Barter Country

As the economy suffers, a nation turns toward cashless transactions.

Greg Beato from the June 2009 issue

You may have lost your shirt in the market, but chances are you have a few dozen more in your closet, half of which you haven’t worn since the Clinton administration. If your home has never been featured on Clean Sweep, Neat, or one of the dozens of other cable shows where a team of professional organizers and designers gives your rec room an enema, you are sitting on a trove of tradable commodities. We’re broke but we’re loaded, and even if we’ve lost our jobs and cut up all our credit cards, that doesn’t mean we have to stop consuming. In the midst of the Definitely Above Average Recession of 2009, cash may still be king, but barter is that guy who sometimes looks more like the king than the king himself.

When the economy tanks, it’s not just dumbass comedies like Paul Blart: Mall Cop that do surprisingly well. Open your newspaper’s business section, and amid gloomy tales of foreclosures, credit crunches, and government bailouts, you’ll see bullish reports on the booming, almost magical world of barter. Acquaintances solidify friendships via swapped sweaters. Single moms trade housesitting for children’s clothes. Refrigeration companies get paid with sandwiches. The number of listings in the barter section of Craigslist jumped 100 percent from January 2008 to January 2009. According to the International Reciprocal Trade Association, more than 250,000 U.S. businesses now conduct $16 billion in barter transactions per year. Who cares where the Dow’s at when fence builders are exchanging their labor for Jet Skis and barter websites are attracting new members faster than a Bernie Madoff investment fund?

Along with being the world’s oldest form of commerce, barter is impeccably au courant. You want sustainability—I’ll trade you my junk for your junk. You want authenticity—there’s nothing more primal than getting paid for your Web design services with 50 pounds of meat. And at a time when the public has soured on impenetrably complex subprime financing instruments, barter is the ultimate antidote. You have some excess beads and trinkets you can’t move, your trading partner has an island, and you swap. It doesn’t get any simpler than that.

Of course, it’s not always easy to find parties who have what you want and want what you have. That’s where barter exchanges come in. In the U.S., these markets go back to at least 1960, when Marvin J. McConnell created a company called Business Exchange in North Hollywood, California. In a barter exchange, a company pays an annual membership fee to join, then earns “trade dollars” each time it provides a product or service to another member company. It can then use those trade dollars to make purchases from any other member of the exchange. In addition to the annual membership fees, the exchange takes a cut from each transaction.

It took eight years for Business Exchange to turn a profit, but similar businesses started popping up around the country too. One reason for their initial popularity was the tax advantages that exchanges appeared to offer. As the trade newspaper Barter World advised its readers in 1973, it was “quite permissible under [U.S.] tax laws for business owners to trade products or services with each other which represent relatively equal values as tax-free exchanges.”

The Internal Revenue Service didn’t necessarily agree with that, and in 1980 it explicitly said so. Barter club members, the IRS declared, had to report credits earned through trade as income. Exchange growth slowed some at that point, but tax avoidance was just one of barter’s virtues. The system also allows businesses to conserve cash for things like rent and wages. It introduces them to a network of other local businesses that may need their services. It functions as a kind of wholesale marketplace. That is, if an appliance retailer has an item he sells for $100 but paid only $50 for, he will offer it through the exchange for $100. The trading partner on the other end of the transaction—a stationery store, say—will be doing the same thing. For only a $50 outlay, both end up getting goods they’d otherwise have to pay $100 for.

According to International Reciprocal Trade Association estimates at the time, about 400 American barter exchanges in 1987 were generating between $1.8 billion and $3.7 billion (in 2009 dollars) per year. In 1997, those numbers had risen to 686 exchanges and $12 billion. In the midst of dot-com mania, venture capitalists and other investors began pouring hundreds of millions of dollars into barter start-ups like Bigvine.com and Lassobucks.com. For a moment, barter was, like every other thing at the time, the Next Big Thing, with boosters predicting that online exchanges would lower transaction fees, expand trading networks, and ultimately make barter as mainstream as cash.

