In time of crisis, barter works and may have saved Russia in 1998
After the collapse of the Soviet Union caused it to split up into its components, the newly-established nations each faced an economic crisis. In Russia the crisis lasted for a decade. Inflation had destroyed the currency. There was no banking sector to speak of. And the central government had failed to monetize the nation’s potential production through a functioning monetary system.
The answer? Barter! Not only among individuals, but also among businesses and even with the central government. According to a study from the period by Dr. David Woodruff of MIT, “As of early 1998, 50-75 percent of exchange in industry took the form of barter…” With regard to payment of taxes, “In 1997, at least one-quarter of the revenue collected for the federal budget took a non-monetary form.”
At the time, the International Monetary Fund, which was trying hard to impose harsh neoliberal bank-centered policies on Russia, was urging Western governments to take a hard line in trying to force Russian government officials to carry out an anti-barter crackdown. The Russians resisted . Within a couple of more years the Russian economy had begun to move forward again under President Vladimir Putin.
But barter had saved the day. In his study, Woodruff advised against IMF policies, writing: “The rich countries can no longer afford the illusion that they can impose policies on Russia regardless of their domestic support. ”
Source: Dr. David Woodruff, “The Russian Barter Debate: Implications for Western Policy,” November 1998, Ponars Policy Memo 38, Massachusetts Institute of Technology.
Copyright 2010 by Richard C. Cook
Richard C. Cook is a former federal government analyst who writes on public policy issues. His website is www.richardccook.com.
In January 1986 Cook became the first NASA official to testify publicly on the space agency's prior knowledge of flaws in the solid rocket booster O-ring joints that destroyed Challenger and took the lives of its seven astronauts. He told his story in the book Challenger Revealed, published in 2007. Publisher's Weekly wrote of the book: "Easily the most informative and important book on the disaster."
I’m curious to know what kind of “barter” was the Russian Government system participating in? If it was a business to business trade exchange, then that would mean they were likely using the “mutual credit clearing” accounting model. Was that the case?
Comment by Collin S. Ferguson on January 10, 2010[...] Richard C. Cook Featured Writer Dandelion Salad richardccook.com January 10, [...]
Pingback by In time of crisis, barter works and may have saved Russia in 1998 by Richard C. Cook « Dandelion Salad on January 10, 2010Here in America, we’re old pros at ‘bartering’.
At least when it comes to the human soul.
Half a loaf of American Dreams anyone? Only a few spots of surface mold, guaranteed!
A 1 week old slice of pie?
In the sky, that is….
It’s high time to come back down to reality. Eww, that just sounded so 70s.
Comment by TS on January 11, 2010We bartered with Russian business for a decade. They had no money back then, no cash at all. Many became millionaires out of this trading-bartering style. Foreigners bartered clothing, tools, packaging and building materials in exchange for anything they have access to at work, in the army, plants or business property. Birch Plywood was popular item among others. Locals, bartered in all, mainly what they received in product as wages. For few years, many employers paid by product and little, if any, cash. People bartered the stuff in swap meet style outdoor shacks. Companies bartered with other companies, such as a cement producer will barter building materials with contractors who will, in exchange, build the cement company new offices or the manger /owner a huge ugly-Russian style gothic mansion. Food items bartered as well, but not as much, all Russians own a small plot of land called (Dasha) and they basically grow on it everything they need and pickle it all for the winter. I was astonished to see the varieties of veggie and fruit crops grown by my in-laws on their small garden, no more than 100×200 feet. Most Russians also own a 2 room flat back then, in 1990-1998, so there is no mortgage or rent to burden you. Sugar was the main item you must pay cash for it, and you better have couple of kilos saved in the summer, or likely you will go hungry in winter, you could not pickle your garden crop without it. Russians are very resourceful and technically skilled. They took the new order with stride and it is impressive what little Ural town nowadays offers. They got it all and they can afford it all. When America crashes in the next couple of years, would not be surprised that Russia will join to help, with all that cash and oil horded, that is unless the idiots then will be starting another war in Caucasus or Georgia, since Americans lost their once great common and business sense, now they think wars! is how you make money and get stuff you need.
Comment by Syrian Nationalist Party on January 11, 2010Thank you for pushing the concept of the barter system. I wish more Americans would utilize this concept just to save on tax dollars & keep the govt. out of our personal lives.
Finally, someone just wrote a great book about a small town that also stood up to federal tyranny & ended up starting the
2nd American Revolution.
