Low on Cash Flow? Barter for Goods and Services

Oscar Meyer’s bacon barter campaign, featuring actor Josh Sankey, may be a silly stunt, but the evidence suggests that bartering is on the rise. And we are not just talking about exchanging baked goods for vegetables at your Saturday farmers’ market: last year barter worldwide led to a minimum value of $12 billion in the global exchange of goods and services.

Around for millennia, barter has long occurred at a microeconomic level, and has enjoyed surges of popularity when large institutions, mainly government, failed on a massive scale. Barter was common during the Great Depression as farmers were hit with rampant deflation and could not sell their crops. During the first chaotic years after the breakup of the Soviet Union, businesses exchanged goods via an ad hoc barter system. When Argentina’s currency collapsed in late 2001, businesses and municipalities turned to barter as the country’s banking system screeched to a halt. And as an article by Tracey Keys and Thomas Malnight on the Harvard Business Review’s blog outlines, barter between corporations is also on the rise.

According to Keys and Malnight, several factors are behind the surging interest in barter. Financial restrictions and tight access to credit can make barter more lucrative; companies can pitch poorly performing assets and in turn gain the exact goods or services needed, rather than nothing at all, and therefore come close to operating at 100 percent capacity; and businesses can also find new and creative ways to find clients and markets for their products. As a result barter services are on the rise, as are professionals such as attorneys and accountants that specialize in advising their clients about the practice. Towns and cities across the U.S. have set up barter exchanges, internet barter services allow for the swapping of goods across longer distances and at the moment, Thailand is considering a barter arrangement with Iran for agricultural items.

Fans of bartering point to how the practice can build relationships within a community, score services for a very fair exchange and of course, save money. Of course, there is the thrill of also skirting banks, credit cards and as some believe, the tax collector. On that last point, however, it is important to remember that bartering is still considered as economic activity by the IRS. The fair market value of goods received are a line item in Schedule C of Form 1040. And no, the chances are if the IRS nails you for noncompliance, you will not be able to pay your tax bill with website design or carpentry.

Leon Kaye, based in Fresno, California, is a sustainability consultant and the editor of GreenGoPost.com. He also contributes to Guardian Sustainable Business and covers sustainable architecture and design for Inhabitat. You can follow him on Twitter.

Harper’s Weekly illustration courtesy Wikipedia.