ASSIGNMENT 1

Name-Abdur Rahman
Id-1630526
Section - 1
COURSE- INB 304
Submitted to - Raisul Awal Mahmud Sir
Topic- How International business has involved over time beginning
from exchange of goods some thousands of years ago? Explain in
details.
NO TABLE OF CONTENT PAGE
NUMBER
1 ROLE OF MONEY IN TRADE 3

2  BARTERING 4

3 The Transition From Bartering to Currency 6

4 First Official Currency Is Minted 8

5 The market place 9

6 How trade went on to became international 10

7 GROWTH OF INTERNATIONAL TRADE 12

8 CONCLUSION 13
ROLE OF MONEY IN TRADE

Money is one of the fundamental inventions of mankind. It has become so

important that the modern economy is described as the money economy. The
modern economy cannot work without money. Even in the early stages of
economic development, the need for exchange arose. At first, the family or village
was a self-sufficient unit. But later on, with the development of agriculture and
application of the division of labor—that is, the division of the society into
agriculturists, carpenters, merchants, and so on—the need for exchange arose.
Exchange took place first in the form of barter. Barter is the direct exchange of
goods for goods. Barter is a system of trading without the use of money. At first,
when the wants of men were few and simple, the barter system worked well. But
as days passed by, it was found to be unsuitable. It has many difficulties

Money in and of itself, has no actual value; it can be a shell, a metal coin, or a
piece of paper. Its value is symbolic; it conveys the important that people can
place on it. Money derives its value by virtue of its functions: as a medium of
exchange, a unit of measurement, and a storehouse for wealth. Money allows
people to trade goods and services indirectly, it helps communicate the price of
goods (prices written in dollar and cents correspond to a numerical amount in
your possession, i.e. in your pocket, purse, or wallet), and it provides individuals
with a way to store their wealth in the long-term.
 BARTERING
Before formal currency existed, most ancient societies used an exchange and
barter system. However, as humans started to develop more complex societies,
they needed a way to keep track of transactions. Furthermore, finding the right
craftsperson or farmer willing and able to make a suitable exchange grew
increasingly difficult when people started adopting more varied occupations, such
as building and serving as professional soldiers.
If you step back in time to 6,000 BC, you wouldn’t be completely taken aback by
the barter system. Introduced by Mesopotamian tribes, bartering allowed people
to trade goods of value amongst themselves. Some folks were very good at
fishing, some at raising livestock, some at growing grains and some at producing
furniture. As it was necessary for a farmer growing crops to also buy furniture, an
unofficial trade market was born. Remember, trade stems from human need. If
many people want something, it becomes “valuable” in public perception.
In the barter system, both parties need to have what the other wants, and there
is never a standard price of any good or service. In the barter system, a person
who has only a minor need for apples will pay significantly less than a person who
is craving apples and has the financial capability to buy them, even if they are all
located in the same area. Human beings can be gauged if they are trustworthy or
not depending on the situation. One problem with bartering is determining how
trustworthy the person you are trading with is. Since there is no central “market
price” for a particular object, vendors can jack up prices and take advantage of
the fact that consumers do not know the actual price of some good or service. But
the biggest drawback with the barter system is that it is woefully inconvenient.
Most goods being bartered were perishable, and carrying 10 adult goats around
just to exchange them for a chair would have been incredibly physically taxing. If
some “medium of exchange” had to be invented, it needed to be imperishable
and light enough to carry.
So the barter system was filled with flaws making it really tough to exchange
goods to get what they want. Here pointing out few of them:
1. Double Coincidence of Wants:
Under barter system, a double coincidence of wants is required for exchange. In
other words, the wants of the two persons who desire to exchange goods must
coincide. For example, if person A wants to acquire shoes in exchange for wheat,
then he must find another person who wants wheat for shoes.
Such a double coincidence of wants involves great difficulty and wastage of time
in a modern society, it rarely occurs. In the absence of a double coincidence of
wants, the individuals under barter system are compelled either to hold goods for
long periods of time, or to make numerous intermediary exchange’ ii order to get
finally the goods of their choice.
2. Absence of Common Measure of Value:
Even if it is possible to have the double coincidence of wants, the absence of a
common measure of value creates great problem because a lot of time is wasted
to strike a bargain. Since there is no common measure in terms of which the value
of a commodity can be expressed, the problem arises how much wheat should be
exchanged for how many pairs of shoes.
In fact, under the barter system, every good must be expressed in terms of every
other good. If, for example, there are 1000 goods in the economy, then, in the
absence of monetary unit, every good can be exchanged for the remaining 999
goods. What is true for one good will be true for all other 999 goods.
3. Lack of Divisibility:
Another difficulty of barter system relates to the fact that all goods cannot be
divided and subdivided. In the absence of a common medium of exchange, a
problem arises, when a big indivisible commodity is to be exchanged for a smaller
commodity. For example, if the price of a horse is equal to 10 shirts, then a
person having one shirt cannot exchange it for the horse because it is not possible
to divide the horse in small pieces without destroying its utility.
4. The Problem of Storing Wealth:
Under a barter system, there is absence of a proper and convenient means of
storing wealth or value, (a) As opposed to storing of generalized purchasing
power (in the form of money) in a monetary economy, the individuals have to
store specific purchasing power (in the form of horses, shoes, wheat etc.) under
the barter system which may decrease in value in the due course of time due to
physical deterioration or a change in tastes, (b) It is very expensive to store
specific goods for a long time, (c) Again the wealth stored in the form of specific
goods may create jealousy and enmity among the neighbors or relatives.
5. Difficulty of Deferred Payments:
The barter system does not provide a satisfactory unit in terms of which the
contracts about the deferred (future) payments are to be written. In an exchange
economy, many contracts relate to future activities and future payments. Under
barter system, future payments are written in terms of specific goods. It creates
many problems. Chandler has mentioned three such problems:
(a) It may create controversy regarding the quality of goods or services to be
repaid in future,
(b)  The two parties may be unable to agree on the specific good to be used for
repayment.
(c) Both parties run the risk that the goods to be repaid may increase or decrease
in value over the period of contract.
6. Problem of Transportation:
Another difficulty of barter system is that goods and services cannot be
transported conveniently from one place to another. For example, it is not easy
and without risk for an individual to take heaps of wheat or herd of cattle to a
distant market to exchange them for other goods. With the use of money, the
inconveniences or risks of transportation are removed.

