Wednesday, May 22, 2013

What's Fair in Bartering?

Amanda Warren
Activist Post

I have a difficult question and I'd like your help. Admittedly, I am no economist - I know what sounds good and I dream of Atlantis utopias, but I'm downright ignorant with macro economics. I guess bartering is more micro and it comes easy because all you have to do is think about your skills, talents and goods and work up a trade agreement with another party and everyone is happy. Right?

When I talked to a small business owner I worked for, she had nothing but sour sentiments for talk of blossoming barter economies. Greece is using it out of necessity and with encouraging results. Others are going out of their way to choose it for personal reasons. The news vid below, favorably shows New York businesses bartering, and says there are over 1500 bartering websites.

Her business was sinking for many reasons, and she needed good PR, so I suggested barter. Instead of pure cash or credit, she had consumable items that weren't moving which she paid wholesale for - why not trade some to a beginning social media relations expert for a service that would normally cost a lot of dough?

The practice sounds perfect to me because I dislike banking, managing money, exorbitant fees, and paying for inflation while I continue to trade hours for stationary wages. I like sideswipes and life hacks. I've already bartered using my skill set with friends. Her utopia involves government handouts, small business bailouts, and universal health care.

In my mind, she is constantly miserable because she is waiting for what she feels is owed to her, forgetting that it's hers and everyone else's hourly wages that would go to her slice of pie and slices to many, many others.

She asked:
How is a barter society FAIR when I have to trade my GOODS that I PAY cash for wholesale prices for something that other people can do for FREE? A BARBER or HAIR STYLIST for instance, can do their work for FREE as many times as they WANT. But I have GOODS. A barter society can NEVER work!

I mentioned that a hair stylist:
  • Paid for their education.
  • Rents their booth if they do work inside a business, or perhaps they own their shop - utilities, mortgage, loans.
  • Constantly purchases supplies that only last so long: scissors, hair dryers, combs, disinfecting liquids.
  • Must use consumable products like shampoo, conditioner, gels, hair sprays, dyes, perm solution, etc.
  • Must stand on their feet for the whole service duration (and many must buy orthopedics and pay for chiropractic and foot work).
  • Must trade a certain amount of time for each service rendered - so it's unreasonable to think that they can work for free goods as many times as they want. There's a limit to time and energy.
What she also missed during this discussion:
  • She has an education and a decade of experience.
  • She has educational skills that she can offer to others like consulting - both with her products and business experience.
  • She has networking connections, very valuable.
  • She's written some instructive books.
  • She has control over what she decides in regards of value and trade.
But if I want a bag of groceries or a hair style, I'm trading goods that I paid for, she said. I've seen this problem arise in a real-life example. A relative who is a painter bartered painting services for dental and doctor visits for his family. But that left nothing much for groceries in the following weeks, as it would take a week or two to complete some of the work. And he had to buy the paint and supplies. Sometimes he trades with a local farm for fresh goods but still has difficulty with gaining other grocery goods when he's trading paint service.

How is this conundrum solved? Are these birthing pains since our modern society currently isn't immersed in barter and cannot be fully transitioned? Would it be different if the economy completely flunked - would some people and their skills be left in the cold? Is it really just for those doing the trade to work out, going through trial and error?

I think perception of fairness is better left to positive people who choose to initiate these interactions. Now, how do you like to respond to the argument above? For me, it's the feeling one gets when expressing how great it would be to go back to no income tax and already knows the first words out of their mouths ... And the third-eyelid starts to droop ...

Please share your thoughts below.

This video (a few years old) shows some New York businesses helping each other out of economic slumps with bartering. Even though they are giving something away, they join forces in trade to pull the other up. They express happiness and gratitude for the trade.

This woman, now in her 70s, hasn't spent money in over 15 years:

Image: Wikimedia Commons

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Anonymous said...

Maybe people could grow veges/ fruits (if they have a bakc/ front yard for trees) and could barter with extra food they have for those with non-gardening skills? Except that in order for that to work, we need to get the governments to not restrict people giving/ sharing/ trading food to others. If it weren't for all these damn restrictions, people could fare far better. If enough people demand it, and just do it, maybe government will back off... or show their true colors of control so blatantly the rest will wake up.

Anonymous said...

Remember you do not have to keep or use whatever you have newly acquired. It can always be used to barter for something, with someone else. Also bartering does not have to be a one time transaction. It can be an ongoing exchange, sort of like personal credit/debt or something for the parties involved

notsofreecitizen said...

"But if I want a bag of groceries or a hair style, I'm trading goods that I paid for, she said." She doesn't consider food as a good? It's one of the most basic necessities of life.

I would have to say that the "conundrum" you speak of is in the businesswoman's perception of goods and services. She seems to equate a higher value to goods than to services. You won't get very far without some services. A common one is electricity delivered to the house. How do you trade electricity? It's a tangible "item", but it's delivered as a service unless you generate your own.

