Barter
From Wikipedia, the free encyclopedia
A Trade Exchange or Barter is a type of trade in which goods or services are directly exchanged for other goods and/or services, without the use of money. It can be bilateral or multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis, when the currency is unstable and devalued by hyperinflation.
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[edit] History of barter
In the past, goods were to be exchanged in the goods of another without considering of its money value. To organize production and to distribute goods and services among their populations, many pre-capitalist or pre-market economies relied on tradition, top-down command, or community democracy instead of market exchange organised using barter. Relations of reciprocity and/or redistribution substituted for market exchange. Trade and barter were primarily reserved for trade between communities or countries. It is also used when the monetary system failed to measure the economic value of goods.
Barter becomes more and more difficult as people become dispossessed of the means of production of widely-needed goods. For example, if money were to be severely devalued in the United States, most people would have little of value to trade for food (since the farmer can only use so many cars, etc.)
It is used on important transactions between firms or countries to exchange commodities, when monetary constraints are too expensive for the economic actors.
A well-known example of multilateral trade is the triangular trade.
Money used to be considered as simpler for small trades; but use of the Web has changed that perception, especially for Swapping.
[edit] Trade Exchanges
A trade exchange or barter is a commercial organization running a bookkeeping system for its members or clients. These buy and sell products and services to each other using an internal currency. For centuries, barter has been an effective way for businesses to work together. It used to be “direct trade” when people swapped one thing for another. However modern day barter has evolved considerably to become a 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. The exchange plays an important role because they provide the record-keeping, they maintain transaction records and broker services to each member. Commercial exchanges make money by charging a commission on each transaction done. Around 500.000 businesses are involved in a barter exchange. There are approximately 600 commercial and corporate barter companies serving all parts of the world. There are two industry groups, the National Association of Trade Exchanges and the International Reciprocal Trade Association. Both offer training and promote high ethical standards among their members. Moreover, each has created it own currency through which its members trade. The Barter Association National Currency (BANC) and Universal Currency (U.C.) make it possible for members of trade exchanges to access goods and services literally around the world. Exchange systems provide new sales and higher volumes of business, conserving cash for essential expenditures, exchange of unproductive assets for valuable products or services, reduction of unit costs, and opening new outlets for excess inventory and unused capacity. Reciprocal trade finance enables a firm to buy using its incremental cost of production. So long as incremental revenue exceeds incremental cost, it is worth it for a firm to trade using a barter exchange.
There are multiple reasons to use a good barter exchange:
- Increased purchasing power
- Increased revenue
- More clients (both from the barter exchange and from cash-business referrals from barter clients)
- Better cash flow
- Greater marketing opportunities
- Improved efficiency
Unless a business has more work than it can handle, barter is a ‘no-brainer’ for any company. A business has all its fixed costs (rent, salaries, insurance, vehicles, workers' comp, machinery, etc.) whether it has two hundred customers or five hundred, if a business can take down time or inventory that is costing money and turn it into new revenue, it’s a slam dunk. The major benefit to companies is that they get to leverage their cost of goods.
Organized barter companies (usually those with national scope) also have many more benefits over conventional advertising methods since they are much more proactive. Barter members call into the exchange brokerage with things they need and the brokers match those needs with other members that can fill them. There are usually fees to join, but compared to a print advertisement for example, you only pay to join once and then most exchanges are ‘pay per use’.
The first exchange system is the Swiss WIR Bank. 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 and the word for "we" in German, reminding participants that the economic circle is also a community.Only SME can join WIR. Its purpose is to encourage participating members to put their buying power at each other's disposal and keep it circulating within their ranks, thereby providing members with additional sales volume. WIR has grown to 62,000 members, trading approximately the value of 3 billion Swiss Franc. The offering of goods and services for WIR is promoted by the fact that every official participant is obligated to accept payment in WIR for at least 30% of the first 2000 francs of the selling price, and every loan holder must amortize his/her debt by selling goods/services for WIR.
[edit] Corporate Barter
Corporate Barter entails the use of a currency unit called a "trade-credit". The trade-credit must be known and guaranteed (contract to eliminate ambiguity and risk). Trade-credits are redeemed with cash much as a consume can be used to provide full value for asset(s) with an impairmen.
Another type of corporate barter has been implemented by the National Association of Trade Exchanges. Corporations having an interest in trade, can now join as association members of the association and maintain their own memberships in BANC (Barter Association National Currency).
[edit] Barter as cultural exchange
Barter is often rendered a less sophisticated form of market than the moneymarkets, but must be understood as a highly sophisticated way of trading/cultural exchange of knowledge, skills, craftsmanship and so on between parties of uneven economic strength, within a globalised market economy. Barter is used as a concept among non-institutional artist groups or collectives. The concept was used by the Denmark based theatre group Odin teatret and has been used by others in that sense. Odin teatret/Eugenio Barba used the concept of barter in their early period, while touring and exchanging theory-practices in a variety of countries mostly in so-called third world and rural traditional societies/Communities. It can be argued that Barter is a more nomadic form of trade, and is less sophisticated because it is a generally less developed form of trade. That may be because the nomadic has generally been subordinated to the governance of the settler, at least in societies of more imperial governance. For the nomadic the economical intermediary (e.g. money ) is blocking the flow of the barter situations since the currency/current value will not easily be fixed. The Barter tour-journeys of Odin theatre was crucial for the International School of Theatre Anthropology (ISTA)
Barter. Its essence is reciprocal presentation. Through barter, Odin Teatret enters into direct dialogue with a group or a local community by means of an exchange of song, dance, sketches, improvisations and other cultural activities. It can take place in a village, a neighbourhood, a school, a prison or a refugee camp.
(from the home pages of Odin Theatre)
[edit] Swapping
Swapping is the increasingly prevalent informal bartering system in which participants in Internet communities trade items of comparable value on a trust basis.
While swapping is an excellent way to find and obtain items that are inexpensive, it relies upon honesty. A dishonest participant might arrange a swap, and then never complete their end of the transaction, thus getting something for nothing. This practice is called swaplifting,[citation needed] a pun on shoplifting. The victim's recourse is often limited to shunning the swaplifter, or taking him to small claims court.
Complex business models based on the concept of barter is today possible since the advent of Web 2.0 technologies.
In the other word Barter means: The act of trading goods and services between two or more parties without the use of money. Bartering benefits companies and countries that see a mutual benefit in exchanging goods and services rather than cash, and it also enables those who are lacking "hard currency" to obtain goods and services.
[edit] Tax implications
In the United States, it is generally not possible to avoid income taxes by bartering one's services. According to the IRS, "The fair market value of goods and services exchanged must be included in the income of both parties."[1] The barter in many cases must be reported on Form 1099-B and Schedule C.[2]
[edit] See also
- Gift economy
- Hyperinflation
- International trade
- List of international trade topics
- Local currency
- Local Exchange Trading System
- Natural economy
- Private currency
- Reciprocity (cultural anthropology)
- Simple living
