BARTER SYSTEM
• The beginning of the barter trade originated at the time human
societies began to develop, and continues to exist in some societies
today. Modern day money developed through the trades and exchanges
of bartering with the primary exchange being that of "cattle.“ Cattle,
which included everything from cows to sheep to camels, was the oldest
form of modern day money. This developed into the trade of shells and
other items, and continued to evolve all the way to the modern form of
paper money in use today.
• Bartering is traditionally common among people with no access to a
cash economy, in societies where no monetary system exists, or in
economies suffering from a very unstable currency (as when very high
rates of inflation hit) or a lack of currency. In these societies, bartering
oftentimes has become a necessary means of survival.
Trade was very important for Indus civilization their main trade partner was
Mesopotamia, which was an advance civilization in the Middle East.
Around the time the Indus cities started to fail. Mesopotamia was going
through huge political problems the history of bartering dates all the way
back to 6000 Bc. Introduced by Mesopotamia tribes, bartering as adopted
by Phoenicians. Phoenicians bartered goods to those located in various
other cities across oceans Babylonian’s also developed an improving
barter system.
Goods were exchanged for food, tea, weapons and spices. At that times
human skull were used as well. Salt was another popular item exchanged.
Salt was so valuable that Roman Soldiers’ salaries were paid with it. In the
Middle Ages, Europeans travelled around the Globe to Barter crafts and
furs in exchange for sells and perfumes. Colonial Americans Exchanged
musket balls, deer skins and wheat. When money was invented bartering
did not end, it becomes more organized.
Due to lack of money bartering became popular in 1930s during the great
depression, it was used to obtain food and various other services. It was done
through group or between people who acted similar to banks, if any item were
sold the owner would receive credit and buyers account would be debited.
A barter system is an old method of exchange. This system has been used for
centuries and long before money was invented. People exchanged services
and goods for other services and goods in return, today bartering has made a
comeback using techniques that are more sophisticated to aid in trading.
for example, the internet, in ancient times, this system involved people in
the same area, however today bartering is global the value of Bartering
items can be negotiated to with the other party. Bartering does not involve
money which is one of the advantages you can buy item by exchanging an
item you have but no longer want or need. Generally a trading in this
manner is done through online auctions and swap market.
The first instances of trade between individuals were conducted through
Barter Agreements. Money developed later as a mediating form of
exchange. Barter still exists in certain societies, differing from traditional
gift exchange as bartering consists of a specific economic transaction
specifying the reciprocal items to be given and has no ceremonial
component.
A resurgence of bartering occurred with technological advances, particularly
the development of internet which permitted communication on an
increasingly globalized scale. Direct exchange of goods and services
without need of international currency exchange has proven attractive to
money, and challenges the monetary system to adopt changing needs of
traders who are developing relationship that break down political and
national barriers.
The Indus valley economy has heavily based on trading. It was one of the
most important characteristics of this civilization.
Almost every aspect of their society, from the cities they built to the
technology they developed, was to ensure that they could create high quality
and profitable trade products for the civilizations the Indus people traded
with traders and craftsmen used the trade routes to bring raw material in to
the town and cities, this is where they were turned in to jewelry, pottery and
metal were archeologists have found heights and measuring sticks which
suggest that there were trade centers with the cities. Cotton was the one of
the most important product of the Indus valley trade their wealth was based
on a substance economy of wheat and barely.
The Indus civilization had broad network of a trade but their
currency was traded goods instead of money, there was swapping
and bartering system. The Indus valley civilization had what was
called soap, stone, seals and this is what they might value used for
money later on the in the civilization.
Indus valley people had one of the largest trading areas, ranging anywhere
from Mesopotamia to China we know Indus valley traders went to
Mesopotamia as well as other countries, because Indus seals have been
found in there also the Mesopotamians wrote about the importing goods
from Indus people which further support the idea of a trading partnership
between the two civilization.
Indus valley traders crossed mountains and forests to trade they followed
rivers walking along the river bank and used boats to cross rivers, when
needed.
DEFINITION:
1. R.H.Parker : "Barter is the Direct exchange of goods and services
without the use of money as either the means of payment or a unit of
account.
2. S.H.S Sloan: "Barter is the direct exchange of commodity or service for
another without the use of money".
3. In simple words: "Barter is a system in which goods and services are
exchanged for other goods and services without the use of money".
Advantages of Barter System
Since direct barter does not require payment in money, it can be utilized
when money is in short supply, when there is little information about the
credit worthiness of trade partners, or when there is a lack of trust
between those trading.
Barter is an option to those who cannot afford to store their small supply
of wealth in money, especially in hyperinflation situations where money
devalues quickly.
Difficulties of Barter system:
The main inconveniences of barter system are as under:
1.Lack of double coincidence of wants:
The main difficulty of barter system is the lack of double coincidence of
wants. In a barter system a person who wants to exchange his goods must
find some person who is willing to exchange his commodity with his
commodity. For example, a person possessed wheat, which he wanted to
exchange for cloth. He could not succeed in acquiring cloth until he met some
one who not only had cloth but was also willing to exchange with wheat.
2. Lack of common Measure:
The second short coming of barter system is the lack of any common unit
in terms of which to measure the values of goods and services. In the
absence of any common measure of value, the value of each commodity
in the market can not be expressed as one quantity.
3.Lack of sub-division:
The third serious difficulty of barter system is the lack of sub-division of
commodities. there are certain commodities which can be divided without
loss of value. For example the owner of cow wants to have 5 kg of sugar.
The barter between the person having cow and sugar will not take place
because the value of cow is much more than 5 kilo of sugar. As it is not
possible to divide his cow, so no exchange will be possible between the two
persons.
4. Lack of Store of Value:
The barter system suffered the lack of storing the value. There is no way of
storing of wealth for a long period. Some commodities lose their value with
the passage of time. Some commodities, such as milk, fish, vegetable, wheat,
and cotton lose value with the passage of time. Such commodities could not
store for a long period.
5. Difficulty of Future Payments:
The barter system suffered the difficulty of the future payments. When goods
are lent to another person, the payment had to be stated in terms of certain
goods. This gave rise to many problems.
6. Difficulty of Transfer of Wealth:
Under barter system there is difficulty of transfer of wealth from one place
to another place. Immovable property cannot be transferred to another
place. The transfer of movable property is very difficult and costly. Suppose
a person wants to shift one hundred heads of cattle from Faisalabad to
Karachi. You can well imagine the difficulties he would face.
7. Difficulties in Tax Collection:
The difficulty of barter system is the imposing and collection of tax in the
form of goods. If the government is able to collect the tax in the form of
goods, there would be problem of the storage of goods. If so possible, the
government will face difficulties to utilize the revenue for development and
non-development purpose.
8. No Capital Formation:
Under barter system people are concerned with their current needs. They
do not save and there is no capital formation. The difficulty of store of
wealth hinders from saving and capital formation .Thus, there is no capital
formation under the barter system.
9. No Investment:
The barter system suffered the lack of store of value so, there was no
saving. Hence investment could not be made.