Class 7 Social Science Chapter 11: From Barter to Money

Two desks, two spare things

You have brought a spare eraser. The classmate beside you has forgotten an eraser and happens to have a spare pencil.

Swap them and you have both got what you needed. That exchange, goods for goods with no money involved, is the barter system.

What people actually used

Barter was the earliest way of exchanging things, and evidence of it turns up all over the world.

What changed hands were commodities, meaning goods that can be traded. The chapter names cowrie shells, salt, tea, tobacco, cloth, seeds, and cattle of several kinds: cows and goats, horses and sheep.

Three that sound invented

Three examples are worth knowing because they stretch the idea of money.

On Yap Island, in the Pacific country of Micronesia, giant discs of rock called Rai stones served as money. Across Central Mexico, and some way beyond it, there was the Aztec Tajadero, a copper object named from the Spanish for a chopping knife. On the Solomon Islands people used Tevau, coils of red feathers taken from birds.

Now the farmer

Here is the chapter's test case. Suppose you farm, everybody around you barters, and three things are needed: medicines for your grandmother, a sweater, and a pair of new shoes.

What you have spare is one ox.

The first difficulty

Before anything else you must find somebody who wants an ox.

And swapping a whole ox for one pair of shoes would hardly be fair. So you need a person who wants exactly what you are offering and is offering exactly what you want. That situation has a name: double coincidence of wants.

How rarely that happens

Think about the chance of meeting one person who will hand over shoes, a sweater and medicines together, all for an ox.

So in practice you go the long way round. Trade the ox for several bags of wheat, then carry the wheat about and trade portions of it, to one person for shoes, another for the sweater, another for the medicines.

The second difficulty

At each of those stops an argument has to happen. How many bags of wheat is a pair of shoes worth? How many for a sweater?

There is nothing to settle it by. Comparing the worth of one good against another is hard, and if either side feels the deal is bad for them they simply walk away. What is missing is a common standard measure of value: an agreed worth that lets goods be priced against each other.

The third difficulty

Notice why you had to involve wheat at all.

You cannot hand over part of an ox for a sweater. An ox will not divide. That is the problem of divisibility, which is whether a thing can be split into portions.

The fourth difficulty

Taking an ox with you everywhere is not practical, and the sacks of wheat are little better.

Whether a thing can be carried about from place to place is its portability, and both an ox and a pile of grain score badly on it.

The fifth difficulty

Suppose you keep the leftover wheat. You now need somewhere safe to store it.

And it will not last. Grain rots, or the rats get it. Whether a thing lasts, and can be kept for a long time without spoiling, is its durability.

Five difficulties, five names

Go back over the story and count.

Finding the right partner is double coincidence of wants. Arguing over proportions is having no agreed yardstick of worth. Being unable to split the ox is divisibility. Carrying it about is portability. Watching the wheat spoil is durability.

Why that list matters

Those five are not a random collection of nuisances. They are a specification.

Each one names something a good medium of exchange would have to supply, and that is exactly how the chapter will introduce money: as the thing that answers all five at once.

What money is, then

Money is the one tool everybody will take, used for paying and being paid when goods or services change hands.

Read that definition against the farmer's list. Everybody accepting it kills the double coincidence problem. Being a common tool gives the standard of value.

And an everyday word for the act

One more term before the next topic. A transaction is a piece of business done between people, and especially an act of buying or selling.

Today we carry out transactions with coins and notes, and also with mobile phones and computers.

What barter is not

It is worth saying plainly that barter is not a failure or a primitive mistake.

It worked, for a very long time, and parts of it still work today. The five difficulties only begin to bite when the things being exchanged grow in number and the distances grow longer, which is what the next topic takes up.

Scenario:

A village decides to hold a market where nothing may be paid for in cash. A potter brings forty pots. A weaver brings cloth. A goatherd brings one goat, which is worth roughly fifteen pots. A fisherman brings a basket of fish that must be eaten today. By midday the potter and the weaver have traded happily, the fisherman has given away most of his basket, and the goatherd has sold nothing at all and is going home with his goat. The village council asks why one trader did so badly and another did so quickly.

Analysis:

One market, four traders, and outcomes that the five named difficulties fully explain.

Activity:

List three things your family buys that would be hard to barter, and say which of the five difficulties each one hits.

Title:

A barter round in class

Safety:

No hazards here.

What You Notice:

Double coincidence of wants usually stops the most people, and divisibility is next. Very few groups finish within four minutes, which is the point: the problem is not that anybody is unwilling to trade, but that the matching itself is hard.

On Yap Island giant discs of rock, called Rai stones, served as money.

The Aztec Tajadero took its name from the Spanish word for a chopping knife.

On the Solomon Islands coils of red birds feathers, called Tevau, were used as money.

Five problems: partner, price, pieces, portage, perishing.

An ox will not divide, travel, or keep.

Barter did not disappear

Money has taken over from barter nearly everywhere in the world. Nearly.