Maybe, and I STRESS maybe, you can explain it to her this way. It's not the goods that she's selling, it's her service. Her service is buying those goods in bulk at a price far lower than one person could buy one of the goods for. If a person can buy one of her widgets at a lower price elsewhere, s/he will. If a person can buy one of the widgets at the same wholesale price the businesswoman pays, s/he will, and the businesswoman will lose a sale. The buyer of her "goods" is paying for the businesswoman to locate the goods, buy them in bulk at a low price and store them until a buyer comes along. The businesswoman did not create the goods she is selling. Even if she did create the good being sold, (one of her books, for example), the good was created from a service rendered. The book did not write itself. The lumber sold at the lumber store did not cut and shape itself from the tree. The iWidget did not magically appear without human labor. By the same measure, if a person can cut or style their own hair, the services of a barber/beautician aren't needed.

The "barter" transaction evolves because you are not trading for a fixed monetary amount. The value of the goods and/or services being traded are based on their perceived value by both parties. If a retail store is selling television sets for 100 FRNs, and no one is buying, the retail store will lower the price to the level that people will buy the TVs. When viewed this way, the business owner is bartering the good in exchange for an amount of currency or coin. Items (including services) are auctioned to the highest bidder. One person bids higher than the rest because of the perceived value of the item being sold.

Unfortunately, one cannot always trade goods for goods, or services for services. Both parties to the barter transaction have to be a bit flexible in their negotiations without completely "giving away" perceived value. To make an analogy, the true purchasing power of gold coins has stayed the course over the decades/centuries in relation to fiat currency. Yet, there are periodic fluctuations in the perceived value of gold in relationship to fiat currency. Gold consistently holds its purchasing power in the long run, whereas fiat currency consistently loses its purchasing power.

Hide Behind said...

There are but few rules in barter. watch your butt
trade for what is of value to you by trading to them of what is of least value to you.
You will soon learn the values thay wealthy people who have earned their wealth understand. only get what you need in order to get what you realy want.

Anonymous said...

When trading a service for an item both parties should get it in writing. Too often the service is not done or the item is withheld because of dispute over details.
That said I just traded 3 trays of strawberries from my garden runners for a large beautiful oil painting and both parties are thrilled. [retail value of strawberries at nursery about $100]

Anonymous said...

During the hyperinflation during the Weimer repulic of post world war 1 Germany, the impoverished once middle class city dwellers were taking the Hamster train from Berlin and trading their valuable to the farmers in the country side for food.

If you have good fertile agricultural land located in a climate where you can get at least 2 or 3 crops a year or more, and grow your own fruit and vegetables and raise livestock, you can always barter for what you need in times of economic crisis.

A free market economy is based on supply and demand. It is whatever the market will bear. For example: A bushel of wheat for a barrel of oil. Using gold and silver is a form of barter because it has intrinsic value. A commodity must have value in use and value in exchange and be an object of utility.

An economy that is based on fraud eventually collapses. When the internatioinal finance hyenas that are skimming off the top of the financial pyramid cannot get any more new investors at the bottom to buy into their gigantic Ponzi Pyramid scam, the financial base of the economic system collapses.

They are going to play this thing out to the very end. said...

She ought to read the book 'Economics in One Lesson' by Henry Hazlitt. It explains economics in the very clear and rational way that our school system doesn't.

Anonymous said...

All the goods that she would barter with were bought with her money, and all of that money was bought with her time. We trade our time for money all the day every day, and now, she can't see the good in trading her money for somebody elses time? She needs to realize that mutually beneficial voluntary exchange is the engine that builds wealth and prosperity - not printing presses!

Amanda Warren said...

Guys - thanks so much for your thoughtful comments! Really enjoyed reading them and it helped dig deeper into bartering philosophies. Peace,

Anonymous said...

I have used my photographic services for years bartering for vacations, trips. clothes, whatever. But it's rare to barter today because "everything has to go thru the computer."

Also the IRS doesn't like it because of the "underground economy.

Anonymous said...

You have delineated the positive and negative equation of Barter quite well. Like a pro actually. What you are not doing is moving on from someone that does not get it and will not until the #&@! really hits the fan. Find others who will barter gladly. At least 1 in 10 and maybe more.
I speak from experience similar to the 70yr old. Acquiring a Lincoln, Mercedes and Cadillac, amongst other 'needs', was not easy but it was not hard either. You have the skills, use them, teach them. Even as a broker you will do well.
As they say, 'pay attention, or pay cash'.
You go girl.

rarchimedes said...

I think that most people engage in barter when the opportunity offers, but establishing a fair barter is in many situations quite difficult. Money is an agreement to establish relative values where either volume or lack of fair exchange items exists. In an economy where everyone is having to go through barter negotiations, large populations cannot survive. If we are having a survival situation where population is rapidly diminishing, barter will start to dominate, but so will forcible exchange by whatever means is available, only limited by the ability of people to resist, which may or may not be large. Plot farming cannot support anywhere near the population we currently have, so violence will quickly become the means of exchange. Yes, in our currently insulated world, almost everyone can do some bartering, but the basis of the society cannot be supported by barter. If any society other than totally feudal survives, some form of money will reappear as a means of allowing exchange to grow beyond the neighborhood or town or city or whatever units come into existence.

We can appeal to this in theory, but in practice, a fully barter economy will be a disaster beyond any imagining.

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