3 — Commodity Money in Ancient Civilisations (c. 3000 BCE – 600 BCE)

Part B — Commodity Money and Early Coinage

With the expansion of trade and complexity in early societies, commodity money emerged as a widely recognised medium of exchange, facilitating economic growth beyond the limitations of barter.

Economic Context

  • Ancient civilisations such as Mesopotamia, Egypt, the Indus Valley, and early China developed increasingly sophisticated trade networks.
  • Exchange required items with intrinsic value, ensuring acceptability across regions.
  • Commodity money served as both a medium of exchange and a unit of account, standardising value within and between communities.

Characteristics of Commodity Money

  • Intrinsic value: Objects were valuable in themselves (e.g., silver, gold, livestock).
  • Divisibility: Could be broken into smaller units for smaller transactions.
  • Portability: Allowed trade over long distances.
  • Durability: Maintained value over time, unlike perishable goods.

Examples of Commodity Money

  • Mesopotamia:
    • Silver shekels as units of account.
    • Barley used in local trade and as a measure for taxes.
  • Egypt:
    • Grain and metal ingots functioned as standardised mediums for transactions.
  • China and Africa:
    • Cowrie shells, valued for scarcity and durability, circulated as currency.
  • Other commodities:
    • Salt, tobacco, and cattle were used regionally.

Functions and Limitations

  • Functions:
    • Facilitated trade and taxation.
    • Provided a measure of value for accounting and credit.
    • Allowed storage of wealth over time.
  • Limitations:
    • Acceptance was often regional and not universal.
    • Bulky or difficult to transport in large quantities.
    • Value could fluctuate based on scarcity, quality, or spoilage.

Significance

  • Commodity money represents the first attempt at standardising value beyond barter.
  • Demonstrated the necessity of widely recognised and trusted media for economic transactions.
  • Laid the foundation for the development of coinage, where metal standards and state authority would formalise money.

References

  • Davies, G. (2016). A History of Money. Cardiff: University of Wales Press.
  • Schmandt-Besserat, D. (1992). Before Writing. Austin: University of Texas Press.
  • Ingham, G. (2004). The Nature of Money. Cambridge: Polity Press.
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