What Is a Private Closed Economy?

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.

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.