Part II. An Exposition Of Finance. Chapter VI. Trade, Commerce, And Industry

Trade, Commerce, And Industry

Unlike the origin of the vast multiplicity of customs prevailing among people of different races - customs, with whatever local variations of form, essentially identical in nature, - there is no mystery concerning the origin of trade. Its necessity lies in the material needs of men, and the fact that no set of men possess all the commodities which minister to those needs. Hence, the only mode in early times - apart from robbery or fraud - in which this exchange of the superfluous for the necessary could be arranged, may be thus described: A man possesses a certain kind of article which he does not wish to keep, or of which he possesses more than sufficient for his wants, and is therefore willing to part with a portion; and desires another kind of article which he does not possess, or of which he does not possess enough: another person happens to possess more than he requires of the article which the former desires, and is therefore prepared to dispose of some of it; and wishes in his turn to secure a supply, or a greater supply (if he already holds a stock), of the article which the former is ready to give up. The two must then in some way be brought together, and the exchange of articles be made. In simple and obvious cases - that, for example, of the fisherman with his spoil of fish, and the hunter with his gain of game - the process of exchange would be a ready one (as regards the articles themselves apart from their equivalence in value), but it is not difficult to imagine, in other less simple instances, what search and trouble would require to be expended (and often fruitlessly expended) before the two persons discovered each other, with the want on each side which the superfluity on the other side could alone supply. This primitive and universal process is termed Barter1 or Truck:2 its peculiarity is that one article or commodity3 is exchanged direct for another commodity. The fundamental nature of this operation is shown by the fact that modern commerce, with its numberless and intricate complications, is precisely an interchange of one commodity for another; that is to say, it remains in essence the original act of barter still. But from an early period the grave inconvenience, and sometimes the impossibility, of a direct act of barter, particularly as commodities and needs multiplied in form and use, became evident, and the operation - although, of coursei the act itself was unaltered in character - of effecting exchanges of goods was simplified by the employment of a medium4 of exchange - the process becoming now an indirect in place of a direct act of trade. If a primitive man owned a large fish, and required some different commodities in exchange of much inferior value, he could cut up the fish, and dispose of the pieces separately for the various articles he needed, although some waste would ensue; but if he possessed two hats (granting him, for illustration, a hat in those days) and wished to barter one for an article of less value, the utility (and, therefore, the exchangeability) of the hat would be destroyed by cutting it into fragments. Hence arose the origin of a medium for exchanging goods which was of a nature acceptable to all exchangers - shells, iron, and other fairly durable articles, which people cared to possess, have thus been employed as media. In more modern times, gold and silver have, in consequence of their durability, intrinsic attractiveness, and other qualities, become the recognised material channel through which the interchanges of goods are conveyed. But while the original act of barter persists, the introduction of a medium obviates the precarious search by buyers for sellers, and sellers for buyers, by the substitution of two acts of barter in place of the primitive single act. But the two operations are the easier to perform: since, with an established medium of exchange, such as money, a person disposes of what he does not want to one who needs it, and receives, in exchange, its value in money; and this money he then hands to another person who is willing, in return, to give the commodity which he seeks. All commerce, then, remains a series of barterings of one material article for another, but, through the machinery provided by a medium, the act of barter ceases to be a direct operation confined to the two specified dealers.

Barter Or Truck

1 Barter: from an Old French word, barater, to exchange (the original meaning of the French word was, to cheat, to beguile).

2 Truck: from the French troquer, to barter, or chop.

3 Commodity: from the Latin commodus (com for cum, and modus, measure, with measure), fit, convenient, suitable; thus a thing of use or advantage. The term Commodity is rightly extended in political economy to include any object, substance, action or service which can give pleasure, or avert (or reduce) pain.

4Medium: from the Latin medius, the middle. The analogical use is evident; the middle connects the origin and end; and hence a medium (or means) of exchange is that instrument by which the one commodity is brought into contact with the other commodity in the exchange of the two.