HOME

TheInfoList



OR:

In
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct excha ...
, barter (derived from ''baretor'') is a system of
exchange Exchange may refer to: Physics *Gas exchange is the movement of oxygen and carbon dioxide molecules from a region of higher concentration to a region of lower concentration. Places United States * Exchange, Indiana, an unincorporated community * ...
in which participants in a
transaction Transaction or transactional may refer to: Commerce *Financial transaction, an agreement, communication, or movement carried out between a buyer and a seller to exchange an asset for payment *Debits and credits in a Double-entry bookkeeping syst ...
directly exchange
goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not tr ...
or
services Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a p ...
for other goods or services without using a
medium of exchange In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. The origin of "mediums of exchange" in human societies is as ...
, such as
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...
.
Economists An economist is a professional and practitioner in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...
distinguish barter from gift economies in many ways; barter, for example, features immediate reciprocal exchange, not one delayed in time. Barter usually takes place on a
bilateral Bilateral may refer to any concept including two sides, in particular: *Bilateria, bilateral animals *Bilateralism, the political and cultural relations between two states *Bilateral, occurring on both sides of an organism ( Anatomical terms of l ...
basis, but may be multilateral (if it is mediated through a
trade exchange An association of businesses formed for the purpose of trading with one another, using mutual credit to keep account. Typically the lead business will run the exchange, performing a brokering services and providing (or renting) an online marketpla ...
). In most
developed countries A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
, barter usually exists parallel to
monetary Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are a ...
systems only to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of
monetary crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...
, such as when currency becomes unstable (such as
hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as ...
or a
deflationary spiral In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
) or simply unavailable for conducting
commerce Commerce is the large-scale organized system of activities, functions, procedures and institutions directly and indirectly related to the exchange (buying and selling) of goods and services among two or more parties within local, regional, nation ...
. No
ethnographic Ethnography (from Greek ''ethnos'' "folk, people, nation" and ''grapho'' "I write") is a branch of anthropology and the systematic study of individual cultures. Ethnography explores cultural phenomena from the point of view of the subject ...
studies have shown that any present or past society has used barter without any other medium of exchange or measurement, and anthropologists have found no evidence that money emerged from barter. They instead found that gift-giving (credit extended on a personal basis with an inter-personal balance maintained over the long term) was the most usual means of exchange of goods and services. Nevertheless, economists since the times of
Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
(1723–1790) often inaccurately imagined
pre-modern societies Pre-industrial society refers to social attributes and forums of political and cultural organization that were prevalent before the advent of the Industrial Revolution, which occurred from 1750 to 1850. ''Pre-industrial'' refers to a time before ...
as examples to use the
inefficiency Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...
of barter to explain the emergence of money, of "the"
economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with the p ...
, and hence of the discipline of economics itself.


Economic theory


Adam Smith on the origin of money

Adam Smith Adam Smith (baptized 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the thinking of political economy and key figure during the Scottish Enlightenment. Seen by some as "The Father of Economics"——� ...
, the father of modern economics, sought to demonstrate that
markets Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...
(and economies) pre-existed the state. He argued (against conventional wisdom) that money was not the creation of governments. Markets emerged, in his view, out of the division of labour, by which individuals began to specialize in specific crafts and hence had to depend on others for subsistence goods. These goods were first exchanged by barter. Specialization depended on trade but was hindered by the "
double coincidence of wants The coincidence of wants (often known as double coincidence of wants) is an economic phenomenon where two parties each hold an item that the other wants, so they exchange these items directly without any monetary medium. Within economics, this h ...
" which barter requires, i.e., for the exchange to occur, each participant must want what the other has. To complete this hypothetical history, craftsmen would stockpile one particular good, be it salt or metal, that they thought no one would refuse. This is the origin of money according to Smith. Money, as a universally desired medium of exchange, allows each half of the transaction to be separated. Barter is characterized in Adam Smith's "''
The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the ''magnum opus'' of the Scottish economist and moral philosopher Adam Smith. First published in 1 ...
''" by a disparaging vocabulary: "haggling, swapping, dickering". It has also been characterized as negative reciprocity, or "selfish profiteering". Anthropologists have argued, in contrast, "that when something resembling barter ''does'' occur in stateless societies it is almost always between strangers." Barter occurred between strangers, not fellow villagers, and hence cannot be used to naturalistically explain the origin of money without the state. Since most people engaged in trade knew each other, exchange was fostered through the extension of credit. Marcel Mauss, author of ' The Gift', argued that the first economic contracts were to ''not'' act in one's economic self-interest, and that before money, exchange was fostered through the processes of reciprocity and redistribution, not barter. Everyday exchange relations in such societies are characterized by generalized reciprocity, or a non-calculative familial "communism" where each takes according to their needs, and gives as they have.


