solidarity (Ritzer, G 2008) ^[1] Durkheim described what he called “mechanical” and “organic” solidarity that correlates to a society’s economy. Mechanical solidarity exists in simpler societies where social cohesion comes from sharing similar work, education, and religion. Organic solidarity arises out of the mutual interdependence created by the specialization of work. The complex U.S. economy, and the economies of other industrialized nations, meet the definition of organic solidarity. Most individuals perform a specialized task to earn money they use to trade for goods and services provided by others who perform different specialized tasks. In a simplified example, an elementary school teacher relies on farmers for food, doctors for healthcare, carpenters to build shelter, and so on. The farmers, doctors, and carpenters all rely on the teacher to educate their children. They are all dependent on each other and their work.

The dominant economic systems of the modern era are capitalism and socialism, and there have been many variations of each system across the globe. Countries have switched systems as their rulers and economic fortunes have changed. For example, Russia has been transitioning to a market-based economy since the fall of communism in that region of the world. Vietnam, where the economy was devastated by the Vietnam War, restructured to a state-run economy in response, and more recently has been moving toward a socialist-style market economy. In the past, other economic systems reflected the societies that formed them. Many of these earlier systems lasted centuries. These changes in economies raise many questions for sociologists. What are these older economic systems? How did they develop? Why did they fade away? What are the similarities and differences between older economic systems and modern ones?