Some barter systems are still going, and the chapter's main example is a three-day fair held every year in Assam.

The Junbeel Mela

It takes place at Junbeel, in the Morigaon district of Assam. The name is worth unpacking: in Assamese jun means moon and beel means wetland.

The fair opens with the Agni Puja, a worship of fire, offered as a prayer for the wellbeing of all.

It did not begin as a market

Here is the part that explains everything else. From the fifteenth century onwards, the chiefs of four tribal communities gathered at this place every year.

Those communities were the Tiwa, the Karbi, the Khasi and the Jaintia, of Assam and Meghalaya. The chiefs came to discuss political matters and to keep friendly relations with one another.

How the market grew out of it

Members of those communities began coming along to the gathering. Over time the occasion turned into a fair.

People brought their produce with them and started exchanging it among themselves. So the trading grew out of the meeting, and not the other way round, which is why it is still called a socio-cultural event today.

What changes hands there

The bartering begins early in the morning, with local products: roots and vegetables, fruit, herbs and spices.

There are also handmade goods and artefacts, made from natural materials gathered in the forests of that hilly region. People from the plains exchange these for rice cakes and other foods that cannot be grown up in the hills.

Why that last detail matters

Notice what the hill people and the plains people each bring.

Each side has what the other cannot produce at home. That is the double coincidence of wants from the last topic, except that here it is not luck. Geography supplies it reliably, year after year, which is exactly why barter can still work at this fair.

Two smaller survivals

The chapter adds two everyday examples, and both are probably familiar.

A book exchange, where you bring books you have finished and choose others from the collection: your jungle adventure for somebody's mystery story, and no money anywhere.

Old clothes for new utensils

The second has lasted for years. A vendor comes to the houses with new utensils, or other items for the home, and takes away used clothes and fabrics in exchange.

Both sides gain. The household is rid of what it no longer wants, and the vendor collects material that can be resold, repurposed or recycled.

Why money came anyway

Return to the main story. The saying goes that necessity is the mother of invention, and the necessity here grew steadily.

More kinds of thing were being exchanged. More of them. And over longer distances. At some point it became clear that a different system was needed.

What was needed

Trade becomes far easier once one commonly accepted medium exists, and that is how money arose.

It then spread by being used: the more people paid and were paid with it, the more firmly it counted as payment. Note the order: it worked because people used it, and people used it because it worked.

The first job: a medium of exchange

That is the function the farmer needed most. Money sits between the two goods, so neither party has to want what the other is holding.

Which answers the double coincidence of wants in a single stroke.

The second job: a store of value

The farmer could not keep his wheat. It would rot, or the rats would get it.

If he takes money instead, he can hold it for a long time and buy things later. Which is what we mean by calling money a store of value, and it answers durability.

The third job: a measure of value

Money also serves as a common denomination, measuring the worth of goods and services.

That lets goods and services be compared through their prices, and it answers the missing common standard measure of value.

The fourth job: deferred payment

Suppose you want a book priced at a hundred rupees and have fifty in your pocket.

You might ask the shopkeeper to let you pay the rest later. The fact that money is accepted for payments made later makes it a standard of deferred payment.

Money going round

One last picture, and it is the best argument for the whole system.

Your parents pay money to shopkeepers for various things. Shopkeepers hand some of it on as wages to the people who work for them. Those workers spend the very same coins on daily essentials, and on school fees for their children. The same rupees keep moving, and at each step somebody gets what they needed without having to find a double coincidence of anything.

Scenario:

Two barter fairs are described to a class. The first is held every year in a hill district where the surrounding villages grow only millet and must obtain salt, iron tools and dried fish from the plains below. It has run for centuries and still does. The second was held in a large town where most traders dealt in cloth, and it closed about eighty years ago once coins became common. A pupil says the first fair survived because the people there are more traditional, and the second closed because the town was more modern.

Analysis:

Two fairs, two fates, and an explanation that reaches for culture when the chapter offers something sturdier.

Activity:

Find out whether anything is still exchanged without money where you live, and what each side gets out of it.

Title:

Match each function to the problem it solves

Safety:

No hazards here.

What You Notice:

Divisibility and portability usually end up without their own line, and the answer is that money supplies both by being made in denominations and being easy to carry. Most people conclude the medium of exchange function does the most work, because it is the one that removes the need for a double coincidence at all.

In Assamese jun means moon and beel means wetland, which is how Junbeel gets its name.

The Junbeel Mela opens with a worship of fire offered for the wellbeing of all.

The gathering behind it goes back to the fifteenth century.

Four jobs: exchange, store, measure, pay later.

At Junbeel the meeting came first, the market second.

Six stops on one timeline

The chapter prints a timeline of money in India, and six points are marked on it.

Barter around 6000 BCE. Cowrie shells around 1000 BCE. Metal coins around 600 BCE, in iron, silver, gold and copper. Official paper money in 1861. Debit and credit cards in 1980. And UPI in 2016.