Like so many dot-com casualties, most of those big-name sites have already been forgotten. But a new generation of start-ups has emerged to take their place. Businesses are using online exchanges such as ITEX, BizX, and NuBarter. Individuals are trading books, CDs, DVDs, and videogames at sites like Swapthing and Bookmooch.com. And of course there’s Craigslist, where every day people offer up everything from seismic retrofitting to gluten-free baked goods for trade.

For recreational browsers and shopaholics who buy simply because they enjoy the hunt, barter functions like retail methadone: You get to experience the pleasure of shopping without spending any real money, while simultaneously freeing up space for your new acquisitions.

Barter fosters a sense of impulsiveness at a time when shoppers generally are more circumspect about the purchases they make. People who use barter exchanges often treat the credits they earn as mad money. An attorney, say, doesn’t need a $500 painting to decorate his new office. If he were paying out of pocket, he’d spend $50, tops, for a framed print from Target. But he has $500 in “trade dollars,” so why not? Similarly, an artist decides to finally get her leaky sink fixed; $100 an hour for a plumber has been deterring her, but she just unloaded one of those seascapes she hasn’t been able to sell to some lawyer. Economy, you’ve just been stimulated!

Barter also taps into a desire for social interaction and a sense of purpose. Amazon, eBay, and many of the Web’s most successful commercial sites have worked hard to foster a community around the transactions they facilitate, so it feels as if people are doing more than just purchasing goods and services: They’re building friendships, expressing their tastes, fashioning communities of interest. Barter exchanges take this a step further by removing the most impersonal element, cash. Transactions are preserved, which is important, because while we want to develop friendships and share our opinions, we also want to get stuff. But with money playing a less apparent role, the deals feel more personal, more authentic, more noble.

Indeed, in the age of Obama, when service and sacrifice are the buzzwords of choice and AIG executives are the new national villains, barter is an excellent way to reconcile our idealism with our hard-to-shake materialism. When you’re trading DVDs and linen blazers, you’re not just getting new things; you’re creating new communities and saving the environment! When you trade graphic design services through a barter exchange, it almost feels as if you are doing volunteer work— except that volunteer work isn’t very efficient. You might end up doing things you have no real aptitude for, like serving soup to homeless people or teaching immigrants to read. With barter, you are functioning in the area of your expertise. You are doing what you are good enough to get paid for, only you’re not getting paid, so it feels meaningful. Thanks to your skill as a graphic designer, you’re helping other small businesses make it during these tough economic times, and helping to ensure that your community retains a robust business infrastructure. The fact that you’re getting a new air conditioner out of the deal is just gravy.

Contributing Editor Greg Beato ([e-mail]) is a writer in San Francisco.

Comments

anarch|5.12.09 @ 7:08AM|#

We're broke but we're loaded

Speaking of which, someone please comment on this.

|5.12.09 @ 7:38AM|#

I can't wait for the barter economy. My pack-ratting pathology will become fiscal acumen. How many carrots can I get for a well-thumbed copy of Jugs?

John Tagliaferro|5.12.09 @ 7:48AM|#

SugarFree,

Just about what I was thinking.

How many slices of pepperoni pizza for an old shirt? None? How about I wash the paper plates?

Kyle Jordan|5.12.09 @ 7:49AM|#

Bartering is great. I haven't Paid for a new knife this year. Trades and whatnot have treated me well.

John Tagliaferro|5.12.09 @ 7:53AM|#

I need to go back and read Huckleberry Finn again. Good barter tale in there.

|5.12.09 @ 7:54AM|#

I guess I missed the part where any evidence of this headline was presented: As the economy suffers, a nation turns toward cashless transactions

|5.12.09 @ 7:59AM|#

Don't forget local currency schemes - it's a great time for enterprising would be independant monetary authorities to benefit from seignorage. Bull Market!

Anti-eco-fascist|5.12.09 @ 8:47AM|#

Speaking of which, someone please comment on this.

