What’s the Role of Trading?

Trading in the civilizations of the Middle East and surrounding areas developed a high degree of sophistication in ancient times. That is not surprising when you look at a map, given that the region was positioned in the middle of a number of important other civilizations and societies. The ancient Middle East connected the Mediterranean to India and China to the East and from the Mediterranean to the North and West of Europe. It had access to the vast Indian Ocean, which would emerge over millennia as the great trading sea of the world, well before Columbus and his European followers mastered the Atlantic. Trading in turn stimulated a variety of business innovations.

Consider one of the great civilizations of the region, Babylonia, which arose in Mesopotamia about 3,800 years ago. Succeeding earlier dynasties such as the Sumerians and the Assyrians, Babylonians developed surprisingly modern-sounding trade and exchange mechanisms. They had a monetized economy based on silver, used debt and credit, had negotiable instruments that could be assigned to third parties, and housed a class of specialized merchants who benefitted from a stable government that provided standardized weights and measures, infrastructures of transportation such as canals, and a code of laws under their most famous ruler, Hammurabi. Prices fluctuated with supply and demand and producers responded, with farmers putting more land under cultivation when prices were steep and bringing more produce to the market to sell. We know all this for one simple reason. The Babylonians, like their predecessors and like the Chinese and the Incas independently, had developed and made use of written language. When scholars deciphered their cuneiform script, they discovered that much of the writing concerned business transactions, prices, and quantities of goods.

Now we don’t want to make ancient Babylonia into a modern capitalist economy. Most people still lived and worked on the land, and were illiterate. Trade, particularly long-distance trade, was rare. Slavery and serfdom were common and extensive. But where trade was possible, it not only occurred but people could also be quite innovative in developing the tools, in this case the financial and business tools, for carrying it out. As we will see, different societies invented or reinvented these tools again and again when they had the opportunity to engage in trade.

One reason that these ancient societies differed from what we would think of as a modern capitalist economy was, they still lived a very precarious existence. They lived in a Malthusian world where bad weather, sudden disaster, or even a disappointing harvest year could spell famine, starvation, and death from opportunistic diseases. Good harvests encouraged the population to grow but that just meant more mouths to feed. Though farmers responded to the new demand, they did so by stretching resources to the maximum, putting into cultivation more and more marginal, low productivity lands—the famous law of diminishing returns. All it took was one or two bad years, maybe caused by some random fluctuations in weather, and the population exceeded the available calories. Plagues lurked just outside the gates of these societies, ready to swoop in as soon as hunger made the population vulnerable. Diseases also followed the routes of trade, most famously the deadly bubonic plague. If trading goods between people who had different skills and made different products was a net gain for humans; trading germs between populations that had different levels and types of immunity was a net gain for the disease microbes.

In a world where even basic caloric security was almost non-existent, it could be risky to stray too far from accepted practices. Innovation, particularly in the great agricultural sector, tended to be highly incremental, even if agriculture itself had been a radical breakthrough. In fact, until quite recently innovation was not a positive word. People might have sought out new things and changed when it benefitted them, but they were still quite wary of the new and untested. Innovation was, in ancient Greek and Latin as well as many other languages, a word to be suspicious of, signaling a troubling or unwelcome novelty, even a sacrilegious deviance, a vice forbidden by law and tradition, an upsetting of the established order.

We should remember, even in our world, at any given time most technology is old technology. Much of the work of engineers and others responsible for it involves maintaining more than changing. Some things, from doorknobs and bookshelves to paperclips to electric fans, have hardly changed over decades, even centuries. If we look, we can see many of the artifacts of earlier innovations still on the earth. Take the pyramids of Egypt. The ancient Egyptians were probably the first civilization to develop special tools to make rope, perhaps as long ago as 4,000 to 3,500 BCE. Ropes of water-reed fibers, pulled by thousands of workers, allowed the Egyptians to move the heavy stones required to build their monuments. But the pyramids were not just a technological innovation. At one time historians thought that the pyramids could only have been built by slave labor. It turns out that this was actually not the case. We now know that these ancient builders were organized into private contractor teams, skilled artisans who combined human muscle and energy and what by our standards today seem incredibly simple machinery—ropes, incline planes, simple pulleys—into an effective building force. They were innovators who brought together tools, technology, and organization to build something that has stood for more than 4,500 years. In fact, the tools and the devices the pyramid builders used would not be radically changed or improved upon for thousands of years. Masons in Europe who put up the great cathedrals of the Middle Ages used mostly the same simple machines that the ancient Egyptians used. The radical breakthroughs in construction had to wait a bit longer.

The cutting edge of innovation is where the rare and unusual lies. So, in this premodern world, the number of people engaged in risky, cutting-edge behavior was necessarily tiny. That was what made ancient trade so important; it was highly risky, even dangerous, yet had the potential to greatly increase wealth and well-being. So those who engaged in high-risk trade inevitably represented a small portion of society, since very few societies could afford to put a majority of their resources into innovative but risky ventures. Societies that did engage in extensive trade had to maintain a precarious balance, one that was often not sustainable over the long run. But when they could maintain it, they often became the flourishing centers of innovation and creativity precisely because they had access to so many diverse products and goods, to so much diverse knowledge and ideas.