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The practice of swapping one good or service directly for another, without the use of money as an exchange medium, is known as barter. Because the relative value of one good against another varies with need, availability, and social context, barter transactions are not inherently simple, but often involve complex social relations.
- Characteristics of Barter
- Barter and the Study of the Economy
- Barter versus Gift Exchange
- Barter Today
Barter may be loosely defined as transactions involving the direct exchange of goods and services. It stands in contrast to exchanges facilitated by money, which enable the acts of buying and selling to be separated. The conception and use of barter very firmly reflect the society in which it is employed. The way in which barter is understood and carried out in a Pacific society, for example, where it might be linked to social rites that govern relations with neighboring islands, is different from the use of barter in communities today in the United States, in which neighbors might exchange food preserves for help with plumbing.
Characteristics of Barter
Trying to define barter with any precision is difficult. This is because barter transactions typically involve complex social relations (though a number of anthropologists have argued to the contrary, that barter is largely devoid of social ties). The social anthropologists Caroline Humphrey and Stephen Hugh-Jones, while recognizing that any attempt to provide a general definition or model of barter usually involves the loss of the crucial social context which conditions the act of barter, nevertheless suggest a number of characteristics.
Barter results from a demand for goods or services one does not already have. A man with a pig might want, for example, a canoe. The participants in the exchange are free and equal. Money, by which the value of the goods to be bartered might be measured, is not present; there is no independent means of judging the value of the items to be bartered. The two parties must come to an agreement that the items to be exchanged are of equal value (a process in which bargaining is usually critical). Finally, the acts of buying and selling occur simultaneously, even though the completion of the transactions (delivering the goods, performing the service) may take some time.
Barter and the Study of the Economy
The traditional view of barter in European economics may be understood through the work of two men. The Greek philosopher Aristotle (384–322 BCE) provides the earliest surviving discussion of the role of barter in the development of exchange. His account (Politics Book I, chapter 9) is also important for its attempt to perceive the political and social implications of what might appear to be a simple economic process. The practice of exchange, he noted, did not exist in the earliest form of association—the household, which was self-sufficient—but arose when larger social groups developed and households began sharing things. The mutual need for different goods, he claimed, was the essential reason for these exchanges. For Aristotle the original purpose of barter was to re-establish nature’s own equilibrium of self-sufficiency. But it was out of this exchange, he warned, that money-making arose—a practice which he regarded with disdain as contrary to nature, in that it served no useful purpose but simply promoted the accumulation of more wealth.
In his 1776 book The Wealth of Nations, Adam Smith offered a more mechanical view of the function of barter. With the emergence of a division of labor, he argued, each man only produced a small part of the total range of goods he desired. They had to resort to barter, “which must frequently have been very much clogged and embarrassed in its operations” (Smith 1998, 32) for a person could not always find someone with the goods required that wished to barter for what was on offer. As Smith (1998, 32) explained it:
One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less….The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them.
In order to alleviate the inconvenience of barter, money was invented. Barter, for both Aristotle and Smith, is then constructed as a feature of economic activity in societies at their earliest stage of development.
Barter versus Gift Exchange
Barter played an important role in many non-European societies prior to contact and integration with modern Western economic systems. Its use (and the presence of different social and economic values) is often recorded by explorers: Captain Cook, for example, traded guns for pigs in the Marquesas Islands on his first visit in April 1744, but found the supply of pigs quickly dried up. Having no understanding of the important role of the animal in commemorative feasts (which limited the number for sale), he assumed that he and his crew had simply oversupplied the market with guns.
Modern anthropologists recognize an important distinction between commodity exchange and gift exchange. They perceive barter as one form of commodity exchange (commodities are items that are sought after, such as animals or cars, that have both a use value and an exchange value). While the aim of commodity exchange is to obtain goods, the aim of gift exchange is to place the person (or group) that receives the gift under an obligation. The anthropologist Christopher Gregory, in a detailed study of this distinction, argued that commodity exchange establishes a relationship between the objects exchanged, while gift exchange establishes a relationship between the subjects making the exchange. Barter, as thus described, is identified as an exchange of items that are not tied to social systems (as gifts are) through the hands of more or less strangers. No form of dependence (social or political obligation) is supposedly created in these transactions. In reality the distinction is not so clear-cut. In situations where the exchange of gifts precedes the exchange of commodities, for example, a web of links ties the two types of exchange together. Indeed, simple acts of barter can often be part of a much more complex process of political, social, and economic interaction between people.
Barter is still a significant form of economic activity today, even in societies that use money. Despite the theories of Aristotle and Smith, barter cannot be associated merely with primitive economies. It is increasingly used by businesses: the International Reciprocal Trade Association in the United States claimed that in 2001 the barter of products between companies was worth over $7.5 billion. There are numerous barter clubs and associations in the United States that facilitate low-level transactions, mostly involving household goods. But not all barter is associated with strong economies. In Argentina, for example, the depressed value of the currency, the closure of banks, and mass unemployment have contributed to an increased use of barter. The Guardian, a British newspaper, reported on 25 April 2002 that with the shortages of cash, barter clubs emerged (sometimes located outside shopping centers) in Buenos Aires to enable people to exchange goods and services that they themselves made or supplied. Barter is thus very much a part of modern economic activity, both in strong economies and weak ones.
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