In the realm of financial calamities, never doubt the extent of man’s adaptability to changing circumstances.
In a recent Forbes column, the great free market advocate Bill Frezza makes mention of a new trend popping up in the economic sideshow known as Greece:
Ironically, the inventors of democracy may be the first to rediscover the moral foundations of money, as barter networks begin springing up across a demonetized Greece. Hundreds of them are now in operation, many in anticipation of the shock to come when Greece is inevitably forced to say goodbye to the euro. These networks are lubricating commerce just as jobs and euros in the formal economy are running dry.
Members of barter clubs receive Local Alternative Units, or TEMs for their Greek acronym, in return for some product or service rendered to another member of the closed community. Fellow community members agree to redeem these TEMs in kind, and are cast out if they don’t.
Here is a report from RT on the phenomena:
In a country where cash is in short supply, time has taken on a whole different value. They say time is money, and now it’s being used as a currency in an emerging barter system developed by cash-strapped Greeks who want to swap goods and services.
“In the Time Bank we exchange voluntary services. Sometimes I give painting lessons for free but I take yoga for free also,” says Niki Roubani of the Bank of Voluntary Time project. “It’s huge, it’s everything we do without money. It’s looking after people and making things ourselves.”
The Time Bank is just one of a growing number of service-swapping alternatives that are providing people in Greece with an imaginative way to cope with the tough economic conditions.
According to the New York Times, one TEM represents one euro and those looking to partake in barter networks must first sign up online to database online that mimics the lay out of Craigslist.
Emerging barter markets and alternative currencies aren’t unusual in times of financial chaos. Greece’s own barter movement is demonstrative of what occurs in lieu of people no longer having access to or trusting the currency they were previously forced to conduct daily business with. As Frezza mentions, a type of alternative and localized medium of exchange has developed and the RT report highlights a “time bank” where people offer their skills for a set amount of time which can in turn be traded for goods and services.
Emerging orders like these should spark the interests of austro-libertarians as they give keen insight into how society, and thus humanity, will react to catastrophe if the institutions many take advantage of suddenly disappear. Ardent libertarians such as Murray Rothbard truly believed that society would be better off with the quick and even immediate abolishment of the state. While such a principled stance is admired, some recognize the kind of havoc drastic, instantaneous changes could potentially create. While button pushing sets the stage for long term prosperity, it would undoubtedly bring short term pain.
Seeing the barter system evolve in Greece however gives heed to optimism and confidence in society’s coping mechanism to deal with the sudden changing of circumstances such as the erosion of the state. Another great example of this rests in a recent article by Doug French about the restaurant chain Waffle House’s ability to operate in emergency conditions:
“Hurricane Irene knocked out power in Weldon, N.C., on Saturday evening,” writes Valerie Bauerlein for the Wall Street Journal, “but as the sun rose on this tobacco-farming town at 6:30 the next morning, the local Waffle House, still without electricity, was cooking up scrambled eggs and sausage biscuits.”
What professor Kouvelis leaves out is the Hayekian insight that Waffle House gains its knowledge through market mechanisms for discovery, communication, and use of knowledge in the allocation of productive resources. Waffle House can only serve customers and make money if they are open. The company does little advertising and doesn’t hold press conferences. The secret to its success is serving good food and always being available. This may involve being open but only serving a few items. By narrowing their focus, the company can more effectively ensure that it can push a limited number of ingredients through a disrupted supply chain. The company would only breed dissatisfied customers if it remained open only to run out of eggs or hash browns.
Despite a lack of power brought about by natural disaster, Waffle House quickly readjusts to meet a new demand by utilizing its resources and supply chain infrastructure. It is the triumph of capitalism in the face of adversity.
Man’s ability to adapt to changing circumstances is a trait that has enabled it to survive, progress, and outwit natural selection for thousands of years. Greece’s newly developed bartering system is in response to both a lack of access to cash and the country’s inevitable exit from the Eurozone. The country, which has become stunningly indebted due to a bloated public sector and unsustainable welfare and retiree benefits, is destined for a default on its national debt. Such a necessary default will come in the form of either bond holder haircuts, the coordinated devaluation of the euro by the European Central Bank, or abandonment of the euro and the massive printing of the drachma. This is on top of austerity measures such as tax increases currently being imposed to shore up the country’s finances. The citizens of Greece see the writing on the wall and have begun setting up an alternative market to reconcile what will undoubtedly be a monetary event for the history books. Not only is their experiment in barter economy preparing them for the worst by establishing local commercial networks but it also throws a wrench into the mechanism of the state-enforced monopoly on currency creation known as central banking. Though the local alternative units may represent the euro now, there is no telling what currency or standard the people could turn to in order to establish prices should the fiat system lose its appeal.
