The Barter Economy Returns

With trust in the world’s currencies at its lowest point in recent memory, bartering has reemerged as a possible solution to the credit crunch. All but forgotten, bartering predates any modern form of currency, and arose naturally in the ancient world as the primary means of economic exchange. Today, there are a number of barter systems in place alongside replacement currencies that operate on a local level in cities or small rural villages. Whether these approaches come from a hot Web 2.0 startup or a tiny Thai village, they are changing the economic landscape. Here’s a look at some of the most promising.

Cyber Bartering

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Cyber-bartering is not a new phenomenon, but bartering-specific sites are more popular today than ever. More specialized sites such as Barterbee, Barterquest and Rehashclothes, offer individuals various avenues for bartering, specific to what good or service they are looking for. And then there is Craigslist.org: this site is not a bartering site per se, but its worldwide reach and myriad categories offer individuals the ability to trade anything with anyone, anywhere in the world. Want to trade a washing machine for a motorcycle? How about your old hockey gear for a new snowboard? Check out this site, and chances are, you’ll find someone who’s willing to take up your offer.

Regional Bartering Exchanges

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In the last several years, many regional bartering exchanges began popping up in various parts of the United States, and presumably elsewhere in the world.  These are networks of businesses that trade the value of services for that of other services. For instance, a plumber may do a $400 dollar repair job for a local brewery. But instead of trading this directly for $400 worth of beer and chicken fingers, he can take this credit and put it back in circulation by trading units of $400 for other goods and services from the various other network members.

Big Businesses Bartering

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While it may sound strange, many of the world’s largest companies are involved in bartering at some level. According to a recent study by Barter Business Unlimited (a large network with over 10,000 member businesses), “…more than 65 percent of the corporations listed in the New York Stock Exchange are presently using barter to reduce surplus inventory, boost sales and ensure that production facilities run at near capacity.” This can definitely help lots of businesses struggling to move inventory during this recession. CEO of Bartermania.com, Vipul Rawal claims that global business-to-business bartering is up by as much as 60% due to the current recession, and this trend is starting reach developing countries such as India and China.

Local Bartering Circles

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In countries across the world, people are going back to the local marketplaces in droves. Exchanging wares and services are typically traded at such gatherings, which may set up for bartering specifically, or the bartering itself may just be a byproduct of individuals’ personal credit crunches. Anything from surfboards to electronics, to produce can typically be traded at such places. While these of course did not emerge as a reaction to the current recession, there’s no doubt that they are more popular today than ever.

Script Currencies

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Another recent development is the re-emergence of local currencies, or script currencies. One of the most famous examples of these started in 2007, in Western Massachusetts. In an effort to promote buying locally, residents of several communities are able to trade in $10 US at local banks for $11 Berkshares. There is a ten percent discount worked into the exchange rate, and the currency is widely accepted by many area merchants. As a result of the increased local commerce, businesses are willing to discount their prices, and local shoppers are happy to get the discount. It is estimated that more than $2 Million worth of Berkshares have circulated through 350 businesses since the bills were first printed two years ago. 

Replacement Currencies

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Replacement currencies also tend to develop when a national currency loses the trust of local economies. During Asia’s financial crises a decade ago, these developed in more remote regions, where many were dependent on remittances from relatives living in capital cities. The Santi Suk community in Northeastern Thailand is a notable example. The whole program is managed by a single monk, who operates the ‘Bank’ from his one-room office. The currency goes by the Thai word for ‘merit’, and is used alongside, or in lieu of the Thai Baht. Proponents of this currency (which are decorated by drawings made by local children) were once the subject of central government scorn, but due to today’s global financial crises, the government is allowing the money to flow freely once again, as it does not place a strain on the broader economy, nor the currency at large.

Bartering’s Legal Side

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While few might stop to think about the legal ramifications of bartering, it should be noted that even though it seems informal, bartering is a transaction just like any other. For those trading goods or services of a marked value, a contract ought be used to protect both parties. According to SMU Law professor, Mary Spector, every aspect of the exchange should be outlined, for example, with regards to pet care being exchanged: “Would [four hours of pet care] mean grooming the pet? Walking the pet? How many pets would be involved? Is it just dogs or would it be dogs and fish?

Tax Implications of Bartering

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Similar to the legal ramifications, there are also tax implications of barter-based commerce. According to the IRS, “If you conduct any direct barter – barter for another’s products or services – you will have to report the fair market value of the products or services you received on your tax return.”