The Reincarnation of Barter Trade & Barter Economy

Abstract

Although anthropologists along with historians and academic circles point to no ethnographic evidence to confirm or deny the existence of barter among the prehistoric people in the new Stone Age (the Neolithic epoch during 9000-6000 BC.), the 18th-century Scottish philosopher Adam Smith believed that barter existed, but it was “primitive” and the inefficiency of barter was a precursor to the emergence of money, economy, and economics. Adam Smith was wrong about two things; one was his description of barter and another was the evolution of money and societies, neither of which had moved on a straight line; throughout history, barter trade has coexisted alongside monetary-based economies and it is still with us in the 21st century, but this time around bartering is more efficient thanks to an exponential growth in e-commerce. The contemporaneous crises throughout the 1990s and in the first decade of the millennium have played a role in the extraordinary rise of barter, offsets and non-monetary transactions (NMTs). A series of macroeconomic since the onset of the new millennium has renewed interest in barter trade, which has gained momentum following the September 11 attacks (2001), the burst of the dot.com bubble (2001-02), the Afghanistan War (2001-21), the mortgage (sub-prime) debacle (2006) and the ensuing global financial crisis (2007-08), the sovereign debt crisis (2009-12), the US-China trade war (2018-20), and the coronavirus (covid-19) pandemic (2019-22). The US-origin systemic crises in this millennium have cost the world’s economies trillions of dollars, yet the United States still continues to intensify sanctions against Russia, China, and Iran. Just to maintain the dollar’s “exorbitant privilege”, the U.S. has increasingly used threats (political bullying), weaponized the dollar, and abused sanction power as a foreign and security policy. These unorthodox events and policies have renewed interest in barter among poor and developing countries that are; 1) highly indebted with insufficient net foreign reserves; 2) imposed sanctions by the U.S. and the EU; 3) attempting to avoid using dollars in local, regional and international trade; and 4) interested in reducing current account deficit.

Keywords: barter economy, sanctions, weaponized dollar, abuse of sanction power, welfare

JEL Classification: E0, E6, M00, M10, M20, P20, P21, P23, P26