I want to highlight in this post the flourishing barter system in Greece. It is one that grew out of necessity, due to the lack of circulating income within the country, which is then the result of three years of austerity measures. What do people do when insufficient money is going around, and each has less income to buy his needs, yet still has his demands, as does his neighbour? Last year the New York Times reported on the Greek Volos network:
Part alternative currency, part barter system, part open-air market, the Volos network has grown exponentially in the past year, from 50 to 400 members. It is one of several such groups cropping up around the country, as Greeks squeezed by large wage cuts, tax increases and growing fears about whether they will continue to use the euro have looked for creative ways to cope with a radically changing economic landscape.
“Ever since the crisis there’s been a boom in such networks all over Greece,” said George Stathakis, a professor of political economy and vice chancellor of the University of Crete. In spite of the large public sector in Greece, which employs one in five workers, the country’s social services often are not up to the task of helping people in need, he added. “There are so many huge gaps that have to be filled by new kinds of networks,” he said. Here in Volos, the group’s founders are adamant that they work in parallel to the regular economy, inspired more by a need for solidarity in rough times than a political push for Greece to leave the euro zone and return to the drachma.
Back in 2008, I mused whether there could be a private sector solution to the aggregate demand problem. Back then, austerity was already being trumpeted by many policymakers and opinion makers as the necessary solution to the economic crisis, while rejecting Keynesian solutions as wasteful and 'crowds out' private sector investment. (Pundits who believed that people stopped spending because of too much government waste rather than because people with the money started hoarding them out of fear, or because of escalated debt calls and investment writedowns).
Back in 2008, in the similar situation of less transactions, and less income going around, bartering also seemed to me the circuit breaker to this vicious cycle of fear and recession. "Could the private sector solution involve local companies engaging in quasi-barter trade with each other? Or paying via in-kind currencies? For example, we can have businesses paying employees via credits that can be used by consumers to buy/pay for services of other local producers. So in essence, in an economic downturn where actual cash flow is scarce, demand is created by empowering cash-starved businesses to pay employees and suppliers in some 'credit principle' that other businesses will then consider acceptable form of payment. I don’t really know how this type of arrangement can be made to work, but if it can, it will work only if enough businesses participate. The world is now more globalized than ever before, and this solution would again only be possible if an economy has enough industry diversity to be self-sustaining on its own, otherwise the arrangement will need to be global in scope."
What's happening in Greece shows us that despite the constraints caused by policymakers that are both literally and figuratively distanced from the problems and challenges of regular people, life still has to go on. I would still expect that this situation (in Greece and in all of the Eurozone) be finally resolved properly, as bartering remains a short-term solution. It gets bogged down by the constant requirement of a double coincidence of wants, and results in far less efficiency and productivity than when commerce is done with a state-backed currency. Still, for what it's worth, for now this development is a triumph of the human spirit over outsize constraints, of necessity over adversity.
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