OK: I contend it's an eco-fascist propaganda site. The idiot in the video portrays everything as a zero sum game (which the system she's bashing most certainly is not), ignores the environment's astounding capacity to heal itself, pays absolutely no attention to where we derive those toxic chemicals (hint: they're from nature too), pretends we have no free will unless we're buying into her claptrap, and bashes the big corporations simply for being big, forgetting how much more wasteful the small businesses from which they arose were.

She also completely overlooks the massive pollution managed economies (such as the Soviet Union's) produced in their countries, ignores the many contributions those big corporations she hates so much have made to a better life for everyone, and particularly reveals a total lack of knowledge and interest of how industrialization has improved not only the consumer's life, but also the producer's: people in those nations she accuses us of exploiting are richer and longer-living and have better health care and education than they ever did when they were languishing in their mud huts.

Need I also point to the jaw-dropping hypocrisy of her publishing this anti-technological claptrap on the internet, product of our much-despised military-industrial complex? Need I point out she's playing fast and loose with her figures, providing no reference whatsoever for them? Maybe I'm just an old cynic here, but frankly it looks to me like she pulled them out of her anal cavity. If the world of consumer goods is as toxic as she claims, I'd have to ask why she's wearing those allegedly toxin-drenched modern clothes in the video.

Her solution to this exaggeratedly bleak world situation she portrays is also menacingly brief, avoiding any mention of just how exactly this eco-fascist utopia she's pushing is supposed to arise. (Hint: she wants us to vote for more eco-fascism!) She neglects to mention how many of those allegedly toxic consumer goods go into the "education" and "health care" on which she advocates more spending. (What does she suppose schools and hospitals have for supplies, mud pies and banana leaves?) She clearly knows nothing at all about how the world's economy really works, preferring to chalk all advances in our standard of living up to "exploitation" and other such Marxist dogma.

So ditch the Story of Stuff, people: it's garbage. If that commie whore really believed all that "sustainability" crap she's spouting, she'd kill herself in order to stop being a consumer, leaving instructions that her remains be carried out of the residential area in which she lives (probably in the city) on foot and dumped in the nearest forest for all those poor exploited animals to consume. Since she has not done these things, we can safely assume she's another self-righteous and hypocritical eco-fascist scold, eager for OTHER people to give up their health and happiness to sustain her wasteful and parasitic existence.

When she's dead, she'll doubtless be joining the rest of her fellow fascists in the afterlife's hottest, most perpetually Globally Warmed climate of all.

|5.12.09 @ 8:53AM|#

If I could barter my art services with the city and county to pay utility bills and property taxes, I'd be in heaven. Unfortunately, expenses like these are not on the barter table.

Mad Max|5.12.09 @ 8:57AM|#

Anti-eco-fascist,

Now *that* is what I call a rant.

Mad Max|5.12.09 @ 8:59AM|#

Merle,

Maybe if you went to prison for tax avoidance, you could take one of those art therapy courses. That would kind of be like bartering art for government services, wouldn't it?

short fat bastard|5.12.09 @ 9:26AM|#

Wake me when women start offering sex for chickens.

High Every Body|5.12.09 @ 9:35AM|#

Wake me when women start offering sex for chickens.

Same for empty Starbucks cups.

robc|5.12.09 @ 9:38AM|#

short fat bastard,

Sex for lobster is a very common trade.

|5.12.09 @ 9:39AM|#

That's a very Marxist article.

There is a reason cash replaced the barter system in every major civilization: limitations on the types of goods and services you can barter for, say, no one wants to trade you chickens for goats. Even the online barter services mentioned still use a form of cash; the "barter points" you trade with.

The sites certainly take their fees in cash, not in some barter exchange.