Features of bartering

Often the following features are associated with barter transactions: There is a demand focus for things of a different kind. :Most often, parties trade goods and services for goods or services that differ from what they are willing to forego. The parties of the barter transaction are both equal and free. :Neither party has advantages over the other, and both are free to leave the trade at any point in time. The transaction happens simultaneously. :The goods are normally traded at the same point in time. In the case of services being traded however, the two parts of the trade may be separated. The transaction is transformative. :A barter transaction "moves objects between the regimes of value", meaning that a good or service that is being traded may take up a new meaning or value under its recipient than that of its original owner. There is no criterion of value. :There is no real way to value each side of the trade. There is bargaining taking place, not to do with the value of each party's good or service, but because each player in the transaction wants what is offered by the other.


Advantages

Since direct barter does not require payment in money, it can be utilized when money is in short supply, when there is little information about the credit worthiness of trade partners, or when there is a lack of trust between those trading. Barter is an option to those who cannot afford to store their small supply of wealth in money, especially in
hyperinflation In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as ...
situations where money devalues quickly.


Limitations

The limitations of barter are often explained in terms of its inefficiencies in facilitating exchange in comparison to money. It is said that barter is 'inefficient' because: ;There needs to be a 'double coincidence of wants' : For barter to occur between two parties, both parties need to have what the other wants. ;There is no common measure of value/ No Standard Unit of Account : In a monetary economy, money plays the role of a measure of value of all goods, so their values can be assessed against each other; this role may be absent in a barter economy. ;Indivisibility of certain goods : If a person wants to buy a certain amount of another's goods, but only has for payment one indivisible unit of another good which is worth more than what the person wants to obtain, a barter transaction cannot occur. ;Lack of standards for deferred payments : This is related to the absence of a common measure of value, although if the debt is denominated in units of the good that will eventually be used in payment, it is not a problem. ;Difficulty in storing wealth : If a society relies exclusively on perishable goods, storing wealth for the future may be impractical. However, some barter economies rely on durable goods like sheep or cattle for this purpose.


History


Silent trade

Other anthropologists have questioned whether barter is typically between "total" strangers, a form of barter known as "silent trade". Silent trade, also called silent barter, dumb barter ("dumb" here used in its old meaning of "mute"), or depot trade, is a method by which traders who cannot speak each other's
language Language is a structured system of communication. The structure of a language is its grammar and the free components are its vocabulary. Languages are the primary means by which humans communicate, and may be conveyed through a variety of met ...
can trade without talking. However, Benjamin Orlove has shown that while barter occurs through "silent trade" (between strangers), it also occurs in commercial markets as well. "Because barter is a difficult way of conducting trade, it will occur only where there are strong institutional constraints on the use of money or where the barter symbolically denotes a special social relationship and is used in well-defined conditions. To sum up, multipurpose money in markets is like lubrication for machines - necessary for the most efficient function, but not necessary for the existence of the market itself." In his analysis of barter between coastal and inland villages in the
Trobriand Islands The Trobriand Islands are a archipelago of coral atolls off the east coast of New Guinea. They are part of the nation of Papua New Guinea and are in Milne Bay Province. Most of the population of 12,000 indigenous inhabitants live on the main isla ...
, Keith Hart highlighted the difference between highly ceremonial gift exchange between community leaders, and the barter that occurs between individual households. The haggling that takes place between strangers is possible because of the larger temporary political order established by the gift exchanges of leaders. From this he concludes that barter is "an atomized interaction predicated upon the presence of society" (i.e. that social order established by gift exchange), and not typical between complete strangers.