With this emerging order I wish the citizens of Greece the best of luck on their endeavors as they will most definitely need it.
Tags: Barter, Black Markets, Euro, Free Markets, Greek Economic Crisis, trade
Kavius must be trembling in his pants that all the economics study he did at college has no basis in a localized barter system. This system, currently gaining popularity in Greece is to put food in the mouths of family members who don't have understanding of concepts of FIAT money credit default swaps etc , as Neal said is an alternative storage system, between buyer and seller that effectively removes the ability to form derivative markets on human labour and GDP even before it's been earned .
This my friend is a non perfect knee-jerk survival mechanism instigated by the descendants of the birth of democracy. By the people for the people .
It's for local day to day survival necessities and there is nothing wrong with trying to survive peacefully.
I'm sure when it's time to buy a new Volkswagen golf, they will be using euro currency, of which they will have more of if they can remove parasitic profiteering practices included in normal every day , day to day survival transactions such as buying food and essential services
Voluntarily exchanges between consenting market participants is barter. People trade more "personal promises" before actual physical exchanges. Even a man and a women consent to "personal promise" and then physically barter to form a family. Adaptability is "whatever works" for voluntarily exchanges. A verbal promise "my word" need not be physically recorded for a third party involvement. Value is perceived in the "senses" of the last receiver but the problem of storing perceived value is solved by the abstract concept of "Money". Money facilitates indirect trade by voluntarily exchanging perceived "stored" value in some form of a "storage" commodity. A "promise" (private or fiat) has not long distance, long term storage capacity. A storage media "whatever works" becomes physically required. I remember reading that candy bars became "trade currency" during the Kosovo War. Whatever Works storage media is some form of personal private property. Market participants have voluntarily accepted and will continually accept various competing personally chosen private property commodities. Buyers determine value (price) and sellers determine money (storage media).
Kavius,
Again, you make a valid point but if you read through the reports linked in the article you will see that there are pockets of actual barter within this movement. The RT report in particular has footage of a bazaar where people bring bags of clothes to trade.
Perhaps I was wrong to make a broad sweep and label all these emerging social systems as "barter" but I still stand by my conclusion that these movements give optimism to man's coping mechanism.
As I said, you addressed that in your follow up… should have refreshed my page before commenting.
<quote>Seeing the barter system evolve in Greece however gives heed to optimism and confidence in society’s coping mechanism</quote>
This is what I wanted to address and, rereading my comment, I seem to have missed it.
Just because the fiat currency you have chosen is not government mandated, does not mean you are engaging in barter. The line between fiat monetary systems and barter systems is a fuzzy gradient (commodity being bartered becomes money, proxy notes used as stand in for commodity, commodity removed from proxy), and it is simple enough to not realize you have crossed a critical line. The TEM is not a barter system, but a Euro proxy system.
And of course you addressed that in your follow up… sorry, should have refreshed my page before commenting.
@kavius
While I understand your point and agree to a certain extent, I think I addressed the main issue you pointed out. Like I said, though the TEMs are practically another fiat currency (they represent the euro), they have the potential to denominate prices under any standard as the system progresses-including gold or silver or any commodity.
The main point of my piece was to show that the establishment of these systems themselves create a much needed social network capable of sustaining trade after a potential currency crisis. If you watch the RT report, there is actual barter that occurs as well.
While it isn't perfect, these new barter groups show the extent of humanity's adaptability to changing circumstances. That was what I tried to highlight.
Like you (and most people that come to this site), I would love to see a barter system not priced essentially in euros or leaving a digital trail for the government. These do exist in Greece but what received more media coverage were the online type of clubs.
Unfortunately, this is a flawed solution. This is a case of a problematic system being replaced with the same system under a different name. As was discovered by the barter club in British Columbia about 10 years ago, there is no fundamental difference between using cash and using some form of trade credit and — given the scale of the group running the credit system — there are problems associated with scale and taxation. Given the unit of account is considered equivalent to the Euro, there is no distinction between doing the work and receiving TEMs and receiving Euros, except that Euros are more widely accepted than TEMs. Further, one of the touted benefits of Barter is the ability to exclude the government from the transaction, because the unit of account is completely digital, there is a record which the government can use to determine the tax burden associated with the transaction. As was discovered in British Columbia, the government was quick to point out that taxes were owed on the transactions, and they had easy access to a complete record of all transactions… they would be watching come tax season. In the end, TEMs are mearly another fiat currency, and not even that in the end, just a stand in for Euros. There is no difference between Euros and TEMs, except for a different issuer of the currency (what is to stop the managers of the TEM from creating some extra just for their personal use, hyper inflating the currency?).
This actually sounds like a step backwards for the people of Greece. They would be far better actually using barter (trade of goods) than another fiat monetary system.