The whole "Do away with money, be a commun -ity, and everything will be great!" idea gave us Stalin, folks. Wake up. It always has been and always will be every man for himself.

randy|5.12.09 @ 9:47AM|#

dollar crah---> barter---> gold

joe|5.12.09 @ 9:49AM|#

Aristotle discovered a few years back that a common medium of exchange (aka "money") is necessary for economic calculation... I guess every truth needs rediscovering from time to time...

wake me when you get honest money back

|5.12.09 @ 9:49AM|#

Let's not forget that a fair amount of the impetus for barter transactions is that they are tax-free, income and sales.

High Every Body|5.12.09 @ 9:58AM|#

Let's not forget that a fair amount of the impetus for barter transactions is that they are tax-free, income and sales.

So are unreported cash transactions.

bb|5.12.09 @ 10:08AM|#

"So are unreported cash transactions."

ha, dontcha know about the the rfid chps in cash?

barter accountant|5.12.09 @ 10:11AM|#

What did we barter to get joe back?

|5.12.09 @ 10:19AM|#

If that Annie Leonard chick wants to be successful she's going to have to get way better looking somehow. That's the only way people are going to listen to her crap.

EJM|5.12.09 @ 10:25AM|#

Whoever came up with the homepage title for this ("Barter Country") really deserves a bonus.

(Reference explained here, just in case.)

Jozef|5.12.09 @ 10:39AM|#

I've been doing bartering for a long time, mainly service for service. A typical transaction was to take family portraits of my massage therapist's family, exchanged for a number of massages. Because I never did any photography for money, it was very difficult to put a value to my services. I'm a modest person - I tend to undervalue my skills, so it should come as no surprise that there was very little to declare, tax-wise.

This is also a reason why I wouldn't do bartering using local currencies. As long as I don't have a point of reference, valuing my barters are fully dependent on my subjective opinion.

Anti-eco-fascist|5.12.09 @ 11:05AM|#

Hey, they just picked up on this Marxist brainwashing video over at Free Republic too: http://www.freerepublic.com/focus/f-bloggers/2249198/posts

I particularly liked the one response suggesting that if any of your kids start falling for this crap, you take away their cell phones, computers, and video game consoles on the grounds that it's "for the good of the planet" allegedly. That'll change a few attitudes! I further suggest refusing to let the kids have any food that's artificially produced or packaged in any way, which will change their attitudes toward Annie the Commie even faster. ("You want food? Go grow your own, brats! Eating stuff out of a can is bad for the planet.")

|5.12.09 @ 11:38AM|#

Re: Story Of Stuff. On Take Your Child to Work Day, our company was also hosting a "sustainability fair" with this video as one of the events. My 8-year-old, with no prompting from me, became disgusted with the content and presentation within the first three minutes and asked to go. He couldn't stop talking about how wrong she had to be, how that wasn't the way the world worked. Gives me hope for the future!

|5.12.09 @ 11:43AM|#

Sorry, barter bucks are cash no matter how you try and slice it. It's the exact same effect as if you sold your junk and then used the cash to purchase something.

Really it's no different than a flea market, lol.

|5.12.09 @ 1:47PM|#

The whole "Do away with money, be a commun -ity, and everything will be great!" idea gave us Stalin, folks. Wake up. It always has been and always will be every man for himself.

Don't currency systems rely on some level on trust and co-operation that would be impossible to achieve if it truly always were and always will be "every man for himself"?

phalkor|5.12.09 @ 2:13PM|#

OK: I'm saving that rant; tis good.

KingofthePaupers|5.13.09 @ 12:00AM|#

Jct: Best of all, when the local currency is pegged to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See my banking systems engineering analysis at http://youtube.com/kingofthepaupers

|5.13.09 @ 12:25AM|#

I'm very glad to see this article. Actually, networked barter is incipient anarchocapitalism -- a bulwark against hyperinflation and radical increases in taxation.

When the country goes bankrupt (and it will, motherfuckers) there will be a marketplace infrastructure in place as a cushion against complete breakdown of civil society.

Then the power center will shift to these trade associations, and they are unlikely to be dominated by a bunch of Marxist fags.

