The history of taxation and money are closely related since the development of currency facilitated the collection of taxes. The history of money is almost as long as the history of man. It goes back thousands of years. Before money was invented, trade relied on barter exchange. This form of exchange required the trading parties to have coincidence of needs or wants. This requirement restricted trade since people had to find someone who had what they wanted and wanted they had. Currency allowed barter to be replaced by a currency system of exchange that was better because it did not require a coincidence of needs and wants.
Currency is a unit that makes exchange or trade easier. Archaeological artefacts and other evidence indicate that the first examples of currency were plain of livestock like goats and sheep. Trade based on swapping livestock for other items started way back as early as 9,000 BC.
Following that early beginning, as permanent agriculture began to be practiced, people began to use grain and other crops as a monetary unit. For example, one trader might ask someone to trade a fur or animal skin for a sack of corn. China played an important role in the early development of monetary units.
There is evidence that by about 1200 BC, people in China were using cowry (or cowrie) shells as a unit of exchange to facilitate trade. The cowry is a form of marine gastropod or sea snail. This shell has served as money throughout history even to the middle of this century. This is important since cowry shells themselves, unlike agricultural produce, have no inherent value and very little functional value.
A couple of hundred years later, by about 1,000 BC, the Chinese began using artificial cowrie shell as a currency. This development coincided broadly with the ending of the Stone Age and the beginning of the Metal Age. In addition to the fake cowrie shell, metal tools also were used as currency.
The first Chinese coins were produced using base metals, not precious metals like silver or gold. Their early coins often were punched with a hole. This allowed coins to be tied together so that they could be carried more easily. It also helped maintain their security.
At about this time, in 500 BC, a similar but distinct development was occurring a world away in the Lydia or what is today Turkey. In that area, coins were also being used. However, unlike the Chinese coins made from base metal, the Lydian coins were made from silver and had significant inherent value.
Lydian coins were also stamped or marked with distinct engravings to indicate their ascribed value. In the long history of taxation and money, Lydian coins are considered by many to be the first direct antecedents of the monetary coins we use today.
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