The technical definition of a “barter economy” can get surprisingly complex, but we all understand it instinctively. Every one of us, whether we realize it or not, takes part in it too.
If, at a potluck lunch, I take some of your salad in exchange for some of my cake, we’ve bartered. When little Sally helps little Susan with her geometry homework and gets assistance with her English in return, it’s a barter transaction. If you let me borrow your car while I leave my lawnmower with you, the barter economy is at work.
The key characteristic, as you’ll have guessed, is that goods and services are traded without money playing a role. Of course, not every kind of transaction can be done in this way – imagine trading a house for five million eggs and a pair of old socks! Still, while economists have mostly focused on the barter economy’s drawbacks, plenty of ordinary people are now finding that doing business this way can have some pretty important advantages, both in bad times and good.
If you want to get rid of something you own – used clothes, for example – you can get a better “price” for them by cutting out the middleman. The other party receives a good deal too; usually, the difference is split down the middle. Barter transactions are also much friendlier, community-based, and social. Trading goods can even be a good way to meet people with similar interests. If you like, it can allow you to get your feet wet with a side hustle and even save your bacon when money is really tight.
Indeed, the barter economy really comes into its own when hardship strikes and people lose faith in the financial system. In 1920’s Germany, for instance, agricultural work was very popular as farm laborers could be paid in foodstuffs rather than near-worthless banknotes. In present-day Venezuela, boxes of vegetables form part of some government-employed doctors’ salaries.
Barter also makes sense when things aren’t quite that dire: in not-quite-that-bleak 2008, for instance, membership of barter exchanges exploded. If the economy in your area isn’t looking too healthy, there’s a good chance that many of your neighbors dipping a toe into these waters. They, and you, will find that there’s a well-established and growing community of barterers out there. People like these will be happy to show you the ropes, tell you about good deals, and warn you about potential scams. Here’s all you need to know before joining their ranks and potentially spending a lot less each month:
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Bartering Doesn’t Mean Doing Without Cash
Some people on the fringe of the bartering scene regard it as an antidote to capitalism, or at least to extreme rent-seeking. They may have a point, but the truth is that barter is totally compatible with the free market. In addition, no matter how far off-grid you go, you’re always going to need to use money and its proxies like credit cards, checks, and money orders.
For one thing, these forms of payment are all most businesses, like banks and pharmacies, accept. Another reason boils down to simple convenience. Money’s most basic function is as a medium of exchange. If I have potatoes and need gasoline (and cash didn’t exist), I’d have to find someone who had gasoline and wanted potatoes. This quickly becomes complicated and is no way to live.
With money, you can make a top-up payment in case you don’t have enough potatoes, go to someone else who has cheaper gas, or keep your savings much longer than the shelf life of root vegetables. The bottom line is that joining the barter economy simply gives you more options and often saves you money. Cash remains essential – you don’t need to cut up your credit card or quit your job.
Identify Services or Physical Products You Can Trade
We commonly say that each product “is worth” some amount of cash. What we actually mean, of course, is that at least a few people are willing to pay that amount for it. Especially when bartering, a product or service’s value is determined by how valuable it is to some particular person. What you’d like to pay for it, or in fact what you did pay for it, is of far lesser importance.
This is one reason why the bartering of services is generally more profitable than goods – there’s almost certainly at least one marketable thing you can do better than 99% of people. Products are more interchangeable than skills, meaning that customers have more options. Of course, whatever you select in either category needs to have wide appeal. You’re off to a bad start if only one family or business in your area is willing to trade with you, and this becomes even more important if you can’t ship whatever you’re selling long distances (or simply email it).
Still, the real reason services have a higher profit margin when bartering is that time is cheap as long as you don’t have anything better to do. If you have to make objects to barter or perhaps even buy them in finished form, you’ll have to pay expenses in cash. Most people who are interested in joining the barter economy specifically don’t have an abundance of cash, so this is something to avoid.
Contrariwise, when on the hunt for stuff you can accept in return for your work, physical goods should be your first choice. This is particularly true when dealing directly with the producer and again comes down to profit margins and cutting out the middleman. A farmer may be paid under $2 for the gallon of milk that costs you $3.50 in the store, for instance. If you do $100 of work for him (and assuming that you’re unreasonably fond of dairy), he can give you milk that costs him only $80 – but to you, it’s worth $140.