Bob|5.13.09 @ 4:43AM|#

Another good option is SwapAce.com @ http://www.swapace.com - it is free to swap anything for anything

Anti-eco-fascist|5.13.09 @ 4:26PM|#

To get back to the main subject, I'd also like to put in a good word for another barter site called SwapTree, although I'm really liking this BookMooch system I just discovered through Beato's article a lot too. The point system on BookMooch makes a lot of stuff easier to trade than on SwapTree, but SwapTree probably has higher quality material on offer than BookMooch, since BookMooch's point system rewards all trades equally. (That is, you get exactly one trading point for every book you give away, whether it's a great work of literature or a cheesy paperback, so naturally there are more cheesy paperbacks than great works of literature on offer at BookMooch.)

Each system is still a form of capitalism; it's just that the capital they use is rather different from the kind one sees in the physical marketplace. It'd be anywhere from difficult to impossible to assign a precise dollar value to the points earned on BookMooch. On SwapTree, the goods themselves are the capital and their value is entirely in the eye of the acquirer: one of the DVDs I traded for a DVD of (in my opinion) a far superior movie on SwapTree came from Wal-Mart's $5 bin (and in my opinion, it was still overpriced); evidently my trading partner had a different opinion of it, and also of the DVD he sent me (which I wouldn't sell even if someone offered me more than $20 for it).

What makes these barter systems particularly attractive is that the internet has lowered the barriers to entry for small-time merchants: unlike the shopkeeper, the barterer needs no warehouse and no shelf space beyond what he already has in his residence for the goods being exchanged, and is therefore in less of danger of running afoul of government restrictions and regulations. Physical marketplaces such as farmer's markets, no matter how informal, also require their merchants to have a certain minimum of stuff for sale before they can get a booth; on these barter systems, one needs offer no more than a single item to participate.

As for the social effects, I should emphasize that these online barter systems are not communities at all, but networks. These networks are good for what they are, but one should be extremely suspicious of anyone who refers to these impersonal networks and societies in personal terms as communities or families. When politicians and activists start trying to claim we're all one big family, they usually mean they'd like to be the "papa" of this "family" and in charge of the "family" finances, among other things. Triumph of the Will had all kinds of "families" and "communities" of this sort on display in it. Don't let anyone try to co-opt your co-ops!

|5.14.09 @ 11:18AM|#

I can't really see how barter will ever replace most or even much of the traditional economy. To a large extent my company needs to remain in the traditional mode since the cash moves around to so many things. Barter limits my transaction to a single item and leaves me with no way to pay the bills that pour in for business overhead. Trying to figure out how to pay the billboard company for their advertising by barter is just not feasible. One can (and I just did) trade projects for personal items that you wouldn't normally have time for in a healthy economy. But I only need so many decks built and the other guy only needs so many handrails built. Any savings to both of us is because we did not include any profit to the company. That might seem advantageous but you soon see that profit is what makes business run and you won't run for long without it.

|5.16.09 @ 1:06PM|#

Local Barter exchanges like NuBarter are not just websites and they are never meant to replace cash transactions. They are a great supplement to existing businesses to save on cash expenses. Most barter networks have 1 or 2 of each business represented in any particular area and those business owners barter with business owners. They still get cash from customers that do not own a business or people that are not members of the network. There is plenty of business to go around.

The great thing about it is you don't have to trade one on one. As the article explained (which I don't think many of you even read it through) an eye doctor does not have to trade directly with the restaurant. They recieve their trade dollars at a $1 US Dollar = $1 Trade Dollar and can use them anywhere else in the network.

The way this helps pay your utilities and taxes is by using it to get the items you normally buy like printing services and then using your cash to pay your bills. Simple accounting juggling... duh.

By joining a barter network, the other members are more apt to use you for your service rather than your competitor. Then by using those extra customers to get that hotel stay, faucet fixed, car fixed, screenprinting, banner made, company picnic catered... etc etc etc, you actually keep more cash in your bank account. No brainer and nothing fascist about it.