Times of monetary crisis

As Orlove noted, barter may occur in commercial economies, usually during periods of monetary crisis. During such a crisis, currency may be in short supply, or highly devalued through hyperinflation. In such cases, money ceases to be the universal medium of exchange or standard of value. Money may be in such short supply that it becomes an item of barter itself rather than the means of exchange. Barter may also occur when people cannot afford to keep money (as when hyperinflation quickly devalues it). An example of this would be during the
Crisis in Bolivarian Venezuela The crisis in Venezuela is an ongoing socioeconomic and political crisis that began in Venezuela during the presidency of Hugo Chávez and has worsened in Nicolás Maduro's presidency. It has been marked by hyperinflation, escalating starvation ...
, when Venezuelans resorted to bartering as a result of hyperinflation. The increasingly low value of bank notes, and their lack of circulation in suburban areas, meant that many Venezuelans, especially those living outside of larger cities, took to the trading over their own goods for even the most basic of transactions.


Exchanges

Economic historian
Karl Polanyi Karl Paul Polanyi (; hu, Polányi Károly ; 25 October 1886 – 23 April 1964),''Encyclopædia Britannica'' (Chicago: Encyclopædia Britannica Inc. 2003) vol 9. p. 554 was an Austro-Hungarian economic anthropologist and politician, best known ...
has argued that where barter is widespread, and cash supplies limited, barter is aided by the use of credit, brokerage, and money as a unit of account (i.e. used to price items). All of these strategies are found in ancient economies including Ptolemaic Egypt. They are also the basis for more recent barter exchange systems. While one-to-one bartering is practised between individuals and businesses on an informal basis, organized barter exchanges have developed to conduct third party bartering which helps overcome some of the limitations of barter. A barter exchange operates as a broker and bank in which each participating member has an account that is debited when purchases are made, and credited when sales are made. Modern barter and trade has evolved considerably to become an effective method of increasing sales, conserving cash, moving inventory, and making use of excess production capacity for businesses around the world. Businesses in a barter earn trade credits (instead of cash) that are deposited into their account. They then have the ability to purchase goods and services from other members utilizing their trade credits – they are not obligated to purchase from those whom they sold to, and vice versa. The exchange plays an important role because they provide the record-keeping, brokering expertise and monthly statements to each member. Commercial exchanges make money by charging a commission on each transaction either all on the buy side, all on the sell side, or a combination of both. Transaction fees typically run between 8 and 15%. A successful example is International Monetary Systems, which was founded in 1985 and is one of the first exchanges in North America opened after the TEFRA Act of 1982. Throughout the 18th century, retailers began to abandon the prevailing system of bartering. Retailers operating out of the Palais complex in Paris, France were among the first in Europe to abandon the bartering, and adopt fixed-prices thereby sparing their clientele the hassle of bartering. The Palais retailers stocked luxury goods that appealed to the wealthy elite and upper middle classes. Stores were fitted with long glass exterior windows which allowed the emerging middle-classes to window shop and indulge in fantasies, even when they may not have been able to afford the high retail prices. Thus, the Palais-Royal became one of the first examples of a new style of shopping arcade, which adopted the trappings of a sophisticated, modern shopping complex and also changed pricing structures, for both the aristocracy and the middle classes.