The Transition From Bartering to Currency

Money–in some way, shape or form–has been part of human history for at least
the last 3,000 years. Before that time, historians generally agree that a system
of bartering was likely used.
Bartering is a direct trade of goods and services; for example, a farmer may
exchange a bushel of wheat for a pair of shoes from a shoemaker. However, these
arrangements take time. If you are exchanging an axe as part of an agreement in
which the other party is supposed to kill a woolly mammoth, you have to find
someone who thinks an axe is a fair trade for having to face down the 12-foot
tusks of a mammoth. If this doesn't work, you would have to alter the deal until
someone agreed to the terms.

Slowly, a type of currency–involving easily traded items like animal skins, salt, and
weapons–developed over the centuries. These traded goods served as
the medium of exchange (even though the value of each of these items was
still negotiable in many cases). This system of trading spread across the world,
and it still survives today in some parts of the globe.

One of the greatest achievements of the introduction of money was increasing

the speed at which business, whether mammoth-slaying or monument-building,
could be done.

Chinese Create Object That Resembles Modern-Day Coin

Sometime around 770 B.C., the Chinese moved from using actual usable objects–
such as tools and weapons–as a medium of exchange to using miniature replicas
of these same objects that had been cast in bronze. Due to impracticality–nobody
wants to reach into their pocket and impale their hand on a sharp arrow–these
tiny daggers, spades, and hoes were eventually abandoned for objects in the
shape of a circle. These objects became some of the first coins.1

