Parable of the Travelling Merchant
This tale is set in colonial America. A small isolated village is a reasonable place, the price of a days labor is $1, a nice simple figure and the range of things done in the economy is small and straightforward.
The Merchant Thomas Smith is travelling, as is his wont, from town to town and village to village in Colonial America, hauling his cart laden with wares that he has purchased at previous stops and hopes to sell at future stops. On this day he is off on a road he hasn’t travelled before and comes upon the very poor, unfortunate town of Arkham. As Thomas entered the town he could see that although the town was well situated near water and other necessary resources, the state of the buildings and the roads and the people indicated a quite depressed condition for their economy. Little was in repair and less was being done by anyone. It seemed to be a poor choice for the destination of a merchant hoping to increase his prosperity, but Thomas was always a hopeful sort and decided he would first see if he could learn more about the town and its history.
After a brief time he learned that the cause of the impoverished state of the village. By some strange chance the town was completely devoid of money. No type of currency could be found, neither coin nor paper of any kind. The exact cause of this strange state of affairs need not concern us now (this is after all a parable). So in this town while all types of simple barter could be done, any more complex transaction was impracticable. The blacksmith needed coal for his forge but the coaler did not need any tools, he needed his roof patched. The main who could repair his roof, however, needed no coal, he needed land cleared, and so on. So the village remained in very unkempt state with may of its houses in disrepair, fencing broken down, animals untended, land going to waste, roads in need of attention and generally in a very poor state. Thus the town seemed a poor place for Thomas to spend his time. Given the general poverty of the area, he could find no tradable goods to purchase, and of course given the absence of money, no one in the town could purchase his goods.
And yet, there was much opportunity for prosperity, and trade, in Arkham. The townsfolk were capable of producing many things of value. The land could be cleared and the animals could be tended. Beyond that there was evidence that people could make many things of value for trade. One woman of the town had, in the past, made beautiful ceramic ware (but her kiln was now cold and she had no clay), the blacksmith had skill and could make wonderful tools (but he was out of coal)yet another townsman did fine woodworking (but he had no wood and his tools needed attention from the blacksmith). A long list of similar stories could be told of the townspeople of Arkham.
Given the possibility of prosperous trade from Arkham to the rest of the region, Thomas pondered what he could do. He had his cart, laden with various goods for trade, goods which he had purchased for a total of $50, but which he could expect to sell for a total of $100. In addition he had but $2 in cash on him, as at this stage in his travels he had most of his capital in his tradable goods. Now, as stated, he could hardly benefit anyone with his tradable goods, but he thought he might do something useful with his cash. There was nothing of value here for him to buy, but it occurred to him that another use might be made of his two dollars.
He took one of his dollars and gave it away to one of the villagers. He purchased nothing, just gave it away. The glad recipient of this bounty immediately set off with his new riches and paid the one dollar to the fellow most skilled at repairing roofs, to repair his leaking roof, the greatest hindrance to his prosperity. The fellow who got the dollar to repair the roof set in to do the job, but first went to the blacksmith who he paid a dollar to fix his plow. The blacksmith, before setting to work on the plow, first paid the collier for a dollars worth of coal and the collier went and paid another villager a dollar to fell trees and create some lumber. Before the day was out that one dollar, given away, had done some six or seven dollars worth of work throughout the town. Seeing the wonderful effect of this one dollars rapid pace through the town, Thomas sent his other dollar off on much the same trek.
After two or three days of this the town was already much improved. Walls had been whitewashed, roofs had been repaired, land cleared, fences mended and host of other tasks had been completed. The prosperity of the town was rising fast as the two dollars in currency were passed quickly from person to person compensating each person in turn for useful labor done. Each person in turn could provide some valuable service to a fellow townsperson, knowing that he or she could expect to get someone else to do something useful in return.
Before the week ended the basic needs of the town had been addressed and people began to produce goods above and beyond anyone’s immediate needs. The one woman’s kiln was again being used to produce ceramic ware, the woodworker produced some of his fine utensils and the blacksmith was producing extra tools of fine quality.
At first Thomas was just pleased to see the good being done by his two dollars, which was, after all, a small part of all his capital. By means of this small donation he was able to do a great deal of good. This alone pleased him much. But as he saw the changes coming on about the town, especially the latest, the production of finished goods that could be traded, he soon realized that he could recover his two dollars, and not only that, he could join in on the rising prosperity his generosity had started.
One of the two dollars, on its latest circulation around the village came into the hands of one young wife who had no longer any purchases to make among the residents of Arkham. This would be all well and good in ordinary circumstances, but here it cut in half the work being done about the town. Seeing this Thomas went to see if this woman would be interested in any of the wares in his merchant’s cart. As it happened she was. Several items of use about the house were exactly the sort of thing she wished to have and so he was able to capture his dollar back by trading items he had purchased for fifty cents, but had fully expected to trade for a dollar. This time, however, rather than give the dollar away, he went to the woman will the kiln and ceramic goods and purchased, with the dollar he had back, goods that he knew he could sell, in another town not two days travel to the west, for two dollars for sure. As the woman with the ceramics had other tasks she needed about the town, the dollar was again on its travels, making possible an increase by several dollars in the prosperity of town each day.
With this trade, Thomas saw that his cart now had goods which sold on his usual route would bring him $101, one dollar more than the cart was worth when he arrived. He had reduced the value of the cart to get the dollar from the woman who wanted his goods, but had raised it by two with the purchase of the ceramic wares from the second woman. Over the next few days he was able, on several occasions, to capture one or another of the dollars (or the same one each time, who could tell) by trading off his goods, and then increase the value of his cart by buying up the tradable goods the villagers were now able to produce.
So although a scant two weeks had passed from the time Thomas arrived in Arkham it had been transformed by his donation of two dollars from poverty to prosperity, and his cart, which upon arrival had goods worth $100, now had a set of goods worth $110. So, in spite of his having donated $2 to the town, he was $8 richer than when he arrived.