It’s the same reasons that started the original revolution (high taxes, govt. tyranny, etc.). If you want to see what’s coming nxt to Americans, by our govt., then I strongly recommend it as a must read this yr.
http://www.booksbyoliver.com
Comment by Shawnee470 on January 11, 2010An interesting idea and one that gives this American a glimmer of economic hope. Unfortunately, five short paragraphs is a mighty thin skeleton upon which to place the flesh of the future. Could we not have a little more information?
Comment by Glenn on January 11, 2010[...] richardccook.com [...]
Pingback by In time of crisis, barter works and may have saved Russia in 1998 « In These New Times on January 11, 2010So what kind barter can dispossessed masses engage in? That’s the apartment dwelling worker slaves, I mainly referring too as well as the homeless. If it all goes bad or when it goes bad, Millions will be out in the cold with nothing… The landless have nothing to trade.
Comment by Mark on January 11, 2010Let’s see how good the various economic managers are around the world over the coming weeks and months. If everything collapses human beings will have to trust each other and co-operate. A new more intelligently designed and divinely mandated structure may emerge, bizrat hashem.
Melbourne, Australia
Comment by Adam Neira on January 11, 2010they also have BARTER CLUBS which have sales outlets and print thier own CURRENCY. early on it was easily conterfeited but they now use BARCODE marked currency.
Comment by arkansascajun on January 11, 2010you bring in your stuff on consignment. when it sells they pay you in thier currency, useable in any of thier outlets.
tax free
It is most unfortunate that you are suggesting barter, an atavistic exchange system, as a means of economic survival. This quote from C.H. Douglas is pertinent:
“Question 4. “What should be the purpose of money?”
Douglas: “In many places there is a complete misapprehension as to the use of [a] money system at the present time. In the first place all the vocal orthodox economists are quite obviously and honestly unaware of any change whatever in the reasonable functions of money and in the economic system in the last 300 or 400 years. For example, I saw a letter attacking me in ‘The Listener’ from someone who said that my views on Economics had been exposed by Sir Francis North in 1641! To my mind that is one of the most completely damning things that could be said. Anything I can contribute is based on the conditions which have come into prominence within the past fifty years.
“The first thing to be clear about is that the idea of money as a medium of exchange is, if not obsolete, so rapidly becoming obsolescent it is really not worth considering [i.e.,] the idea of an economic system carried on by isolated craftsmen or farmers exchanging their products with each other on a basis which will ensure that the products are in fact, exchanged.]
“The modern economic system is not in least like that. It is a system in which you have a central pool of production through enormous industrial organisations in which by far the most important factor is real capital—machines, power, etc., and the problem is not to exchange between these institutions. It is to distribute from them to people who fundamentally have nothing whatever to exchange. They are simply standing on the outside line of an organisation which is productive, and the problem is to get the goods over from the organization to these people—not to exchange at all.
“The idea of a money system as a means of exchange is only applicable to a small and diminishing fraction of the total production of the world.
“Therefore, it is of the most fundamental importance to enquire what is the purpose of money. It is that it is first of all an effective demand—a ticket system—a valid demand for goods and services. Consequently, it is the most extraordinarily flexible voting system which the mind of man can conceive.
“Every time I go into a tobacconist’s shop and buy a pack of Black Cat in preference to Gold Flake, I vote for Black Cat in preference to Gold Flake. Every time I buy Cadbury’s cocoa in preference to Fry’s, I vote for Cadbury’s. This preference is transmitted day by day to the companies concerned and they know whether or not their goods are meeting with public approval. This is the whole essence of the economic system. The problem is to produce what the public want and to get it over to them.
“The fundamental purpose of a proper money system is first to give the most rapid and flexible indication to producing organisations as to what the public want, and secondly to see they get it.
Comment by bob klinck on January 11, 2010Toilet paper people, what better barter could one have in a post consumption/sugar addictive world?
Aint anybody noticed that there are not more fruit trees, wild berries, vegetables or anything growing wild that is edible in the neighborhood>
when i was a kid folks used to supplement their gardens with the supermarket, not the other way around. Crab apple trees brought us jelly, grapefruit, avocado, lemons. Neighbors would always be sharing their abundance from the gardens with other neighbors. This was just a normal neighborhood with little yards. as kids we knew who was growing watermellon and when it would be ripe and that the old world war 2 vet growing it was ecstatic about sharing it with us.
Now we all have IBS from all the GM processed garbage and no one grows anything anymore. even if one chose to, the seeds and or plantlings are GM as well and maybe get one harvest but those seeds wont re germinate.