Although China was the first country to use an object that modern people might
recognize as coins, the first region of the world to use an industrial facility to
manufacture coins that could be used as currency was in Europe, in the region
called Lydia (now western Turkey). Today, this type of facility is called a mint, and
the process of creating currency in this way is referred to as minting.
First Official Currency Is Minted
In 600 B.C., Lydia's King Alyattes minted the first official currency. The coins were
made from electrum, a mixture of silver and gold that occurs naturally, and the
coins were stamped with pictures that acted as denominations. In the streets of
Sardis, in approximately 600 B.C., a clay jar might cost you two owls and a snake.
Lydia's currency helped the country increase both its internal and external trading
systems, making it one of the richest empires in Asia Minor. (Today, when
someone says, "as rich as Croesus", they are referring to the last Lydian king who
minted the first gold coin.2)
Transition to Paper Currency
Around 700 B.C., the Chinese moved from coins to paper money. By the time
Marco Polo–the Venetian merchant, explorer, and writer who travelled through
Asia along the Silk Road between A.D. 1271 and 1295–visited China in
approximately A.D. 1271, the emperor of China had a good handle on both
the money supply and various denominations. In fact, in the place where modern
American bills say, "In God We Trust," the Chinese inscription at that time
warned: "Those who are counterfeiting will be decapitated."3
Parts of Europe were still using metal coins as their sole form of currency all the
way up to the 16th century. This was helped by their colonial efforts; the
acquisition of new territories via European conquest provided them with new
sources of precious metals and enabled them to keep minting a greater quantity
of coins.
However, banks eventually started using paper banknotes for depositors and
borrowers to carry around in place of metal coins. These notes could be taken to
the bank at any time and exchanged for their face value in metal–usually silver or
gold–coins. This paper money could be used to buy goods and services. In this
way, it operated much like currency does today in the modern world. However, it
was issued by banks and private institutions, not the government, which is now
responsible for issuing currency in most countries.4
The first paper currency issued by European governments was actually issued by
colonial governments in North America. Because shipments between Europe and
the North American colonies took so long, the colonists often ran out of cash as
operations expanded. Instead of going back to a barter system, the colonial
governments issued IOUs that traded as a currency. The first instance was in
Canada (then a French colony). In 1685, soldiers were issued playing cards
denominated and signed by the governor to use as cash instead of coins from
France.

The market place

Trade provides mankind's most significant meeting place, the market. In primitive
societies only religious events - cult rituals, or rites of passage such as marriage -
bring people together in a comparable way. But in these cases the participants
are already linked, by custom or kinship.

The process of barter brings a crowd together in a more random fashion. New
ideas, along with precious artefacts, have always travelled along trade routes.
And the natural week, the shared rhythm of a community, has frequently been
the space between market days.
 
Agricultural produce and everyday household goods tend to make short journeys
to and from a local market. Trade in a grander sense, between distant places, is a
different matter. It involves entrepreneurs and middlemen, people willing to
accept delay and risk in the hope of a large profit. The archive found at Ebla gives
a glimpse of an early trading city, from the middle of the third millennium BC.

When travel is slow and dangerous, the trader's commodities must be as nearly as
possible imperishable; and they must be valuable in relation to their size. Spices
fit the bill. So do rich textiles. And, above all, precious ornaments of silver and
gold, or useful items in copper, bronze or iron.
 
As the most valuable of commodities (in addition to being compact and easily
portable), metals are a great incentive to trade. The extensive deposits of copper
on Cyprus bring the island much wealth from about 3000 BC (Cyprus, in Latin,
gives copper its name - cyprium corrupted to cuprum).

Later, when the much scarcer commodity of tin is required to make bronze, even
distant Cornwall becomes - by the first millennium BC - a major supplier of the
needs of Bronze Age Europe.

How trade went on to became international:

Silk roads (1st century BC-5th century AD, and 13th-14th centuries AD)
People have been trading goods for almost as long as they’ve been around. But as
of the 1st century BC, a remarkable phenomenon occurred. For the first time in
history, luxury products from China started to appear on the other edge of the
Eurasian continent – in Rome. They got there after being hauled for thousands of
miles along the Silk Road. Trade had stopped being a local or regional affair and
started to become global.
That is not to say globalization had started in earnest. Silk was mostly a luxury
good, and so were the spices that were added to the intercontinental trade
between Asia and Europe. As a percentage of the total economy, the value of
these exports was tiny, and many middlemen were involved to get the goods to
their destination. But global trade links were established, and for those involved,
it was a goldmine. From purchase price to final sales price, the multiple went in
the dozens.The Silk Road could prosper in part because two great empires
dominated much of the route. If trade was interrupted, it was most often because
of blockades by local enemies of Rome or China. If the Silk Road eventually closed,
as it did after several centuries, the fall of the empires had everything to do with
it. And when it reopened in Marco Polo’s late medieval time, it was because the
rise of a new hegemonic empire: the Mongols. It is a pattern we’ll see throughout
the history of trade: it thrives when nations protect it, it falls when they don’t.
Spice routes (7th-15th centuries)
The next chapter in trade happened thanks to Islamic merchants. As the new
religion spread in all directions from its Arabian heartland in the 7th century, so
did trade. The founder of Islam, the prophet Mohammed, was famously a
merchant, as was his wife Khadija. Trade was thus in the DNA of the new religion
and its followers, and that showed. By the early 9th century, Muslim traders
already dominated Mediterranean and Indian Ocean trade; afterwards, they
could be found as far east as Indonesia, which over time became a Muslim-
majority country, and as far west as Moorish Spain.
The main focus of Islamic trade in those Middle Ages were spices. Unlike silk,
spices were traded mainly by sea since ancient times. But by the medieval era
they had become the true focus of international trade. Chief among them were
the cloves, nutmeg and mace from the fabled Spice islands – the Maluku islands
in Indonesia. They were extremely expensive and in high demand, also in Europe.
But as with silk, they remained a luxury product, and trade remained relatively
low volume. Globalization still didn’t take off, but the original Belt (sea route) and
Road (Silk Road) of trade between East and West did now exist.

