Evolution of Trade

07-Jul-15, Tuesday

In simple words, trade can be described as the voluntary transfer of ownership of any goods or services from one to another in exchange of something else.  

This something else depends on the form of trade.  Barter [the original form of trade] is a form of trade in which goods or services are exchanged for some other goods and services. But after the advent of money as a medium of exchange has allowed the trade to be conducted in a manner which is much easier and effective compared to early forms such as barter.

Trade is something not new. It is believed to have taken place throughout much of recorded human history.  It can be mapped back to the Stone Age. Evidence has been found to prove exchange of obsidian & flint during the Stone Age.

Trade started as a direct exchange of goods and services for some other goods or services.  It primarily involved agricultural products. When the civilization started, some people were engaged to produce rice while some choose to produce some other cereals depending on the soil they do it on. So later they started exchanging them in some ratio.

Later one side of the trade started to involve some precious metals in exchange of goods and services which became a medium of trade and gained symbolic as well as importance. As a result buying got differentiated from selling and earnings.

We can classify the trade into two kinds. One that the trade started with, the barter within a community, place or ethnic group and another that takes place between two distant individuals or groups and is termed as long-range trade. This first appeared during the time of Mesopotamia and Indus valley Civilization in the 3rd millennium BCE. Seal of Harappan has been found in the basin of Tigris and Euphrates on the bank of which Mesopotamia civilization blossomed, this is evident that trade existed between Harappan of Indus Valley and Sumerians of Mesopotamia Civilization.

Subsequently, the invention of money greatly simplified and promoted trade as never before. Today, this has become like the only form of trade though in some parts of the world other forms of trade are still evident.

Forms of trade

Initial form -> Goods or services for goods & services [Barter]

Intermediate form -> Goods or services for precious metals

Latest or current form -> Goods or services for money