The Economic Impact Of Bartering
James Harvey Stout (deceased). This material is now in the public
domain. The complete collection of Mr. Stout's writing is now at
Jump to the following topics:
- Barter affects
the economic system.
bartering have a place in a healthy economy?
the economic system. Bartering is fundamentally a personal activity
-- one-to-one, you and me getting what we want. But when millions of
people are bartering, it becomes more than just an individual action;
it becomes a supplemental economic system, which both complements and
alters the macrocosmic system. We can see this effect in various
- It allows us to be less reliant on the job market. To acquire
goods and services, we usually need money, which is usually
acquired through a job. (If we want more goods and
services, we usually have to get a high-paying job.) But
when we barter, each trade is a "job" in itself; we become a
businessperson who generates goods and services which we would
have bought with the money from a job. Therefore:
- We can accept a lower-paying job which we enjoy, and make
up the difference by bartering. This lower-paying job can even
be a part-time job.
- We can stay at a lower-paying job which we enjoy,
instead of climbing a stressful corporate ladder.
- Regardless of our income level, we can supplement it by
moonlighting with bartering. Instead of watching television in
our free time, we can barter our services -- or our goods,
which could be the handicrafts from a pleasant hobby.
- Bartering is not as susceptible to inflation. Consider these
- Inflation might raise the price of everything else, but if
we agree that your rototilling equals my carpentry, that's
that. Two hundred years ago, we might have been able to trade
an hour of tutoring for a large bag of garden vegetables. The
cash price might have been 5 cents for either one. In
our current era, the tutoring might cost 400 times that much
($20) and the vegetables' price could have inflated by that
same amount. But the barter deal would be exactly the same.
- Bartering is not totally inflation-proof.
- Inflation can occur within a barter club when some
members start to add special charges (in units) when selling
to the other members. (Many clubs prohibit this practice.)
- The service charges and other fees in barter clubs might
be considered inflationary; we must raise our prices in
order to cover those extra costs.
- Inflation can happen within a barter club's economic
system because it is associated with the money-based
economy. When prices rise in the money-based economy, they
also rise in a unit-based barter club; for example, when a
$500 TV set inflates to $600, the barter-club members must
then pay 600 units to buy it.
- Inflation might occur in a community's economy when a
new barter club introduces its money supply in the form of
units. If the club creates hundreds of thousands of dollars
worth of units, the effect would be the same as if it had
introduced the same amount of dollars.
- Bartering has a different dynamic in "supply and demand." If
the shovel manufacturers of the world unite and suddenly produce
enough shovels to give 100 of them to everyone, there would be no
effect on the value of our shovel in terms of its ability
to dig potatoes. (Try doing a similar saturation with $100 bills,
and see how their value is affected.) Of course, if we try to
trade that shovel, we will find that it has no value as a
medium of exchange, since everyone has 100 of them.
- Bartering allows businesses to sell goods and services to
cash-poor customers. We can see barter's influence wherever a
barterer is placing an extra order for farm supplies, filling an
empty table at a restaurant, or joining a telephone-answering
service which had been going broke. Bob Murley of Full Circle
Marketing explained that some excess production capacity can as
good as money: ''Everybody who produces something has a greater
capacity to produce more of the same thing than to get something
new or to create something new. So if a man is manufacturing
tennis rackets, he can produce another thousand tennis rackets
easier than he could go out and create a cruise for himself or
advertising space for himself or travel credits for himself. So
excess production is a tradable, barterable commodity."
- Bartering affects credit.
- When we can pay for some goods and services by bartering,
we might not need to borrow as much money.
- Barter clubs lend their units. This is an additional line
of credit for us.
- Bartering provides an additional "safety net." Non-profit
barter clubs provide a means by which cash-poor people can acquire
the necessities of life -- food, housing, clothing, etc. When I
worked at a non-profit barter club, I saw people who were in
severe financial distress -- not knowing where they would find
their next meal. We were usually able to help those people. While
bartering assists the people, it also makes them less dependent
upon taxpayer-supported government programs, e.g., welfare and
- It creates micro-economic systems. Indeed, the sheer
magnitude of the macro-economy could be one of its
problems. Theodore Rosjack said, in the introduction to E. F.
Schumacher's book, Small is Beautiful, "... whether the
bigness is that of public or private bureaucracies ... from
bigness comes impersonality, insensitivity, and a lust to
concentrate abstract power." It is easier to accumulate (and
abuse) assets and power in a money-based system than in a
direct-barter system; however, bartering, too, can be used to
amass wealth, particularly in a field like real-estate exchanges.
And "small" is not always "beautiful"; sometimes it is weak and
inefficient, as demonstrated by some barter clubs and by the
difficulty in setting up one-to-one trades as a way of life.
- It provides a basis for the re-definition of money and
economics. Some people believe that bartering is a philosophical
challenge to our money-based economic system. These people create
barter clubs which are decentralized, operated by members of the
community, and guided by idealistic motives. Some of them try to
transform economic values by making all labor equal: Your hour of
work equals mine, even though you are a doctor and I am a
window-washer. Paul Fink of the Community Skills Exchange in
Olympia, Washington, expressed a far-reaching philosophy on
bartering in a letter to me. He said: "I find barter books much
too apolitical. Our Community Skills Exchange is based on an end
to: the monetary system, hierarchy of wages, an unequal social
employer/employee relationship, centralization of production and
service, specialization of individuals, and labor as merely an
'economic' exchange. Our organization attempts to teach people how
to take charge of their own lives and once again feel powerful. As
far as we're concerned, empowerment is the focal issue." The
idealistic barterers are presenting interesting ideas about
commerce and money. They give their organizations names like
"Skills Bank" and even "Energy Bank," as though assets and money
are taking on a different meaning to these people. The skills and
energy of the community are indeed stored there -- in a form which
can be more real and directly usable than cash.
bartering have a place in a healthy economy? The popularity of
bartering has risen and fallen throughout history as national
economies have become depressed or prosperous. In the 20th century,
we saw an increase in bartering during the U.S. depression of the
1930s, and in post-World-War-II Europe. Bartering became popular
again during the extended recession of the early 1980s in the US.
When the economy is in good condition, people would rather spend
their abundance of cash -- but when inflation is high, and many
people are unemployed, and cash is less available, people want to
barter. However, bartering might have found a permanent place in a
healthy economy, for these reasons:
- Contemporary barter clubs. These clubs do not rely on
one-to-one trades; instead, they use a computerized system of
"units" which make bartering almost as easy to use as money. The
clubs are printing their own checks, issuing their own credit
cards, distributing their own scrip, making loans with interest,
and providing other alternatives to the money-based economy.
- Lack of faith in the economy. We are in a world of corporate
restructuring, down-sizing, rapidly changing industries, periodic
recessions, a high rate of bankruptcy, and other changes -- and
the ever-present possibility that the entire system could collapse
someday. In this world, bartering gives some stability; we can
barter regardless of the condition of the general economy.
- Bartering's respectability. Although some corporations (and
individuals) hesitate to barter because the activity still carries
some of its stigma as a sign of poverty and distress, it is coming
into the mainstream as a smart way to do business, even when our
finances are strong.
- Bartering will always be popular in its personal forms -- in
the trade of our turnips for a neighbor's banana bread, and the
trade of our kid's marbles for another kid's toy. In those
situations, barter is not determined by economic conditions; it is
a ritual and an expression of friendship -- and it is a natural,
deep-rooted part of our heritage and humanity.