How Bartering Led To The Advent Of Money

Posted by Allison on 6 April 2009, 15:17

Modern money has provided us with a very convenient way of paying for goods and services.  We have banknotes and coins to hand over for the value of what we have bought, and thanks to the advance of technology we can also use credit and debit cards to ensure that no actual money changes hands.  Instead some figures are virtually debited from your account and added to someone else's.

But the history of money stretches back many centuries – and even before money was invented the ever resourceful human being was trying to find ways to get what they wanted without leaving anyone else out of pocket.

That's when bartering was the order of the day, and people thought nothing of exchanging things they had for something that they wanted.  It was a fair if uneven method of exchange, and it certainly served the purpose until something better was thought up.

So how did bartering occur back then?  We still have an understanding of bartering now, since we will sometimes swap services with another person to avoid having to exchange real money.  Businesses do this all the time, without even realising that what they are doing is the most primitive form of paying for goods that the world has ever known.

But you wouldn't necessarily exchange a cow for your weekly shopping at the supermarket nowadays, and that's exactly what they used to do when bartering was the main form of buying and paying for things.

The most important thing to recognise about bartering is that it has distinct advantages and disadvantages, and it was primarily the disadvantages that led to the advent of money as we know it today to come into existence in the first place.

The great thing about bartering was that anything you had could be used in exchange for something else.  Because there was no fixed system where so much of one thing was worth so much of something else, it was down to the individual to barter with other people to get the best deal they possibly could.  Just as you would haggle with someone on a market stall today to try and get the price down for the goods you wanted, so you would have had to barter with someone in times gone by to agree on a fair exchange to get your goods.

It sounds like a great opportunity, but in reality bartering could be a real problem.  Let's suppose you needed to buy a bag of grain, but the one person in your village who had one wanted a bag of wheat in exchange.  That sounds like a good deal – the only problem is that you don't have a bag of wheat.  In this situation you might have had to exchange something with someone else who does have a bag of wheat in order to be able to make the exchange you really need.

And if that single bag of grain has gone by the time you have gone through the whole drawn out process, then your time is up.  That is why something needed to be done, and why – in around 1200 BC – the first signs of a common monetary system started to be integrated into society.

The idea of money as we know it today was still a long way off, but something had to bridge the gap.  It had to be something that was available in large quantities so everyone could have some, and there wouldn't be likely to be any problem of shortage.  By definition it also had to be something that was relatively small and light, which made it easy to carry around.

Enter the humble Cowrie shell, along with various other shells that were used as money through the years.  Even snail shells have been found which date back thousands of years, and were clearly used as an early form of common currency.  Whatever type of shell was used, holes were often made in them to enable the user to thread them on a necklace to wear around the neck.  This was much easier than carrying them around any other way, and kept both hands free at the same time.

China was the first country to use shells as payment for various items, and many other Eastern regions followed.  It was clear that while bartering still had its place in certain circumstances, a common method of payment was needed which everyone could use, but even Cowrie shells and other forms of common payment such as whale's teeth and other bizarre items had their limitations.

For example, if it was agreed that a sack of grain was equal to sixty shells of some description, that would have been a lot of shells to carry round with you – even on a necklace.  That's when the next step of evolution from bartering to modern currency came into being, and the world moved on to the idea of creating tokens out of metal and making different ones to correspond to different amounts.

But when we think about how money has affected our lives over the centuries, and how we look at it today, it seems strange that it all began with bartering so many hundreds of years ago.  We humans are ever resourceful when it comes to exchanging goods with one another, and while bartering is used on a much larger scale now – operating between businesses or even countries rather than individuals – it's clear that it has a long a distinguished history.

It's hard to tell exactly when bartering began – although humans have always been resourceful and it's possible that it came into being soon after the point when languages were developed and we learned how to ask for things from each other.

As such, bartering is easily the oldest form of currency the world knows, and perhaps it is fitting that even in a world which relies so much on electronic transactions, bartering still has its place.