Mention barter and many people think it was something those ancients did by
swapping things for food and vice versa when money wasn’t around. Its time to wake up dude! You have been there, done that. You have bartered as kids. Remember those super hero comics you got for the baseball cards your pal didn’t have? Well, the news is, barter as a form of business is alive and kicking, and making fast inroads into modern trade.
A standard dictionary defines barter as trading goods or services without the
exchange of money. It is conducted between two parties who have products or
services that each other need. The key word here is ‘need’. In ancient times, if a
toolmaker wanted eggs, he could only get them if the egg dealer wanted tools. And
if he didn’t, the toolmaker very well went without eggs. Or he went right back and
clobbered the egg dealer silly with his tools to get those eggs! Err… this latter
exchange may not qualify as bartering!
Since antiquity all societies successfully practiced barter as an accepted medium of
exchange. In the not so distant past, doctors were being paid in chickens, apples or
other farm produce! Then money made its appearance and became the lifeblood of
business. And bartering was thought to have died a natural death.
Nothing could have been further from the truth. Bartering thrived all along, albeit on
a low key. Take the case of the communist countries during the cold war. Barter
often played an important role in trade for them, as their currencies were not readily
convertible. Or take the case of Germany after the two world wars. Bartering became
their prime means of exchange at the retail level, as currencies collapsed due to
hyperinflation. So, barter saved the day for these countries.
Glyn Davies very rightly observes in A History of Money from Ancient Times to the
Present Day that “barter has, undeservedly, been given a bad name in conventional
economic writing, and its alleged crudities have been much exaggerated”. Barter has
survived to this day. Why? Simply because people needed it then, as they need it
now, only the methods have changed.
In the modern day, the advent of computers not only revolutionized the world, it
also facilitated a sudden resurgence of bartering. The tremendous capabilities of
this new technology of tracking barter transactions and maintaining huge
inventories made bartering an easy and inexpensive form of trading. The spread of
barter exchanges, which create markets for traders, has also fueled its spread.
Bartering has become serious business and comes under the purview of the income
tax and the sales tax departments.
Today, it is amazing to see what all can be obtained through barter… computer
hardware and software, household items, jewelry, books, CDs, movies, hotel
accommodations, real estate, etc. The list may well be endless! Barter is big
business and getting bigger with every passing day.
Bartering is becoming popular because it offers some excellent benefits. It saves
cash and increases profits by boosting the bottom line. It strengthens relationships
because of closer interaction with barter customers. It generates new business, as
barter customers often end up becoming cash customers or rope in others. It helps
market business in ways not otherwise possible by attracting certain customers that
are otherwise difficult to obtain. It helps to move surplus stock that will otherwise
lie unsold. And it has the potential to expand the market area dramatically.
No wonder when considering funding applications, venture capitalists are
increasingly evaluating the ability of applicants to barter. That barter is gaining
legitimacy as a corporate asset is demonstrated by the many seminars targeting
Corporate Finance Officers.
Businesses generally use two types of barter. The one-on-one bartering, which is
the true form of bartering involving two parties, and third party bartering that uses
some form of currency to allow more dynamic exchange between the parties
If statistics provided by the International Reciprocal Trade Association are anything
to go by, barter today is a huge six-billion-dollar business-to-business hit
worldwide. And this figure is expected to grow by more than ten percent annually.
If you are not already bartering, you should probably consider it. There are
numerous ways to find barter deals online. You can search for online barter
websites, join online barter clubs or contribute to bartering newsgroups. If you have
your own website, you can set up barter message boards or chat rooms to get
For better or for worse, barter is here to stay, making business lucrative to the
cash-rich and the cash-strapped alike. Edmund Burke has rightly noted in his
speech on the occasion of Conciliation of America in the 1700s that, “All
government – indeed, every human benefit and enjoyment, every virtue and every
prudent act – is founded on compromise and barter”.
M. Bawri is an entrepreneur and a fashion designer. She prefers to create a separate
space for each of her activities.