Quid pro quo?

The philosophy and history of barter

"this for that"

In this great future, we can’t forget our past

Adam Smith (5 June 1723 - 17 July 1790) - philosopher and pioneer of political economy.

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

-Sought to demonstrate that markets pre-existed the state, and should be free of government regulation.

-Individuals began to specialize in specific crafts and had to depend on others for subsistence goods.

-”Double coincidence of wants" - each participant must want what the other has.

Adam Smith and the origin of money

OLD Limitations of Barter*

-Need for presence of double coincidence of wants

-Absence of common measure of value

-Indivisibility of certain goods

-Lack of standards for deferred payments

-Difficulty in storing wealth

Advantages of Barter -Direct barter does not require payment in money (when

money is in short supply).

-The poor cannot afford to store their small supply of wealth

in money, especially in situations where money devalues

quickly (hyperinflation).

-Rid yourself of unused resources, while acquiring much

needed goods and services.

Ancient Barter -Silent trade (ended around 1500AD)

-Refers to trading between tribes of other languages.

-Communication included fire, gongs, smoke or drums to signal a trade commencement.

-Africans traded Europeans gold for salt, beef. Because of this trade, cities grew and flourished and parts of West Africa became commercial centers.

History of Exchanges -Where barter is widespread, and cash supplies limited,

barter is aided by the use of credit, brokerage, and money as a way to value items.

-Ancient Egypt.

-The Owenites in Britain and the United States in the 1830s were the first to attempt to organize barter exchanges.

-Labor notes developed, based off of a person's labor. (I.O.U.)

Barta cause ya gotta -Currency may be in short supply, or highly devalued

through hyperinflation. -Money ceases to be the medium of exchange, and sometimes is bartered itself.

-Barter sometimes naturally develops in areas of economic dismay.

-Bartering allows you to save your cash.

The past hundred years -The Swiss WIR Bank

-Founded in 1934 (because of the depression).

-It has a stable history, not prone to failure like current banking systems.

-It has remained fully operational during times of general economic crisis

and helps dampen downturns in the business cycle, helping to stabilize the

Swiss economy during difficult times.

-Best example of sustainable barter in human history.

-Spain

-there is a growing number of exchange markets. These barter markets or swap meets work without currency. Participants bring things they do not need and exchange them for the unwanted goods of another participant. (Basic, Bazaar).

The past 100 years, cont. -LETS (1983, BC Canada)

-Local Exchange Trading System

-Use interest-free local credit so direct swaps do not need to be made. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network

-Trade credits, kept in credit bank (not a physical currency)

-Corporate Barter -Larger transactions

-Typically use media and advertising as leverage

-The trade-credit must not only be known and guaranteed, but also be valued in an amount the media and advertising could have been purchased for had the client bought it themselves

Barter is Green -Many barter industry exchanges promote barter as

environmentally friendly, which it is.

-Resources involved in the manufacture and distribution of new products is reduced by trading existing products.

-A global market for barter mitigates waste and acts as a counterpoint to the disposable economy.

The Internet Era -Modern day “Capacity exchange” accounts for 20% or more of world trade.

-US department of commerce believes it is 25% of world trade.

-as high as 50% in certain eastern European and African countries.

-Online digital payment and accounting mechanisms

-Electronic issuance and distribution of a system’s credits combined with the

-Scalability of online trading communities.

-Solving many long unsolved problems in barter

Learn from our mistakes -Widespread barter that does not follow best practices can

lead to different economic systems or even different political parties.

-If barter exchanges begin building up credit, or selling future services, they start to have a similar model to futures exchanges (trading the future worth of goods)

-Barter-only economies, labor dollars, community trade credits, etc can lead to a gift economy where people take what they need, give what they have - which becomes the basis of a communist economy.

-we know that this does not work, because like Adam Smith said, competition and rational self-interest is important to maintain a (somewhat) stable economy

Best Practices -If you plan to barter, follow the rules:

-Know what you want, create a wishlist of things your company needs

-Barter must work as a COMPLEMENTARY currency, in order to reach it’s full potential. The medium of exchange is how we value what we’re trading.

-Never accept something you don’t need (i.e. food from a restaurant you’d never go to, a car you didn’t need.

-Only trade your unused resources.(i.e. unbooked appointments, “dust-collecting” items in storage) make something out of nothing, to save cash while getting what you NEED

-Follow your countries tax regulations (Barter is taxed in the USA!)