Some of the things commonly bartered include:
- Car and appliance repair
- Landscaping and general building upkeep
- IT support
- Professional services of all kinds: accounting, graphic design, coding, etc.
- Food and condiments
- Fresh produce
- Clothing (handmade and used)
- Handicrafts of all kinds
- Durable second-hand items
- Video games and DVDs
- Plants and seedlings
Getting Started with Bartering: First Steps
Some people begin bartering simply because they need some quick cash but can’t get a decent price for their unneeded belongings. Accepting a useful trade may seem like the better option.
Others already have a part-time business or hobby, or would like to start one. Perhaps they’re already accepting money for their effort and creativity each month and have only just realized that they can do better by accepting payment in something other than cash.
Wherever you’re coming from, it’s important to have a clear idea of how much what you have is worth as well as the cost of what you need, before even looking for offers. This means, usually, going online to see what substitutes are available and assigning a dollar value to what you want to trade and what you hope to get in return. Remember that this is just a placeholder: the other party will probably have a higher or lower number in mind for either, so you may have to negotiate a little. Don’t push too hard, though: relationships play a big role in the barter economy, so anyone who gets a reputation for prioritizing their own profits over others’ welfare will find himself at a disadvantage later on.
At this point, you’re basically ready. You can either hit up someone you think might be interested (an acquaintance or a local business) or post an ad, either on a generic forum like Facebook Marketplace or Craigslist, or on a platform like those we’ll describe in a little while. Give as much detail as possible about what you’re offering, including things like when and where you can deliver.
It’s up to you how specific you want to be regarding what you’re looking for in return (or you can just leave this field blank and see what people come up with). If you demand a Lenovo 15.6″ IdeaPad 5 8GB in bright pink, you won’t get many suitable replies and perhaps receive none at all. It would be better to ask for a “laptop suitable for college student” or something similar. Other requests could be for things like “bulk groceries”, “high school tutoring”, or “baked goods”. As long as you’re offering something people want, you’ll be amazed at what kind of stuff you can get for it.
Finding Barter Opportunities
It could be that you already have a barter partner in mind: a local deli that might give you baguettes in exchange for bottled chili sauce, or a neighbor who’d let you have vegetables out of her garden if you paint her house. The wider you cast your net, however, the more kinds of trades you can do and the more exciting bartering becomes.
Advertising on bulletin boards is a good way to get started, as is attending “swap parties” and generating old-fashioned word of mouth. If you sell a physical product, make sure to print some way of contacting you on the packaging. If these methods don’t yield results, or if you’re in a position to take on more work, posting on social media will often do wonders. Many communities also have local bartering clubs – search online or contact your chamber of commerce.
For most people, this is all they’ll need, especially if they can find a dynamic, existing barter group in their area. The vast majority of trades, after all, happen within a few miles of someone’s home in order to keep travel costs and complexity to a minimum.
Online Barter Networks
Some cities and neighborhoods have well-developed barter economies, whether these are organized formally or not. In other places, you’ll probably still be able to find people to give and receive most common items, but you may have to settle for getting stuff you don’t really like. This is where the power of the internet comes in – bartering has never been this easy.
Craigslist and Facebook (either their Marketplace or a dedicated swap group you find there) remain the simplest options for trading locally. If you want to reach more people, or at least more people interested in bartering a specific kind of item, the following are also worth checking out:
- BarterOnly accepts products in numerous categories but not services. They’re not hugely popular at the moment, but still well worth checking out.
- BarterQuest is unusual in terms of what you can trade – at the time of writing, someone wants to swap a private island for a property of equal value. Jewelry, vehicles, and assorted professional services are also represented.
- BizXchange focuses on the kind of goods and services businesses use. Instead of direct trades, a platform-specific currency called BizX dollars is used to determine prices.
- Freecycle is actually not a barter website per se. Instead, you can post any item you want to give away here – it’s better than sending it to landfill, and you never know what kind of junk might make somebody’s day.
- Game Trading Zone, as you would imagine, specializes in computer and video games as well as related gear. You can list an entire library of what you have, wait for someone to show interest, work out a deal, and then ship your respective wares to each other.
