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Natural commodity money

When certain goods or services are directly exchanged for others, it immediately becomes apparent that some goods are needed for a wider range of purchasers than other goods, and this gives rise to public acceptance of them as forms of money (Fig. 8).

If we look at the evolution of money in the early stages of the development of society and public relations, we discover that at that time, it was mainly natural commodity money that was in demand:

1.     kauri shells (Polynesia, India);

2.     øsquirrel and sable pelts, slate spindle whorls — weights used in spinning95 (Ancient Russia);

3.     bricks of natural salt (Ethiopia)96

4.     iron hoes (Sudan)97

5.     beaded belts — wampums (South American Indians);

6.     bottles of vodka and tins of stew — in remote regions of Russia during so-called developed socialism (1970–1980s);

7.     copper and bronze (Ancient Rome);

8.     iron (Sparta)98

Among nomads, cattle played the role of money; among landowners, cultivated vegetable crops; among hunters, animal pelts.99

In Ancient Rome and Ancient Greece, wealth was measured by the number of cattle, and herds were driven to market with which to pay for anticipated purchases. Homer judged the worth of Achilles’ shield and armour in oxen: in Latin, the word pecunia (money) is derived from the word pecus (herd). It is interesting that the Latin root of the word «capital» comes from capital, meaning cattle. In Russian, exchangeable counterparts were called kuna — from the skin of the marten (kunitsa).

Pelts of valuable furry animals fulfilled the function of «fur» money. The units of value of these goods that were equivalent to money were «kuna» (marten pelts) and bela (squirrel (belka) pelts). In a Smolensk document dating from 1150, a fox pelt was valued at 12 kuna. Various kinds of levies (yasak) were paid into public coffers in leather pelts. Pelts were a common form of money for ancient states — Sparta, Rome, Carthage. Chronicles of Scandinavian peoples recount how on land where animals were to be found in abundance, pelts were used as money, to pay for purchases and to pay taxes and fines. In the code of laws of the time, it was stated that for an insult, the offender must pay one fox pelt, for physical mutilation a sable pelt, and so on. […] «Fur» and «leather» money were still in circulation during the reign of Peter the Great. And until very recently, pelts were used as money in Alaska.

When metal money was first used in Ancient Russia it was called «kuna» (the price of a marten pelt) or «bela» (the price of a squirrel pelt), and only with the passage of time did these old names gradually die out»100

Also, rice was used in Japan, tea in China, cotton cloths in Africa and dried fish in Iceland. For example, prices in Iceland in the 15th century were as follows:
for a horseshoe — 1 dried fish;
for a pair of women’s shoes — 3 fishes;
for a keg of wine — 100 fishes;
for a keg of butter — 120 fishes.

Natural money, being of material value itself, was most suitable in the role of money at this time, when commodity production was as yet insufficiently developed and had not become the basic form of public production. The necessity of using natural money was the result of the disunity, the insulation of individual goods manufacturers, for whom only the exchange of products acted as a way to connect economically and socially, confirming the utility of their product and compensating the owners of the goods for the value of that product in the form of equivalent material valuables»". 101

It is worth noting that society, during severe economic crises and upsets, losing faith in the possibility of other, higher forms fulfilling the function of money, lowers itself to this form of commodity circulation, bashfully calling it barter.

For example, in Russia at the end of 1991, during a period of economic reforms, the deficit in goods became so severe that money ceased to be of any use — all trade began to take place on the basis of barter. And there and then, «monetary» commodities appeared (automobiles, timber, steel, petrol, meat), in exchange for which you could receive anything you needed. For example, for a tonne of petrol you could get 4.2 tonnes of cement, 70kg of meat, or 1100 red bricks.

Some economists call this the commodity-accounting phase.

This is how Professor N. G. Mankiw of Harvard University describes the situation in his book, «The Principles of Economics»:
"In cases when a commodity takes over the role of money, having intrinsic value, it is called commodity money. The concept of intrinsic value is applied to money which will still have value when it is not being used as money. A well-known example of commodity money is gold, which has intrinsic value because it is used both in industry and to manufacture jewellery… Another example of commodity money is cigarettes. During the Second World War, prisoners in PoW camps sold various goods and services to each other using cigarettes as a means of hoarding, a unit of accounting and a medium of exchange. In this situation, even non-smokers gladly accepted cigarettes as payment, as they knew that they could always use them to obtain other goods and services"102



Natural money, having served individual and small wholesale irregular turnover, circulates in accordance with the simplest property rules: whoever has the article in his hands is the owner. The simple transfer of the article from the hands of one to another constituted the simplest exchange. As a rule, no contractual relations encroached upon the exchange.

As the variety of goods on the market increased, the problem experienced by vendors and purchasers of determining the dominant commodity in circulation became ever more pressing.

In an evolutionary process, metal began to force other goods out of circulation because it had the greatest capacity to be used in the economy not only as an instrument of circulation but also (after treatment) as tools of labour or weapons: a plough, pitcher, knife, sword, shield or other, similar goods could be transformed more easily than other commodities into no less valuable items, which meant that exchange value could be converted into consumer value almost immediately after the exchange process.


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