Introducing money to a barter based economy

Question

If a person from a culture that uses money was to try and introduce such a system to a tribe of people that use a barter-based system, how could they do this in the shortest amount of time? What methods are there that don't screw up the existing dynamics?

1. The tribe can be considered to be around 500 - 1000 individuals.
2. The person trying to introduce the system has no tradeable goods or skills, and no contact with his own people.
3. The tribe is at stage where they are only just settling and farming rather than nomadic. (Like a lost tribe in the jungle rather than a medieval village.)

Answer 1

The shortest way to get people to use a currency is to create a bank.

Simply put, currency is a stand-in for other goods and services. It is an arbitrary but agreed-on standard that people can use to value different goods or services in an exchange. It does not indicate what has value or how much, simply provides a measure of that value.

So the simplest and quickest way to introduce it is to use it. The quickest way to do that is offer to hold those things that others value. "I will hold onto your sheep skins and in exchange give you a token that marks what of yours I have. Bring back the token and I'll give you your skins back."

The first such tokens would be specific to the goods being traded: essentially a 'receipt'. The only intellectual leap needed at this juncture is that the person who banked the sheep skins needs only trade that receipt to someone else, and that person can come get the skins instead.

From there, you want to generalize the receipt tokens to something that has the traits of a good currency:

• Durable: it has to stick around in the same form a long time.
• Divisible or Fungible: it needs to be fine-grained enough to represent most common values.
• Convenient: a person needs to be able to easily possess and trade currency.
• Consistent: one penny must be much like another penny.
• Scarcity: if money grows on trees, then it becomes meaningless.
• Acceptability: everyone has to agree on the meaning of the currency.

This is actually very hard to achieve, and for such a small tribe might be prohibitively expensive to set up. Consider that, for metal currency, you'd need access to rare metals in sufficient quantities and be able to forge them into similar shapes that everyone trusts you will accept in trade. You have to do this in a way no one else easily can (either because it's subtly difficult or because you physically interfere with others counterfeiting). You can build the trust (acceptance) over time, but finding a suitable form for your currency can be difficult, especially if you're starting with no assets.

Note that most currencies are 'fiat currencies' because to set one up, you need enough physical, military and/or legal force to be able to corner the market on currency production. If production lacks any powerful party regulating it, it is very easy to undermine the value of a currency. It's possible in your case the tribal leaders can provide this political power, but it would be very difficult for a lone person to do it without being very convincing and very lucky. (Consider the measures casinos take to control their betting chips.) Assuming they could find a currency form, though, setting up a bank (and eventually bank + market) would be the best way to go about it, simply because they are providing a service to the community: making trading easier.

Answer 2

According to the book Debt: The First 5,000 Years, currency does not arise organically in a barter society because of a need for a common, divisible medium of exchange. (People keep track of debts in their head, because everyone is known and has a reputation.)

Instead, what happens is that a conqueror comes to town, conquers, and levies a tax, payable only in their scrip. Therefore, everyone needs to get hold of at least some of this scrip, to pay their periodic taxes, thereby giving that scrip value. After that, it becomes the de facto medium of exchange-- a currency, if you will.

So, the easiest way to introduce money into a barter society is to conquer that society and demand that taxes be paid in money that you issue.

Answer 3

Just like the first paper bills were promises to pay out a certain amount of gold, the first coins could be minted only in exchange for the promise of a certain amount of food or other resource, witnessed by some village head or elder.

Example: Farmer John needs a new hoe to till his land. Smith Paul is willing to make one for John in exchange for a share of John's harvest. John makes a coin out of... clay with a drawing of 3 sacks of grain. Paul and John then proceed to village elder Dave and repeat their agreement in front of him. To validate the coin, Dave bites lightly into it, leaving his distinctive teeth marks on the coin.

The coin can now circulate among the locals until harvest time comes around and John trades 3 sacks of grain for his coin back, which he then can destroy (it's worth nothing to himself). Later on, the coins probably wouldn't be destroyed but kept for reuse.

This way, coins only get made in roughly equal measure to resources being produced, and could even be destroyed when a holder claims the promised resource.

Note: Of course this will only work if the society already has a concept of private ownership. If all the food and such are shared by the community, this will be a VERY hard sell.

Answer 4

The biggest reason for introducing money into a barter system is that not all is equal. If I have a live cow I want to trade for your two beans, we're kinda at an impasse unless we start dividing the cow or those beans are very magical.

A fiat currency (IE, this money is this value and accept that) is not easy to introduce right away...you need money to relate to something solid. So you will need something that this money represents. In our history, 'paper money' originated as this paper bill represents a portion of a brick of gold kept at this bank.

With that in mind, your easiest way to introduce a currency is to have something physical that the currency represents. Holding to the cow example above, you could create tokens where each token represents a 'steak' from said cow or equivalent piece and the bearer of said token would receive that when the cow is slaughtered. Until the cow is slaughtered, these tokens may be freely exchanged as if money. I've used cow for this example here, although it's a hard thing to use as it's a living thing that will eventually die making the token worthless unless there is a new cow to take it's place...if there was a limited resource within this tribe that this token could represent, then you have the basis of what your currency is based on and represents.

