This section is from the "The Science Of Wealth" book, by Amasa Walker.
Exchange has its origin from the division of labor; and the further that division is carried, the greater extension is given to exchange. If each man supplied his own wants by his own work, trade could not exist. But, so far from this being the rule of industrial society, the article to which a man devotes all his labor may be such as he never used, perhaps never saw used.
Exchange is that agency which brings a man what he wants for what he does not want, which furnishes gratification for his desires out of objects which are adapted to gratify few or none of his desires.
As the division of labor begins in the most savage state, so exchange is known there. One goes into the woods for venison; another, to the river for fish. At night, they divide. Half the fish is given for half the meat. Perhaps other parties are introduced. Instead of exchanging the whole of their fish or venison, each of the two gives a portion for a trinket, and another portion to the medicine man for herbs which he alone knows how to collect. We have here brought in exchange, not only in regard to the plain necessaries of life, but to the services of science and to luxuries. Yet all this occurs in the daily life of the savage.
Only one went for venison: four have venison now. Only one went fishing: four have fish to eat. The hunter and the fisherman have trinkets and medicine they know not how to get. The doctor and the cripple who made the trinket have fish and venison they could not procure for themselves.
This is the idea of exchange. It extends first to the industry of a hamlet; it enlarges to take in the entire community; it remains through all the successive modifications and refinements of labor and accumulations of capital. It goes abroad; it crosses rivers, then narrow seas, then the broad ocean; hunting out everywhere what the seller wants, carrying everywhere what the buyer wants. The word "exchange" expresses the economical principle of all this: its office is the creation and apportionment of wealth.
" Trade " is a technical term for the sum of all actual exchanges. It is exchange realized.
There are several kinds of trade: —
1st, Domestic or home trade, which includes what is commonly known as the coasting trade.
2d, Carrying trade, in which the carriers have no interest in the commodities beyond their transportation.
3d, Foreign or international trade, to which the word " commerce " is generally applied.
These kinds of trade are subdivided into the wholesale, retail, and jobbing trades; and specialized indefinitely as the iron, cotton, shoe trades, &c.
Whence does trade arise?
From the desire which individuals and communities have for each other's products. It is evident that this is essential to trade; since, if men or peoples produced by themselves all they wished for, there could, as we have said, be no occasion for an exchange. It is evident, also, that this is sufficient for trade, since it supplies all the motive that can exist for an exchange.
To what extent can trade be carried?
To the extent of the surplus production of each individual or nation. Given the aggregate surplus products of all the people of a country severally, and we have the amount of its entire trade. Given the aggregate surplus products of the people collectively, and we have the amount of its foreign trade.
Illustration : Suppose a community of one hundred individuals, each producing three hundred dollars' worth a year, — aggregate revenue, thirty thousand dollars. If each person desires to consume only one hundred dollars' worth of his own articles, he will have left for trade two hundred dollars' worth, — aggregate in the community, twenty thousand dollars. But if, after exchanging around with his neighbors, it is found that each member of the community has one hundred dollars which he does not wish to part with for any thing he can get at home, we have the aggregate surplus available for foreign trade, ten thousand dollars.
Ordinarily, individuals or peoples do not wish to part with all their products. Ohio, for example, does not wish to dispose of all her wheat. A share must be kept for home consumption. The surplus will be exchanged for other commodities abroad.
Exactly the amount to be so retained will depend, within certain limits, on the degree of disposability. The more the wheat is in demand, — that is, the more of desirable things are offered for it,—the less will the producers be inclined to retain it; the greater effort will they make to dispense with its use themselves, or substitute other things for it at home. But this result will be limited by the necessities of the people. It cannot be calculated on to increase very largely the amount available for trade.