The Growth Of Barter

In the early 1980’s the international debt crisis led to a dramatic decline in private lending.

Both business and indebted nations found it increasingly difficult to finance their purchases. Thus, unconventional forms of trade and trade financing experienced a resurgence, including barter trade.

Growth statistics for barter are of poor quality owing to the lack of a central organizing body for retail, corporate and community barter exchanges. Even if many industrialized countries have developed their own barter industry, such a phenomenon has not attracted the interests of the economic literature yet. The few existing studies essentially focus on marketing and management aspects.

Counter-trade statistics are managed by the World Bank who estimates that:

 In 1972 only 15 Countries were engaged in countertrade
 In 1983, 88 Countries were engaged in countertrade
 In 1996 over 100 Countries were engaged in countertrade

Retail barter exchange numbers appear to be static for the United States, Canada, Australia and New Zealand for the last 3-4 years. This appears to be a result of the rate of new exchange openings being relatively equivalent to the merging or closure of other exchanges. Exchange closure is generally related to poor business planning and poor fiscal policy – with many exchanges known to cause currency inflation by having deficit accounts of their own where the exchange makes purchases from its members without being able to counter-balance the barter dollars utilized with either a product or service of its own.

With the collapse of the socialist systems in many countries, many experts expected barter trade to vanish, but recent economic and financial crisis throughout the world has seen barter trade come back with a vengeance.

 In Indonesia countertrade is mandatory for transactions valued US$500,000 or over.

 The WIR business circle cooperative (Wirtschaftsring), founded in Switzerland in 1934 as an answer to the money scarcity of the Great Depression, now acts as a bank, with more than 40,000 participants and its own local “electronic” money, and has a circulation in excess of a billion euros per annum.

 In 2003 in Argentina, various currencies were in general circulation:
o Argentine Pesos
o U. S. Dollars
o Provincial Currencies (up to 20 kinds in circulation)
o Trueque Notes (community currencies - about 100 types in use)
In the same year provincial currencies and trueque notes accounted for over 2 billion US dollars in transactions.

 The number of retail barter exchanges has been growing steadily across the globe as businesses who compete with one another try and acquire more customers, reduce cash costs, and get value out of underperforming assets

The importance of barter, in its different forms, varies across the globe. The World Business Environment Survey in 20 transitioning economies shows that Croatia exhibits the highest percent share of barter in its most raw form (direct trade and counter-trade), whereas highly developed nations engage in the largest amount of corporate trade.

Retail barter exchanges operate in large numbers in the USA and Canada yet have smaller customer bases, with the largest having around 10,000 members with an average trade volume per member of only $250 per month.

Comparatively, some of the smaller European countries which were hit by economic crisis’s, have a smaller number of exchanges with each exchange having a larger number of members (avg: 1000 – 2000) with average transactions of around $2,000 or more per member, per month.

Conditions that favour barter are:

 lack of money
 lack of value or faith in money
 lack of acceptability of money as an exchange medium
 desire to keep money and/or assets within the local economy
 need to recieve value from under-performing assets
 mainting asset price integrity (product, service or countries balance-sheet for cash reserves)



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