Labour notes

The Owenite socialists in Britain and the United States in the 1830s were the first to attempt to organize barter exchanges. Owenism developed a "theory of equitable exchange" as a critique of the exploitative wage relationship between capitalist and labourer, by which all profit accrued to the capitalist. To counteract the uneven playing field between employers and employed, they proposed "schemes of labour notes based on labour time, thus institutionalizing Owen's demand that human labour, not money, be made the standard of value." This alternate currency eliminated price variability between markets, as well as the role of merchants who bought low and sold high. The system arose in a period where paper currency was an innovation. Paper currency was an
IOU An IOU (abbreviated from the phrase "I owe you") is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify repayment terms such as the time of rep ...
circulated by a bank (a promise to pay, not a payment in itself). Both merchants and an unstable paper currency created difficulties for direct producers. An alternate currency, denominated in labour time, would prevent profit taking by middlemen; all goods exchanged would be priced only in terms of the amount of labour that went into them as expressed in the maxim '
Cost the limit of price "Cost the limit of price" was a maxim coined by Josiah Warren, indicating a (prescriptive) version of the labor theory of value. Warren maintained that the just compensation for labor (or for its product) could only be an equivalent amount of l ...
'. It became the basis of exchanges in London, and in America, where the idea was implemented at the New Harmony communal settlement by
Josiah Warren Josiah Warren (; 1798–1874) was an American utopian socialist, American individualist anarchist, individualist philosopher, polymath, social reformer, inventor, musician, printer and author. He is regarded by anarchist historians like James ...
in 1826, and in his Cincinnati 'Time store' in 1827. Warren ideas were adopted by other Owenites and currency reformers, even though the labour exchanges were relatively short lived. In England, about 30 to 40 cooperative societies sent their surplus goods to an "exchange bazaar" for direct barter in London, which later adopted a similar labour note. The British Association for Promoting Cooperative Knowledge established an "equitable labour exchange" in 1830. This was expanded as the National Equitable Labour Exchange in 1832 on Grays Inn Road in London. These efforts became the basis of the British cooperative movement of the 1840s. In 1848, the socialist and first self-designated
anarchist Anarchism is a political philosophy and movement that is skeptical of all justifications for authority and seeks to abolish the institutions it claims maintain unnecessary coercion and hierarchy, typically including, though not necessar ...
Pierre-Joseph Proudhon Pierre-Joseph Proudhon (, , ; 15 January 1809, Besançon – 19 January 1865, Paris) was a French socialist,Landauer, Carl; Landauer, Hilde Stein; Valkenier, Elizabeth Kridl (1979) 959 "The Three Anticapitalistic Movements". ''European Socia ...
postulated a system of ''time chits''. In 1875,
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
wrote of "Labour Certificates" (''Arbeitszertifikaten'') in his
Critique of the Gotha Program The ''Critique of the Gotha Programme'' (german: Kritik des Gothaer Programms) is a document based on a letter by Karl Marx written in early May 1875 to the Social Democratic Workers' Party of Germany (SDAP), with whom Marx and Friedrich Engels wer ...
of a "certificate from society that
he labourer He or HE may refer to: Language * He (pronoun), an English pronoun * He (kana), the romanization of the Japanese kana へ * He (letter), the fifth letter of many Semitic alphabets * He (Cyrillic), a letter of the Cyrillic script called ''He'' ...
has furnished such and such an amount of labour", which can be used to draw "from the social stock of means of consumption as much as costs the same amount of labour." Michael Linton this originated the term "local exchange trading system" (
LETS A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated LETS) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community infor ...
) in 1983 and for a time ran the
Comox Valley The Comox Valley is a region on the east coast of Vancouver Island, British Columbia, Canada, that includes the city of Courtenay, the town of Comox, the village of Cumberland, and the unincorporated settlements of Royston, Union Bay, Fann ...
LETSystems in
Courtenay, British Columbia Courtenay ( ) is a city on the east coast of Vancouver Island, in the Canadian province of British Columbia. It is the largest community and only city in the area commonly known as the Comox Valley, and the seat of the Comox Valley Regiona ...
. LETS networks use
interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distin ...
-free
local Local may refer to: Geography and transportation * Local (train), a train serving local traffic demand * Local, Missouri, a community in the United States * Local government, a form of public administration, usually the lowest tier of administra ...
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. In LETS, unlike other
local currencies In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community curren ...
, no
scrip A scrip (or '' chit'' in India) is any substitute for legal tender. It is often a form of credit. Scrips have been created and used for a variety of reasons, including exploitive payment of employees under truck systems; or for use in local com ...
is issued, but rather transactions are recorded in a central location open to all members. As credit is issued by the network members, for the benefit of the members themselves, LETS are considered
mutual credit "Mutual credit" (sometimes called " multilateral barter" or "credit clearing") is a term mostly used in the field of complementary currencies to describe a common, usually small-scale, endogenous money system. The term implies that creditors an ...
systems.


