|
Trade centres on the exchange of goods and/or services. Exchanges may take place between two parties (bilateral trade) or amongst more than two parties
(multilateral trade). In its original form trade perforce used barter and the exchange
of goods and services of a recognized equal value desirable to both parties. Modern
traders generally negotiate through the use of a medium of exchange, i.e. money, and
rarely through barter: as a result one can separate buying and earning or selling. The invention of money (and subsequently of credit, paper money and
non-physical money) greatly simplified and promoted the development of trade.
Most economists accept the non-obvious theory that trade benefits both
parties, and reject the notion that all exchange must exploit one party. Trade exists largely because differences exist in the
cost of production of some tradable commodity in different locations. As such, exchange at market prices between locations benefits both.
Empirical evidence for the success of trade can emerge when contrasting countries such as South Korea, which has adopted
largely unfettered free-trade, with India, which has pursued a more protectionist policy. Countries such as South Korea have
fared much better (when measured by economic criteria) than India, and others,
over the past fifty years.
History of Trade
Organisation of Trade
Different patterns of organising and administering trade include:
- State control - recognising the importance of trade by preserving the natural
monopoly of everyone
- Guild control - collectivist
convenience for the merchant class, and grounds enough for their reputation
in so many societies
- Free enterprise - a strange modern idea that appears to foster
the deification of dealers for their heroism in the arenas of the markets
Types of Trade
See also
|