Read it as a chain of problems

A list of dates is worth very little on its own. Read it instead as a chain.

Each form solved what troubled the one before it, and then ran into trouble of its own. Shells beat cattle for carrying. Coins beat shells for lasting value. Paper beat coins for weight. Digital money needs no carrying at all.

Who made the coins

Coins come early in this story, and rulers kept a tight hold of them.

A ruler would issue coins, and the people of that kingdom used them for their dealings. Each kingdom therefore had its own. Making coins, and putting them into circulation, was wholly in the ruler's hands.

Why some coins travelled

In time the coins of strong rulers came to be taken outside their own kingdoms too.

That mattered more than it sounds. If a trader could spend the same coin in two kingdoms, trade between those places became far easier, and that is what made trade across distances possible.

What the coins were made of

They were struck from precious metals: gold, silver and copper, or mixtures of them.

A mixture of metals is called an alloy, and the point of mixing is strength. Our coins today are alloys too, mostly iron, with chromium, silicon and carbon added in careful amounts.

What the coins were called

These coins were known as karshapanas, or simply panas. The marks punched into them were called rupas.

That second word should look familiar, because the rupee carries it still.

And the word outlasted the coin

Here is a detail worth keeping. Forms of the word pana are still in use today.

Tamil, Telugu and Malayalam say panam for money, and Kannada says hana. A coin from twenty-six centuries ago left its name in languages people speak this morning.

The two faces

A coin has two sides, and each has a name. The head is called the obverse, and it carries the main design. The tail is the reverse.

In ancient times both sides were engraved. Animals, trees and hills. Kings and queens. Deities.

Two coins to picture

The Chalukyas of Kalyana struck a coin showing Varaha, an avatar of Vishnu, on one face, with a decorated three-tiered parasol on the other.

The Cholas, between 850 and 1279 CE, put their tiger emblem on a silver coin. A royal animal and a royal umbrella, each saying whose coin this was.

Roman coins in Tamil Nadu

Excavations at Pudukkottai, in Tamil Nadu, turned up gold coins with Roman kings on them.

Think about what that means. Those coins did not walk there. Similar finds in Kerala show that southern India was trading with the wider world, and scholars reading these finds conclude the trade favoured India.

A smaller unit

One more old measure. An anna was a sixteenth of a rupee.

To see what that was worth, the chapter offers 1947: one anna could then buy a dozen bananas.

The sign we write today

The rupee sign is younger than most pupils expect. The Government of India took it up in 2010.

Udaya Kumar, of the Indian Institute of Technology in Bombay, designed it. It blends the Devanagari letter Ra with the Roman R, and the two level stripes across the top stand for the national flag while also making the sign for equals.

Why paper came

Now the next problem in the chain. Coins were being used for everything, from vegetables to land.

Carrying a great many of them was hard, and storing them was hard too. The search for something better ended with paper.

Where paper money began

Paper money was used in China first, and it reached India late in the eighteenth century.

The two forms then divided the work between them, and still do. Coins serve the smaller amounts, and paper notes the larger ones.

Who issues it now

In ancient times a ruler issued the coins. Today India has one central authority for this, the Reserve Bank of India.

Nobody else may lawfully issue currency. One issuer is what makes a note trustworthy, because a note is only paper until everyone agrees what it stands for.

Krishnappa's card

Last stop, and it is on a fruit cart. Krishnappa sells seasonal fruit, neatly arranged, and beside it sits a small card printed with a QR code.

Customers scan that card with their phones and pay. The money travels straight into his bank account, and no coin or note is involved anywhere.

Money you cannot hold

Coins and notes can be touched. Money has also taken forms that cannot be.

This is digital money, held in electronic form, and the methods are familiar: debit cards, credit cards, net banking and UPI. Each moves money out of one person's bank account and into another's.

Scenario:

A field at the edge of a southern town is dug for a new building. The workers turn up a small hoard. There are twelve gold coins with the heads of foreign kings. There are four worn silver pieces showing a tiger. And there is one copper coin with a figure on one face and a tiered umbrella on the other. A visitor says the hoard proves foreign rulers once governed the town, since their faces are on the gold. A pupil in the group is not convinced.

Analysis:

Three kinds of coin in one hole, and a conclusion drawn from the portraits rather than from how coins actually travel.

Activity:

Look at the coins in a pocket at home and note what is on each face, and the year.

Title:

Build the chain, not the list

Safety:

No hazards here.

What You Notice:

The gap between coins and paper is usually the easiest, because the chapter names the trouble plainly: carrying and storing large numbers of coins. The gap between cards and UPI is usually the hardest, since both are digital, and the honest answer is convenience rather than a new problem solved.

Forms of the ancient word pana are still spoken for money in four southern languages.

In 1947 a single anna, a sixteenth of a rupee, could buy a dozen bananas.

The rupee sign is only as old as 2010.

Shells, coins, paper, plastic, phone.

Obverse is the face; reverse is the other one.