Barter – Advantages Disadvantages and History
Table of Contents
What is Barter?
Barter – Barter is an exchange system of material goods and services in which money does not intervene as a mediator. Still, the exchange is straight and agreed upon between the interested parties. Similarly, the contract established among two people who carry out a barter called a swap.
Meanwhile, it dispenses with money, barter is a mechanism for the exchange of goods and services different from buying and selling, but which also implies a change of ownership of the goods exchanged and a commercial transaction, whose objective is to satisfy the needs of the population.
For this reason, barter usually reappears at critical moments in the economy of nations, in which money loses its value or its demand. Such as after the fall of empires or in modern times of hyperinflation or violent currency devaluation.
However, there is not always a well-known calculation table that quantifies the value of the goods and services involved in barter. Instead, everything comes down to the capacity for persuasion and mutual understanding of those involved. For this reason, in this type of exchange, a free allocation of value is often allowed.
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History of Barter’s
Though, various experiences with tribes seem to contradict that bartering is natural or characteristic of human beings. On the contrary, today, it is valued that the goods tended to stay administered commonly in the ancestral eras, without them being of private property.
Bartering began 10,000 years ago through the Neolithic Revolution when humanity abandoned its traditional nomadic lifestyle and settled in different regions to cultivate the land. Then, with the birth of private property, barter was probably born as the most primitive exchange system.
Thanks to this exchange, it was likely to complement the diet of the primitive human being: some agricultural goods for others, or livestock goods, or for periodically necessary services.
Finally, however, the exchange of goods and services dynamics became so complex that it became difficult to calculate what cost.
In other words, the same good had to stay valued in several apples (if the person who wanted it grew apples) or in fish (if the person who wanted it was a sinner), all of which was subject to the person’s needs who offered it. And what happens if none of the concerned parties owns something that the bidder wants?
Certain widely and constantly demanded goods began to serve as currency to solve these inconveniences. In ancient aboriginal America, cocoa helped as a currency of exchange among different cultures since they were all essential and valued equally.
In other regions, metals chose: copper, silver, gold. Eventually, from this latter trend, money was born, ending the historical need for barter.
Advantages of Barter
- By not using currency, it is not subject to economic fluctuations or devaluations, keeping the value of assets stable.
- Eliminates the intermediation of money so that goods or services are given receive directly.
- It generally involves direct producers and not intermediaries who seek to enrich themselves through trade.
- It allows to dispose of inventory goods and thus avoids their accumulation since they exchanges for other similar consumer goods.
Disadvantages of Barter
- For example, there is no established scale, it is difficult to exchange goods of very different values.
- It depends on the demand for goods among those involved so that if we have an interest that is not in order, we will not be able to get what we want.
- Then, it does not promote the accumulation of inventories or translate them into lasting money. It is not easy to carry out the exchange over time: tomorrow, the demanders will have other needs.
- It depends directly on production rates and is greatly affected by the weather or other environmental conditions.
Why was the Bartering Exceeded?
Bartering functioned as a scheme for exchanging goods and services within geographically, culturally, and economically limited communities. But as societies grew in complexity and needs, it proved to be a very problematic method.
Its limitations are that it did not encourage accumulation (that is, it does not generate wealth and therefore postpones investment ). In addition, it was very complex to assign the value of things since it depended on whatever had the other to offer.
So, as we explained before, money emerged as an alternative system. Of course, it did not happen instantly, but some goods began to handle universally to express things’ value.
A piece of meat could translate into fish, apples. Corn or chickens between different producers or expressed in grains of salt if it was particularly abundant in the region. Or in precious metals, such as silver and gold. Thus, when the value of things expressed in grains of salt or nuggets of gold. A standard scale began to exist.
The problem then was that not all gold nuggets are the same size. Weight or purity, nor are all grains of salt or cocoa identical. So what could measure favorite: the importance, for example, of said measurement materials (from which names such as weight or pound are born), its purity, or a regular shape.
Then it became necessary for some authority to certify that, for example, a gold doubloon always weighed the same. So it is how money began to stay produced: in identical portions, with similar measurements and weight. And with the king’s face stamped on one side.
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