Barter is the exchange of resources or services
for mutual advantage, and may date back to the beginning of
humankind. Some would even argue that it's not purely a human
activity; plants and animals have been bartering -- in symbiotic
relationships -- for millions of years. In any case, barter among
humans certainly pre-dates the use of money. Today individuals,
organizations, and governments still use, and often prefer barter,
as a form of exchange of goods and services.
Cattle, which include anything from cows, to sheep, to camels, are
the first and oldest form of money. With the advent of agriculture
came the use of grain and other vegetable or plant products as a
standard form of barter in many cultures.
The first use of cowries, the shell of a mollusc that was widely
available in the shallow waters of the Pacific and Indian Oceans,
was in China. Historically, many societies have used cowries as
money, and even as recently as the middle of this century, cowries
have been used in some parts of Africa. The cowrie is the most
widely and longest used currency in history.
Bronze and Copper cowrie imitations were manufactured by China at
the end of the Stone Age and could be considered some of the
earliest forms of metal coins. Metal tool money, such as knife and
spade monies, was also first used in China. These early metal
monies developed into primitive versions of round coins. Chinese
coins were made out of base metals, often containing holes so they
could be put together like a chain.
Outside China, the first coins developed out of lumps of silver.
They soon took the familar round form of today, and were stamped
with various gods and emperors to mark their authenticity. These
early coins first appeared in Lydia, which is part of present-day
Turkey, but the techniques were quickly copied and further refined
by the Greek, Persian, Macedonian, and later the Roman empires.
Unlike Chinese coins which depended on base metals, these new coins
were made from precious metals such as silver, bronze, and gold,
which had more inherent value.
Leather money was used in China in the form of one-foot-square
pieces of white deerskin with colourful borders. This could be
considered the first documented type of banknote.
The first paper banknotes appeared in China. In all, China
experienced over 500 years of early paper money, spanning from the
ninth through the fifteenth century. Over this period, paper notes
grew in production to the point that their value rapidly
depreciated and inflation soared. Then beginning in 1455, the use
of paper money in China disappeared for several hundred years. It
was still many years before paper currency would reappear in
Europe, and three centuries before it was considered common.
"Potlach" comes from a Chinook Indian custom that existed in many
North American Indian cultures. It is a ceremony in which not only
gifts were exchanged, but dances, feasts, and other public rituals
were performed. In some instances potlach was a form of initiation
into secret tribal societies. Because the exchange of gifts was so
important in establishing a leader's social rank, potlach often
spiralled out of control as the gifts became progressively more
lavish and tribes put on larger and grander feasts and celebrations
in an attempt to out-do each other.
The earliest known use of wampum, which are strings of beads made
from clam shells, was by North American Indians in 1535. Most
likely, this monetary medium existed well before this date. The
Indian word "wampum" means white, which was the colour of the
Gold was officially made the standard of value in England in 1816.
At this time, guidelines were made to allow for a non- inflationary
production of standard banknotes which represented a certain amount
of gold. Banknotes had been used in England and Europe for several
hundred years before this time, but their worth had never been tied
directly to gold. In the United States, the Gold Standard Act was
officially enacted in 1900, which helped lead to the establishment
of a central bank.
The massive Depression of the 1930's, felt worldwide, marked the
beginning of the end of the gold standard. In the United States,
the gold standard was revised and the price of gold was devalued.
This was the first step in ending the relationship altogether. The
British and international gold standards soon ended as well, and
the complexities of international monetary regulation began.
Barter is often regarded as an old-fashioned
means of exchange that was superseded because money is far more
efficient. After all, in a monetary system an apple grower who
needs shoes simply has to find a cobbler. In a pure barter system
the apple grower would have to find not just any cobbler but one
who happened to want apples at that time. Thus in virtually all
civilizations, except the Incas money came to play an important
However the inconvenience of barter was just one
factor, and in most places was probably not the most significant
one, in the origin of money.
Barter has, undeservedly, been given a bad name
in conventional economic writing, and its alleged crudities have
been much exaggerated. Barter and money are not necessarily
completely incompatible. One of the most important improvements
over the simplest forms of early barter was first the tendency to
select one or two particular items in preference to others so that
the preferred barter items became partly accepted because of their
qualities in acting as media of exchange. Of course,
they still could be used for their primary purpose of directly
satisfying the wants of the traders concerned.
Barter still often plays an important role in
trade with countries whose currencies are not readily convertible,
e.g. the communist countries during the cold war. At the retail
level barter has become the main means of exchange on occasions
when currencies have collapsed completely as a result of
hyperinflation, e.g. in Germany after the two world wars.
In normal circumstances retail barter is much
less important but its persistence has puzzled some economists. The
magazine Exchange and Mart devoted partly to barter has been
published in Britain every Thursday since 1868. Jevons noticed it
in its early years and was obviously puzzled that any such
publication, partly dependent on serving such a long obsolete
purpose as barter, should appear to have any use to anyone. We
must assume, concluded Jevons, ... that the printing press
can bring about, in some degree, the double coincidence necessary
to an act of barter.