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Examples of Modern Barter Systems

May 18th, 2012

When the concept of barter, generally defined as trading goods or services directly without the use of cash or some other type of money as an intermediary, is mentioned, people often think of it as an ancient or medieval practice that was made obsolete by the invention of money as a medium of exchange. However, with recent recessions, depressions, austerity, high unemployment, outsized public and private debts, and various other forms of economic malaise becoming increasingly prevalent in many areas of the world, the practice of barter is making a comeback as people who do not have much cash but still have items or services to trade are doing whatever they can to survive.

For example, in Greece, where unsustainable debt and Euro-imposed “austerity measures” have combined to create an economic contraction of epic proportions, cash-poor Greeks have set up a service swapping system called the Time Bank, where people can offer their time by performing services for other people, receive credit for it in the system, and then receive needed services in return. The following video is a report by Russia Today that explains how this system works and is currently being used.

Meanwhile, the BBC reported on a similar modern barter system in Volos, Greece called TEM, a Greek acronym that translates to “Local Alternative Unit”, where people can offer various goods and services for credits that are stored electronically in a centralized computer network. These credits can then be used to purchase needed items or services in the future. It could be thought of as a kind of hybrid between barter and an alternative currency system.

After viewing these and other related videos, I ran across another one that deals with Argentina, and the adoption there of a relatively professional, well-organized barter system called the Global Barter Network. This network originated in Quilmes, a suburb of Buenos Aires, and helped to provide sustenance for marginalized populations who found themselves in dire poverty after a particularly nasty economic crisis struck Argentina in the early 2000s. The video (about 20 minutes long) can be viewed below, while an article from the Bulletin of Latin American Research that explains more about the Global Barter Network can be found here.

Finally, we have an example of a remarkable individual named Michael Moore using barter here in the USA to procure seemingly any item or service he desires without having to use our infamous federal reserve notes (also known as cash). Known locally as the “king of barter”, a TV station in Idaho recently reported on his interesting exploits and recent acquisitions.

As this news report alluded to at the end, there can be tax implications in the use of barter, particularly if you are dealing with “big ticket” items that have a substantial cash value. Curious about this topic, I did a little research and tracked down the IRS rules pertaining to barter transactions. They are supposed to be reported as a “Profit or Loss from Business” under Schedule C of Form 1040 and included in gross income for the year in which relevant goods or services were received. The “fair market value of goods and services received” is supposed to be used for calculations, although exactly how this is determined is uncertain.

Presumably any goods or services received in a barter transaction would count as “profits” while goods and services provided would be the “losses”. This makes the reporting requirement for most everyday barter dealings (such as people agreeing to swap a couple of fairly low-value items at a neighborhood garage sale, for example) seem a bit silly because the market value given and received in most cases would be roughly equal and cancel out, leaving little or no “income” or “profit” that would carry any tax liability for either party. Still, for barter fans who are making frequent transactions that represent significant cash values, reporting them might seem like a good idea, if only to relieve future tax-related anxiety.


One Response to “Examples of Modern Barter Systems”

  1. comment number 1 by: Ireland5

    Super article! I also guarantee that American businesses do quite a bit of bartering - off the books. Who could blame them with our taxing system? Of course people as visible as Michael Moore have probably been caught or he actually reports his profits/losses.

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