Chapter I: Prehistory, Barter & Primitive Monies
The concept of money and barter is one that has been around since the dawn of civilization. Although the first recorded instances of money and barter were not in prehistoric times–if only because they predate the invention of ‘writing’, and hence ‘recorded history’--archaeologists have unearthed evidence of primitive money and barter that date back thousands of years prior to the invention of writing (hence before recorded history; prehistory.)
In prehistoric times, trade was conducted using barter and other forms of exchange. Barter is the oldest known form of money and involves exchanging goods or services without the use of currency. Another form of money used in prehistoric times was the use of currency–what today is simply known and referred to as ‘money’. It’s also commonly referred to as cash, coin, dough, bread, cheese, cheddar, loot, shekels, moolah, flousse, salt, scratch, gravy, wonga, lolly, brass, green, bacon, bank, lettuce, cabbage, bucks, duckets, dinero and simoleon. (Say what? Simoleon–as in Simon and Napoleon. Moving on...) But before we dig any deeper into what various ancient technologies were first used as currency–let’s define money in general.
Money is a medium of exchange that is widely accepted in transactions for goods and services. It (ideally) has the following characteristics:
Portability: Money should be easy to carry and transport.
Durability: Money should be able to withstand wear and tear and remain in good condition for an extended period.
Divisibility: Money should be divisible into smaller units to enable transactions of different values.
Fungibility: Money should be readily interchangeable for another of like kind.
Uniformity: Money should be uniform in size and shape to make it easy to recognize and count.
Limited Supply: Money should have a limited supply to maintain its value and prevent inflation.
Acceptability: Money should be widely accepted as a medium of exchange in transactions.
Stability: Money should have a stable value over time to ensure that it retains its purchasing power.
Overall, these characteristics ensure that money is a reliable and efficient technology; a medium of exchange that can facilitate trade and commerce.
So currency is a medium of exchange facilitating the exchange of goods and services, and it has been used since before humans could write. Barter, as a form of trade, was mainly used in areas where currency was unavailable or had not yet been invented, such as in Africa, Mesopotamia, Ancient Egypt and China. In addition to barter and currency, some cultures used forms of indirect exchange: This involved exchanging goods or services through an intermediary, not unlike today’s banker, or notary. (And, placing banking high up on the list of some of the oldest professions in the world, right under prostitution) This was more common in cultures that did not have a common currency or, enough people to facilitate barter (Note: the coincidence of wants being one of the problems that the first forms of money/currency sought to solve*). Finally, some cultures used gift-giving as a form of trade. This was more common in small tribes, where goods and services were exchanged through gifts, such as food, weapons and sexual favours. Overall, bartering, currency, indirect exchange, and gift-giving were all forms of trade used in prehistoric times. It has recently been hypothesized that other common forms of currency were Quality Time and Words of Affirmation. What’s your money language?
The Coincidence of Wants
The coincidence of wants is a term used in economics to describe a situation where two parties have something that the other wants and are willing to exchange. In other words, it is a situation where two parties have a mutual desire for what the other has to offer. For example, imagine a farmer who wants to buy a new tractor and a tractor dealer who wants to buy some grain. If the farmer doesn't have any grain to offer, and the tractor dealer doesn't have any tractors available, then there is no coincidence of wants, and no trade can take place. However, if the farmer has grain to offer and the tractor dealer has a tractor available, then there is a coincidence of wants, and a trade can take place. In this way, the coincidence of wants is a necessary condition for trade to occur. Since as you can imagine, said “coincidence of wants” is a pretty rare occurrence, its lack can be overcome through the use of money as a medium of exchange. Necessity being the mother of invention, it was in fact its extreme scarcity (the coincidence of wants, that is) that Money and Currency were invented as technologies in the first place. Money allows for the exchange of goods and services without requiring a direct coincidence of wants between the parties involved (barter!). Instead, money serves as a common medium of exchange that is widely accepted, making trade much more efficient and easier to conduct. So barter is only possible when there in fact exists a coincidence of wants, when there isn’t, another technology had to be used.
In the Beginning
The earliest known instances of money and barter date back to the 3rd millennium BCE in Mesopotamia (present-day Iraq) where merchants used little clay tokens that represented a certain amount of grain or other goods. They used these tokens as a form of currency, exchanging them for goods and services between each other.
In ancient Egypt, bartering and trade were common practices. Prehistoric Egyptians bartered goods such as cloth, bronze, and food. They also used forms of primitive money, such as silver, gold, and copper rings, which were the earliest recorded forms of coins.
In ancient China, during the Shang Dynasty (1600-1046 BCE), bronze coins were used as a form of currency. These coins had a round shape and a square hole in the center. People used these coins to buy and sell goods in the market.
The Inca civilization of pre-Columbian South America also used a primitive form of currency: They employed a system of knotted ropes (or quipus), which had knots of varying colours, sizes, and patterns that represented a certain amount of goods.
Primitive money and barter were also found in ancient Greece. During the Archaic period (800-500 BCE), coins were used as a form of currency. In the 6th century BCE, the Greeks started to use coins made from precious metals, such as gold and silver.
Despite the fact that the first recorded instances of primitive money and barter were not in prehistoric times, archaeologists have discovered evidence of these practices from even before the invention of writing and recorded history. Whether it was clay tokens in Mesopotamia, bronze coins in China, knotted ropes in the Inca civilization, or coins in ancient Greece, prehistoric societies certainly had their own form of primitive currencies and barter.
Beads were also used as a form of currency in several cultures throughout history. In certain,they were even used to represent different values and make payments.
The oldest known use of beads as a form of currency dates back to the late Stone Ages. In Europe, the linear pottery culture used beads as a form of currency during the 5th millennium BCE. Other cultures in Africa and Asia also used beads as a form of currency before the invention of coins. (Beads continued to be used as a form of currency in some areas of Europe extending as far into history as the Middle Ages! Somewhat understandably, unlike many other continents, Europe was never accused of being a ‘cradle of civilization’...)
In ancient Egypt, strings of beads were used to represent different values. These strings would indicate the value of goods being traded and to effectuate payments. In some African countries, beads are still used as a form of currency today.
Overall, beads have been used as a form of currency throughout history in Europe, Africa, and Asia, and in some places they are still used to purchase goods and services today.
Other various notable objects used as money or currency in early human civilization include:
Shells: Cowry shells were often used as money in Africa and Asia.
Salt: Salt was a valuable commodity in ancient times and was used as currency in many cultures. (Some argue it was instrumental in turning what is now known as the North East of Canada and the US into the hubs of international commerce that they have become today.)
Livestock: Cattle, sheep, camels, goats, and other livestock were used as currency in many cultures.
Precious metals: Gold, silver, and other precious metals were used as currency in many early civilizations, including ancient Greece and Rome.
Bronze coins: Bronze coins were used as currency in ancient China, Japan, and other parts of Asia.
Rai stones: Rai stones were used as currency in the Micronesian island of Yap.
Tea bricks, Spice: Compressed tea leaves and spice were used as currency in ancient China and India.
Wampum: Wampum beads made from shells were used as currency by Native American tribes.
Feathers, Tobacco: Feathers from birds of prey were used as currency by some Native American tribes, as was tobacco. (Yes, just like cigarettes in prison. Let the world not be accused of not making progress!)
These are just a few examples of objects that were used as money or currency in early human civilization. Now that we’ve defined money and its early origins, we’re ready to move on in time.
Stay tuned for next month’s installment, Early Coinage: 1000BC through the Roman Empire, where we explore the world’s transition from a grassroots currency (that as a technology benefited its users) to the first appearance of centralized, government currency as a technology (which began to benefit its issuers.)