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What Is a Private Closed Economy?

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  • Written By: Osmand Vitez
  • Edited By: PJP Schroeder
  • Last Modified Date: 04 November 2016
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A private closed economy is one where a country does not allow external economies to affect domestic economic practices. The increasingly global environment makes it difficult for this type of economy to exist. No trade exists between the domestic economy and those nations around it; all goods come from within a single country’s borders. The problem here is when a country fails to provide the resources necessary to grow the internal economy. The result is often an underdeveloped economy with citizens who cannot rise above a certain lifestyle or economic level.

Economies are generally the result of government entities or individuals who reside within a country’s borders. In some cases, a private closed economy may have the underpinnings of a market, capitalistic, or command economy. In some cases, the latter may be the result because there are not enough limited economic resources to go around for all the citizens. The government entity — or one appointed by the citizens — will then dole out the resources as needed. The government entity can also place heavy restrictions on those in the economy in order to avoid trade with other countries.

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Autarky is a common trait in a private closed economy. Individuals living in the country must be self-sufficient, making sure their actions help increase the overall economy. This term can also apply to the nation as a whole, where the actions of the government entity or governing body create a self-sufficient environment for the entire economy. This can lead to a few different situations in a private and closed economy, such as chauvinism or patriotism. These are two concepts that can be the basis of a mind-set for the nation’s economy.

Chauvinism is a concept that means a nation can only achieve economic goals through the disparagement of other nations. For example, a country may build its economy by telling its citizens the resources from other nations are inferior. These derogatory remarks make it difficult for the country to expand its private closed economy because citizens do not believe other economies are worthwhile. Political restrictions may not be necessary here due to the mind-set of individual citizens as it prevents interaction with other countries for economic reasons.

Patriotism is a bit less detrimental than chauvinism in economic terms. It is a belief that one’s nation has the ability to succeed economically without the use of other nations. Freedom is often a central part of this private closed economy. A sense of nationalism helps the economy succeed amongst all others. Problems can exist with this mentality, but they may be less harmful than chauvinism.

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turquoise
Post 3

@ddljohn-- As far as I know, in today's world, it's not possible to have a completely closed or open economy. Every country has an open economy, but this doesn't mean that trade and investment takes place without limits and regulation. We, the US, don't trade with everyone and the same applies to the whole world.

ysmina
Post 2

@ddljohn-- A closed economy does have an advantage in that regard, but I think that the disadvantages are more.

Being an open economy and engaging international trade has its risks, but this is how the economy grows. An open economy encourages the country to develop, it gives people higher standards of living, better technologies among other things.

In a private, closed economy, growth and development will be stagnant. Technology will not advance as rapidly. There won't be a variety of goods to choose from and there will be less incentives to produce.

The world was composed of closed economies once upon a time, there is a good reason why we moved beyond this system. It's because we want development and trade. We want to make our lives easier and better.

ddljohn
Post 1

Seeing how the global economy affects our national economy, sometimes I wish that we had a private, closed economy in the US. When a country is connected to the global economy, crises in other countries and regions affect us as well. Of course, it also goes the other way. Our crises affect other countries negatively.

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