- PaperBackSwap can help you to make some room on your bookshelf and collect a few new titles. Over a million books are currently available, mostly recent bestsellers.
- SwapaCD and SwapaDVD are very similar to PaperBackSwap but for music and films respectively.
- SwapThing, after setting up an account, lets you create your own online store containing pretty much whatever you want. If anyone is interested, you’ll work out a deal with them directly.
- TimeBanks let you help out others now and ask for help in return when you need it. A founding principle of this movement is that the value of an hour worked is the same for every person, regardless of whether you’re a doctor or a plumber.
- Tradestuff has some truly odd finds, but unfortunately not a lot of them at the time of writing.
Websites like these come and go all the time. If you’re looking to trade something specific, a carefully crafted Google query will usually show you other avenues to pursue.
You Still Have to Pay Taxes on Barter Transactions!
Did you know that even huge companies sometimes barter with one another? One example of this is when a service business, like one that sells advertising or provides landscaping, asks its suppliers if they’d prefer to get their labor for free rather than shelling out cash. Since their costs are lower than the market rate for their work, both sides can get a great deal.
Another reason companies may prefer bartering to dealing in cash has to do with the volatility of the foreign exchange market. Nobody, for instance, knows what the Nigerian naira is going to be worth in a month’s time. A company exporting to that country may therefore be more eager to be paid in crude oil or pineapples instead (more specifically, deeds of ownership to these commodities).
What companies can not do, however, is use the barter economy to evade taxes; neither (technically) can you. This myth is what attracts many people to bartering in the first place, but the fact is that IRS expects you to treat these transactions pretty much exactly like cash income.
You will have to estimate and report the “fair market value” of any goods you receive in return for work you did, as this is income in exactly the same way as if you’d been paid in cash. In fact, regardless of whether we’re talking about products or services, both parties have to declare whatever they received as income. This seems unfair: they get you coming as well as going. (If the buyer had paid cash, the transaction would have been an expense on their side and possibly deductible). If you plan on doing a lot of bartering, consulting a tax preparer familiar with these rules may be worth your while.
If all this wasn’t complicated enough, you may also need to pay sales and other taxes to the state you live in. Since there are fewer records involved in barter transactions, it’s easier to illegally avoid taxes. We do not recommend doing so, however: Uncle Sam is like a dog with a bone when it comes to revenue, and deliberately denying him his fair share carries some serious repercussions.
Final Notes on Bartering
- Bartering and charity, or at least the honor system, often go hand in hand. Like the “take a penny, leave a penny” saucers at checkouts, you may have seen boxes in public spaces containing books or groceries. The idea is that you take something when you need it and replace it when you’re able.
- Bartering may be less formal than monetary transactions, but a verbal contract is still only worth the paper it’s written on. Unless you really trust the other guy, lay out terms like when, where, and how much in writing before handing anything over.
- Some barter exchanges operate a “time bank”, in which you can store hours worked, or some other kind of parallel currency. Don’t think of these as cash: your points are not convertible to dollars and will disappear if you leave that bartering exchange.
- It never hurts to ask small businesses and individuals if they’re willing to make a trade for at least part of your bill, but don’t even bother with large companies (unless you also happen to be a large company).
The barter economy is generally associated with primitive societies or those in great financial turmoil. It’s been a part of human society throughout history, though. It moves to the forefront in times of crisis, like the Great Recession of 2008 and the more recent coronavirus pandemic, but it never disappears.
Bartering helps us to connect with other people and fosters a sense of community that’s often lacking in the modern world. It’s also good for the environment, as it reduces the amount of transport required and encourages recycling. Most importantly from an individual family’s perspective, however, it can provide you with an income while also saving you money. Everybody’s good at something: you may not be able to make a career out of baking bread or detailing cars, but somebody is certainly willing to pay you for it. Instead of making a cash deal, ask them what they can do for you – by matching up your distinct skills, you can both get more of what you want.
In the past, I’ve traded a few hours of fixing up a farmer’s computers for a large quantity of beef, language tutoring for part of my rent, and even some old paintings for a stay in a hotel room. Those are only a few examples; if you have any interesting stories of your own, why not share them in the comments?