Age of Discovery (15th-18th centuries)

Truly global trade kicked off in the Age of Discovery. It was in this era, from the
end of the 15th century onwards, that European explorers connected East and
West – and accidentally discovered the Americas. Aided by the discoveries of the
so-called “Scientific Revolution” in the fields of astronomy, mechanics, physics
and shipping, the Portuguese, Spanish and later the Dutch and the English first
“discovered”, then subjugated, and finally integrated new lands in their
economies.
The Age of Discovery rocked the world. The most (in)famous “discovery” is that of
America by Columbus, which all but ended pre-Colombian civilizations. But the
most consequential exploration was the circumnavigation by Magellan: it opened
the door to the Spice islands, cutting out Arab and Italian middlemen. While trade
once again remained small compared to total GDP, it certainly altered people’s
lives. Potatoes, tomatoes, coffee and chocolate were introduced in Europe, and
the price of spices fell steeply.
Yet economists today still don’t truly regard this era as one of true globalization.
Trade certainly started to become global, and it had even been the main reason
for starting the Age of Discovery. But the resulting global economy was still very
much siloed and lopsided. The European empires set up global supply chains, but
mostly with those colonies they owned. Moreover, their colonial model was
chiefly one of exploitation, including the shameful legacy of the slave trade. The
empires thus created both a mercantilist and a colonial economy, but not a truly
globalized one.

GROWTH OF INTERNATIONAL TRADE

From a historical perspective, international trade has grown remarkably in the last
couple of centuries. After a long period characterized by persistently low
international trade, over the course of the 19th century, technological advances
triggered a period of marked growth in world trade (the 'first wave of
globalisation'). This process of growth stopped, and was eventually reversed in
the interwar period; but since the Second World War international trade started
growing again, and in the last decades trade expansion has been faster than ever
before. Today, the sum of exports and imports across nations is higher than 50%
of global production. At the turn of the 19th century this figure was below 10%.

In the last couple of decades, transport and communication costs have decreased
across the world, and preferential trade agreements have become more and
more common, particularly among developing countries. In fact, trade among
developing nations (often referred to as South–South trade), more than tripled in
the period 1980–2011.

Free international trade is often seen as desirable because it allows countries to

specialize, in order to produce goods that they are relatively efficient at
producing, while importing other goods. This is the essence of the comparative
advantage argument supporting gains from trade: exchange allows countries to
“do what they do best,and import the rest”.

Available empirical evidence shows that while trade does lead to economic
growth on the aggregate, it also creates ‘winners and losers’ within countries – so
it is important to consider the distributional consequences of trade liberalization.
CONCLUSION
That brings us to today, when a new wave of globalization is once again upon us,
the new frontier of globalization is the cyber world. The digital economy, in its
infancy during the third wave of globalization, is now becoming a force to reckon
with through e-commerce, digital services, 3D printing. It is further enabled by
artificial intelligence, but threatened by cross-border hacking and cyberattacks.
Barter system was full of difficulties of exchanging goods and services between
individuals. In the absence of easy exchange of goods and services the barter
system worked as an obstacle to the division of labour and specialisation among
individuals which is an important factor for increasing productivity and economic
growth. Further, the process of economic growth leads to the expansion of
production of goods and services and consequential rise in incomes of the people.
As a result, volume of transactions in the developing economy increases. This
raises the demand for money to finance the increased transactions brought about
by the expanded level of economic activity. Thus, the process of economic growth
would be held in check if adequate supply of money is not forthcoming to meet
the requirements of increase in the level of economic activity.
But as this new wave of globalization is reaching our shores, many of the world’s
people are turning their backs on it. In the West particularly.Protectionism, trade
wars and immigration stops are once again the order of the day in many
countries.