Ever since Man first formed small social units – families and tribes first, nations later – business activities of some sort have been necessary. At the beginning, of course, these small units tried to provide themselves with what they needed most urgently: clothes, housing, food and drink, in other words the basic necessities. For instance, sheep were caught and bred to obtain wool. The sheep had to be shorn, and the wool had to be spun, woven and stitched together before it could be used as a garment. In commercial terms the basic material had to be extracted (primary industry), a product had to be manufactured (secondary industry) and then taken to the end-user (tertiary industry).
As all these steps required different skills, it didn’t take very long before the members of these small units began to specialize in certain activities rather than perform all the necessary steps themselves. This division of labour soon spread from families and tribes to larger communities, with the result that an interchange of goods became inevitable. A group that was good at sheep-farming (but not particularly skilled in making articles of clothing from wool) bartered the unprocessed wool in exchange for a garment. The precise amount of wool to be given was determined by a process of bargaining and, of course, also by the supply of and demand for the products involved.
Very often direct barter was not possible because the sheep-farmer didn’t require further clothing but instead needed tools for shearing. The manufacturer of these tools, on the other hand, required iron ore, which neither the sheep-farmer nor the weaver was able to supply. To be able to obtain the goods required, the producers therefore displayed them at a market so that interested parties could come together to exchange their own products for goods they themselves needed most urgently.
In order to make the exchange of goods less unpredictable, money was introduced as a means of payment – usually in the form of coins made from precious metals. The sheep-farmer then sold the wool and bought the tools needed for shearing and the tool-maker bought the necessary iron ore from a miner.
In order to increase the production of wool and to make more money, the owners of the land might need new farm buildings. Consequently they had to buy the necessary building materials and hire workers to put it up.
If the sheep-farmers didn’t have the necessary funds, they would have to borrow money from people who had capital available to invest in other activities. These capital owners were not usually prepared to provide this service for nothing. On the contrary, they would try to make a profit out of their readiness to risk their money.
So we can see that business developed naturally and inevitably out of the formation of the societies. Man’s desire to achieve more than merely what is necessary to survive is at the very heart of business.
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1. How did early societies provide themselves with what they needed most urgently?
2. Why were sheep so important in early societies?
3. What is the difference between the primary sector and the secondary sector?
4. What is the difference between secondary sector and the tertiary sector?
5. Why did the division of labour become necessary?
6. What is the relationship between the development of trade and the division of labour?
7. Why was money introduced?
8. To what extent does the development of trade depend on capital owners?