So whats left to barter? What good are any of you? Is that degree or job qualification going to help when foraging for food or trying to protect what little you have?
Its a blessed event should that 50 day food supply dwindle, suddenly all the super smart, mortgaged university indoctrinated elitists will see in retrospect the real useless eaters are.
By the way, Israelis are constantly expanding their territories to grow organic food within organic communities while the rest of the world is ripping open a plastic wrapper with their teeth. What does this tell you?
Comment by rachel on January 11, 2010There’s a lot of material out there on the web by Dmitry Orlov that describes how people survived the collapse of the Soviet Union as a lesson for those in teetering Western economies. He also has a book out.
In particular I recall seeing a video online in which he describes the barter system, unfortunately I can’t find it right now.
Comment by aivar on January 12, 2010In Time Of Crisis, Barter Works…
Source: Richard Cook
After the collapse of the Soviet Union caused it to split up into its components, the newly-established nations each faced an economic crisis. In Russia the crisis lasted for a decade. Inflation had destroyed the currency. There…
Trackback by Harvest Dream on January 12, 2010[...] Courtesy of Cousin Al: How Barter Saved Russia [...]
Pingback by » Economics and Investing:Footpounds: Planet Preparedness: on January 12, 2010Barter is quite an interesting topic of conversation. Governments do see it as a threat to the sovreignty of their currency. If you look at the IRS regulations, barter is considered a taxable event.
Unfortunately, as governments weaken by the weight of their debt loads, and consumers become increasingly strapped from unemployment and debt of their own, a forced reversion to frugality and all that comes with it inevitably happens.
The break up and ensuing devolution of the former Soviet states is an example. They, certainly, will not be the last.
The question on everyone’s minds is not “if” but “when” 1st world nations (including the US) will collapse under their own debt weight.
The following link has a pretty good analysis of when that tipping point is:
http://www.SavingsAndLoanBailout.com
Comment by Michael on January 13, 2010If you want to learn how to survive hard economic times read
Comment by BJ Fuller on January 14, 2010Barter Secrets (How to Survive Economic Hard Times) by B. J. Fuller. Barter Secrets shows you how to LEGALLY create your own money and use it to purchase goods and services. You will also learn how to purchase merchandise at 10cents on the dollar and then trade (barter) it at 100cents on the dollar–a $20,000 car for $2,000, a $5,000 high def. T.V. for $500. These are but two of the many how-to barter secrets contained in this best selling book. To order your copy of Barter Secrets go to http://www.barter911.com, http://www.woodsidepublishing.com or http://www.amazon.com
THIS IS A MUST READ SURVIVAL BOOK. READ IT AND REAP.
Richard, I dearly love Bob Klinck comments on what C. H. Douglas wrote. I believe that what C. H. Douglas wrote is truly the answer. Where can I get some of the material written by C. H. Douglas. I would dearly love it.
Comment by Donna Gaddis on January 20, 2010Reply to Donna Gaddis:
Some websites where you can access information on Social Credit:
http://social-credit.com/index.html
http://www.mondopolitico.com/library/socialcredit/socialcredit.htm
http://social-credit.blogspot.com/
http://www.douglassocialcredit.com/
http://www.ecn.net.au/~socred/
http://en.wikipedia.org/wiki/Social_Credit
There exists a voluminous body of Social Credit works produced over a period of over ninety years.
I could not agree more with your positive assessment of C. H. Douglas. Douglas had in my opinion a towering intellect that penetrated to the core of these matters in the most profound manner.
Douglas and John Maynard Keynes were contemporaries who appeared both singly and together in different government financial hearings and private venues.
Keynes left us with a system of finance that engenders increasing debt and inflation with endless toil and the inevitability of war as all nations are forced to attempt to export more real wealth than they import in order to capture financial credits to compensate the internal growing deficiencies of effective purchasing power within their own borders.
Douglas revealed the increasingly non- self-liquidating nature of the price system under the existing faulty convention of national financial cost-accountancy. His recommendations for introducing non- cost-creating consumer credits to issue universal Consumer Dividends and effect Compensated (Retail) Prices would result in a falling price level and increasing economic independence and security for all citizens with the opportunity for increasing leisure in the context of genuine individual freedom. The commu-fascist (totalitarian) social policy of “full employment” would become discredited as technology was allowed to displace human labour at a maximum rate. The purpose of production is to produce goods and services as efficiently as possible–not to create “work” in perpetuation of a slave state.
Social Credit stands for Freedom, Abundance and Leisure.
Sincerely
Comment by Wallace Klinck on April 30, 2011Wally Klinck