Local currencies

The first exchange system was the Swiss
WIR Bank The WIR Bank, formerly the Swiss Economic Circle ( German: ''Wirtschaftsring-Genossenschaft''), or WIR, is an independent complementary currency system in Switzerland that serves businesses in hospitality, construction, manufacturing, retail ...
. It was founded in 1934 as a result of currency shortages after the stock market crash of 1929. "WIR" is both an abbreviation of Wirtschaftsring (economic circle) and the word for "we" in German, reminding participants that the economic circle is also a community. In Australia and New Zealand, the largest barter exchange is
Bartercard Bartercard Private LTD. is an operator of a barter trading exchange. Bartercard enables businesses to exchange goods and services without the use of cash or cash equivalents, or without a direct swap. Bartercard is a trading platform which enab ...
, founded in 1991, with offices in the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and Nor ...
,
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territo ...
, Cyprus,
UAE The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia (The Middle East). It is located at th ...
,
Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is b ...
, and most recently,
South Africa South Africa, officially the Republic of South Africa (RSA), is the Southern Africa, southernmost country in Africa. It is bounded to the south by of coastline that stretch along the Atlantic Ocean, South Atlantic and Indian Oceans; to the ...
. Other than its name suggests, it uses an electronic
local currency In economics, a local currency is a currency that can be spent in a particular geographical locality at participating organisations. A regional currency is a form of local currency encompassing a larger geographical area, while a community curren ...
, the trade dollar. Since its inception, Bartercard has amassed a trading value of over US$10 billion, and increased its customer network to 35,000 cardholders.


Bartering in business

In business, barter has the benefit that one gets to know each other, one discourages investments for rent (which is inefficient) and one can impose trade sanctions on dishonest partners. According to the International Reciprocal Trade Association, the industry trade body, more than 450,000 businesses transacted $10 billion globally in 2008 – and officials expect trade volume to grow by 15% in 2009. It is estimated that over 450,000 businesses in the United States were involved in barter exchange activities in 2010. There are approximately 400 commercial and corporate barter companies serving all parts of the world. There are many opportunities for entrepreneurs to start a barter exchange. Several major cities in the U.S. and Canada do not currently have a local barter exchange. There are two industry groups in the United States, th
National Association of Trade Exchanges
(NATE) and the International Reciprocal Trade Association (IRTA). Both offer training and promote high ethical standards among their members. Moreover, each has created its own currency through which its member barter companies can trade. NATE's currency is known as the BANC and IRTA's currency is called Universal Currency (UC). In Canada, barter continues to thrive. The largest b2b barter exchange is International Monetary Systems (IMS Barter), founded in 1985. P2P bartering has seen a renaissance in major Canadian cities through Bunz - built as a network of Facebook groups that went on to become a stand-alone bartering based app in January 2016. Within the first year, Bunz accumulated over 75,000 users in over 200 cities worldwide.
Corporate A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and re ...
barter focuses on larger transactions, which is different from a traditional, retail oriented barter exchange. Corporate barter exchanges typically use media and advertising as leverage for their larger transactions. It entails the use of a currency unit called a "trade-credit". 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 (contract to eliminate ambiguity and risk). Soviet
bilateral trade Bilateral trade or clearing trade is trade exclusively between two states, particularly, barter trade based on bilateral deals between governments, and without using hard currency for payment. Bilateral trade agreements often aim to keep trade de ...
is occasionally called "barter trade", because although the purchases were denominated in U.S. dollars, the transactions were credited to an international
clearing account A clearing account is usually a temporary account containing costs or amounts that are to be transferred to another account. An example is the income summary account containing revenue and expense amounts to be transferred to retained earnings ...
, avoiding the use of hard cash.