So the question becomes...whats a scarce resource for these people that doesn't die or change over time? Hard to tell from your question what these people may value.

Answer 5

In the beginning there was barter, and then there were cows. The system of barter to agricultural/livestock barter, and the value of a thing was counted in say, goats or cows, even if no actual goats or cows were traded. So a person for example, would say that a service or good was worth a chicken, cow or goat.

Later this became, also skins, as people just don't carry around goats or sheep as much as they should.

What causes currency to develop is an item or something that occurs naturally, is easy to carry, but is not so common that it is worthless. Like cowrie shells from the above PBS example, or something else. It would need to be something that doesn't go bad (so not grain) and would be seen as valued enough within the community.

Dead Cows is how I'd do it. The other thing that causes it to develop is the lack of a hard good AT THE TIME. If people think in terms of cows, and there's sickness which wipes out all the cows, having a representative "stand-in" in the form of currency will help the economy, as long as everyone agrees.

This is not that many people. They can just agree that tokens hold a certain value (each token is valued at say, 1/12 of a cow or something) and as long as that object is not too easy but not impossible to come by, then it's fine.

That the person introducing this has

no tradeable goods or skills, and no contact with his own people.

is going to be awkward. And it sounds as though they are an outsider, and they may not even know the language, which further ups the social difficulty of this. Therefore, they would have to convince someone with social capital and standing in the community of the idea.

Answer 6

We can read from historical accounts that silver and gold—which had value in their own right—were used as a medium of exchange even before standard units of currency were developed. Instead of counting out coins, the quantity of money was calculated by weighing the metal in question.

At some point somebody in a civilized region with a formal government hit on the idea of standard weights of metal, at which point money as we now know it was born.

Answer 7

Honestly, the best way to introduce money, the idea of money, into a barter economy is not with logical reasons and coaxing but with stories.

There's a children's story, or maybeso a set of stories, where the main character wants to trade for something, and has to go on a long quest to get from someone who wants the thing he has, to one who can give him the thing he wants, because of all the people between who are picky about what they want for what they have. Stories like this might catch on pretty well in a barter economy, they are familiar with the web of local favors and debts - but it will also subtly lay the groundwork that the chain of bartering is difficult and inefficient.

Then, your character may have stories or tales or anecdotes (either their own set of stories, or anecdotes about their native land) about the use of money, to circumvent this. Instead of needing to visit fifteen or twenty people to make a trade chain to get what someone needs, wouldn't it be easier to have tokens that will let you give what you have for them, and get what you need for them? The idea of using tokens to keep track of debts might or might not make immediate headway, depending on the size of the population and how good the system they already have is, but the idea will be out there for people to consider.

As a bonus, you say the tribe is at a stage where they're settling from nomadic to farming. That means their ways are changing, they're figuring out different ways of doing things that work, and letting go of ways that don't. Their population will be growing, and they might start running up against the kinds of problems that make money easier than barter, like flexibility or not having to keep track of too many people or debts. They are already changing, your person just needs to make sure the idea is out there and let them figure out if they think it will work better than what they have.

If the idea is there, even in stories, it will be on the radar and available for when the society starts looking for solutions to the problems a barter economy might have in a community becoming larger, more specialized, and less flexible. Especially if the person from the money-culture uses the stories to frame the idea as something that helps solve those problems.

This way, the society may be convinced to try and work out a system that will work for them, based on their own thinking and ways of dealing - inspired by a story, but their interpretation of it, instead of trying to impose or coax the society to adopting an system very much outside their culture. Maybe they won't adopt your person's culture's use of money directly, but with the idea that it can be done differently than plain barter in their minds, they can think about, and talk about, how to make their own system. Maybe instead of centrally backed money (like a bank's) they will pick a common trade good for "pricing" (gold, salt, cocoa beans), or they will start with individual tokens for debts and go from there. It will eventually evolve to suit their culture and needs, but the way it does so will be organic, and therefore a lot more likely to be successfully adopted.

Answer 8

To me, the shortest way to introduce money is to create a common, valuable resource that everyone accepts as a common 'go-to' item. This valuable resource can slowly become the common currency of the barter society & become the new 'money'. The Aztecs developed a currency alongside bartering in the form of cocoa beans. Cocoa beans didn't automatically become the currency overnight. It slowly became this currency because the beans could be used to make chocolate and great drinks. This caused everyone to love these little beans and see them as valuable, leading to a society where everyone accepts cocoa beans as a universal currency and produce exchange rates just in case anybody had some of these beans. Nomads of Ethiopia in the past and present use salt as a currency because it is valuable for preserving meat and you can buy whatever you want from them if you have enough of it on you.

Basically, if you want your clan to have a form of money, have them find a resource that love over anything else and accept that resource in all forms of trade no matter what. Said resource can then become a new form of 'money' that your tribe designs a mutually agreeable exchange rate on.