Money – The Need For Money | Development of Money

There is quit few human institutions that share the same aura of the occult as money. Whatever our moral disposition towards money, its great importance is obvious. That notwithstanding, its origin, use and operations by financial institutions have remained astounding.

To some economist however money possesses certain attribute that makes it worth considering. While some yet regards it as a veil, which hides, what is really going on in society. In a money economy, people think, count and deal in money. They work, start businesses, invest, sell goods, eat, ride car, buy and read newspapers, educate themselves, their children and grand children through the instrument of money.

That is money only lubricates the machinery that is necessary for the production, distribution and consumption of these real things, this machinery that money lubricate is the process of exchange, or purchase and sale. It is useful as a medium of exchange, and should be able to satisfy the condition of being used as a standard for deferred payments and as an object for storing values. It is the common denomination, by which prices of innumerable goods and services can be measured and compared. It makes possible the exchange of a huge variety of goods and services that people produce.

Note that money in itself is nothing. It has value only in so far as and for as long as people accept it as having value because of its role in the exchange of real things. But as we have already pointed out the pursuit and acquisition of money is regarded as sensible by most, including the export, abhorrent and immoral by some others, and insane by very few indeed.

The Need For Money 

Man began to encounter problem of exchange from the time he began a settled life. He had to exchange what he produced for the products of others in order to enjoy a variety of goods, such an economy was called barter economy. In such an economy where goods were bartered for others, a lot of problems arose each time a consumer wanted what was not commonly used. Trade by barter obviously has many drawbacks.

  • The difficulty of storage – Many goods cannot be easily preserve and as such will get spoilt before long. In such circumstances, farmers will not be able to barter for goods in the future as their products are of a perishable nature.
  • The cumbersome nature of most commodities – Many commodities which were offered for barter were too bulky and this made it difficult for a producer to carry them to distant places where consumers could be found.
  • There was no common measure or standard of value – The value of a good , which has to be exchanged for another good, could not be easily arrived at as people were dealing with goods, which had different intrinsic values. Thus grains might fetch more meat in the market as there was no way of using an intermediate instrument.
  • The need for a double coincidence of wants – In order to exchange what a man had, he had to go round the village to find a man who not only wanted what he had, but who had what the first man would want in exchange. This procedure therefore resulted in wastage of valuable time and energy.
  • Credit was impossible in the barter system or economy as there was nothing, which could serve as a unit of account. It is therefore, possible to claim that in such a system, the level of borrowing and lending must have been very rudimentary.
  • Many commodities could not be sub divided into smaller units so as to facilitate exchange. A blacksmith wanting a handful of maize could not sub divide his hoe for that purpose. A man with a cow who wanted yams could not kill the cow only to part with leg in return for a yam.

Development Of Money  

These difficulties were common in the early period of division of labor between agriculture and pastoral activities. When the pastoral communities were wandering about. They had to exchange their goods for those of the settled agricultural communities. Thus, cattle, sheep, goat, fowl, became common in markets. The farmer communities in return offered grains, tubers axes, knives and metals. From then on-wards probably began an exchange of a multiple nature. A nomad might exchange a goat for a knife, a basket of grains and some yams.

However, this system could not last for long because specialization and division in the settled communities was on the increase. With many goods in the market, a better and a general medium of exchange had to be introduced or agreed upon. Therefore, during this period, people had to exchange the goods for what was commonly seen and regularly found in the market. Thus, it became commonplace to have a single commodity like the cow serving as money.

Such a stage is referred to as commodity exchange. The most common units used in most Africa were, cowries shells, shark’s teeth, spears, cattle, feathers, salt and skins of wild animals with fierce appearance etc.

The next stage in the development of money occurred when agricultural was separated from handicrafts. The development of manufacturing increased the size of the market and led to the need to introduce a commodity, which could be used in a mush wider geographical area than was hitherto possible. Thus metal, especially the beautiful and attractive ones, came into the market. At the beginning, all types of metal were but as the importance attached to them as money increased, the government finally took over the responsibility of putting them into circulation. These metals especially gold and silver offered special advantages which were not enjoyed previously by different commodities.

They were scarce, stable in value, durable and could be transported easily. This meant that the problems hitherto restricting production and trade in the economy were gradually being removed. These metals were later used to produce coins, which contained certain quantities of pure gold or silver. Today most coins in circulation do not have the gold content or the silver content. In fact, they are token coins.


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