Tax implications

In the United States,
Karl Hess Karl Hess (born Carl Hess III; May 25, 1923 – April 22, 1994) was an American speechwriter and author. He was also a political philosopher, editor, welder, motorcycle racer, tax resister, and libertarian activist. His career included stints on ...
used bartering to make it harder for the
IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...
to seize his wages and as a form of
tax resistance Tax resistance is the refusal to pay tax because of opposition to the government that is imposing the tax, or to government policy, or as opposition to taxation in itself. Tax resistance is a form of direct action and, if in violation of the tax ...
. Hess explained how he turned to barter in an
op-ed An op-ed, short for "opposite the editorial page", is a written prose piece, typically published by a North-American newspaper or magazine, which expresses the opinion of an author usually not affiliated with the publication's editorial board. ...
for ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'' in 1975. However the IRS now requires barter exchanges to be reported as per the
Tax Equity and Fiscal Responsibility Act of 1982 The Tax Equity and Fiscal Responsibility Act of 1982 (), also known as TEFRA, is a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before. Between summer 1981 and summer 1982, tax revenue fell by ...
. Barter exchanges are considered taxable revenue by the IRS and must be reported on a 1099-B form. According to the IRS, "The fair market value of goods and services exchanged must be included in the
income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...
of both parties." Other countries, though, do not have the reporting requirement that the U.S. does concerning proceeds from barter transactions, but taxation is handled the same way as a cash transaction. If one barters for a
profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory inter ...
, one pays the appropriate tax; if one generates a loss in the transaction, they have a loss. Bartering for business is also taxed accordingly as business income or business expense. Many barter exchanges require that one register as a business. In countries like Australia and New Zealand, barter transactions require the appropriate tax invoices declaring the value of the transaction and its reciprocal GST component. All records of barter transactions must also be kept for a minimum of five years after the transaction is made.


Recent developments

In Spain (particularly the Catalonia region) there is a growing number of exchange markets. These barter markets or swap meets work without money. Participants bring things they do not need and exchange them for the unwanted goods of another participant. Swapping among three parties often helps satisfy tastes when trying to get around the rule that money is not allowed. Other examples are El Cambalache in San Cristobal de las Casas, Chiapas, Mexico and post-Soviet societies. The recent blockchain technologies are making it possible to implement decentralized and autonomous barter exchanges that can be used by crowds on a massive scale. BarterMachine BarterMachine
(from www.bartermachine.org Accessed 5 September 2021.)
is an Ethereum smart contract based system that allows direct exchange of multiple types and quantities of tokens with others. It also provides a solution miner that allows users to compute direct bartering solutions in their browsers. Bartering solutions can be submitted to BarterMachine which will perform collective transfer of tokens among the blockchain addresses that belong to the users. If there are excess tokens left after the requirements of the users are satisfied, the leftover tokens will be given as reward to the solution miner.


See also

*
Collaborative consumption Collaborative consumption is the set of those resource circulation systems in which consumers both "obtain" and "provide", temporarily or permanently, valuable resources or services through direct interaction with other consumers or through a ...
*
Complementary currencies A complementary currency is a currency or medium of exchange that is not necessarily a national currency, but that is thought of as supplementing or complementing national currencies. Complementary currencies are usually not legal tender and the ...
*
Gift economy A gift economy or gift culture is a system of exchange where valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift in a gift culture; although there ...
*
International trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant s ...
*
List of international trade topics This is a list of international trade topics. * Absolute advantage * Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) * Asia-Pacific Economic Cooperation (APEC) * Autarky * Balance of trade * Barter * Bilateral Investme ...
*
Local exchange trading system A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated LETS) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community infor ...
*
Natural economy Natural economy is a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the ...
* Private currency *
Property caretaker A property caretaker is a person, group, or organization that cares for real estate for trade or financial compensation, and sometimes as a barter for rent-free living accommodations.Dunn, Gary"Property Caretaking Rent Free"Escape Artist Magazin ...
*
Quid pro quo Quid pro quo ('what for what' in Latin) is a Latin phrase used in English to mean an exchange of goods or services, in which one transfer is contingent upon the other; "a favor for a favor". Phrases with similar meanings include: "give and take", ...
*
Simple living Simple living refers to practices that promote simplicity in one's lifestyle. Common practices of simple living include reducing the number of possessions one owns, depending less on technology and services, and spending less money. Not only is ...
*
Trading cards A trading card (or collectible card) is a small card, usually made out of paperboard or thick paper, which usually contains an image of a certain person, place or thing (fictional or real) and a short description of the picture, along with other ...
* Time banking


References


External links

* * {{Authority control Business terms Cashless society Economic systems Pricing Simple living Tax avoidance Trade