Greece's Emerging Barter Economy

I caught wind of this new concept in emerging order from the impeccable Bill Frezza in his Forbes column today:

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. While it sounds primitive, and it is, TEMs are real money.

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 same 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.

Here is a link to a BBC report on the concept as well.  Though this movement isn't surprising considering the literal chaos going on in Greece, it is demonstrative of what occurs in lieu of people no longer trusting the currency they are forced to use.  As Frezza mentions, a type of alternative and localized currency has developed and the RT report talks about a type of "time bank" where people offer their skills for a set amount of time in order to trade for goods and services.

Emerging orders like these always peak my interests because they give a keen insight into how society, and thus humanity, will react given an economic catastrophe where the institutions that many of us take advantage of may disappear.  Being an ardent libertarian, I truly believe that society would be better off without the existence of the state.  But at the same time however, I recognize the kind of havoc such a change overnight would create.  I was once asked by Nigel Ferguson in front of a group of about 100 libertarians (a decent mix of Rothbardians, minarchists, and Friedman/Chicago school types) whether or not I would "push the button" to abolish the state immediately.  My reply was that I would push it half way, which garnered a fair bit of laughter.  The truth is pushing such a button, while setting the stage for long term prosperity, would bring short term pain.

Seeing the barter system evolve in Greece makes me more optimistic about society's coping mechanism to deal with the quick eroding of the state.  Witnessing the operations of big box retailers in action also gives me hope since I find it hard to believe they will close up shop in lieu of a fiscal tragedy.  There is after all a profit to be made and they still posses the infrastructure and contacts needed to provide goods and services.  As Doug French pointed out in a recent article 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."

The venerable Waffle House has learned a thing or two about responding to crisis, given their locations up and down the eastern seaboard. Panos Kouvelis, PhD, the Emerson Distinguished Professor of Operations and Manufacturing Management and director of the Olin's Boeing Center for Technology, Information, and Manufacturing explains, "The companies that are most frequently exposed to supply-chain disruption are the ones that have the best risk management plans."

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.

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 the country's inevitable exit from the Euro zone.  The country, which has become stunningly indebted due to a bloated public sector and unsustainable welfare/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 (not likely due to the iron grip on the ECB and national governments by the elite financial) or the massive printing of the drachma.  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 fiscal crisis for the history books.  I wish them the best of look on their endeavors as they will most definitely need it.

I want to also mention that the emergence of Greece's barter economy flies in the face of anthropologist David Graeber who claimed to find evidence that money did not evolve from a system of barter such as the theory laid out by Austrian school founder Carl Menger.  From an interview via Naked Capitalism:

The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when the Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.

In summary:

So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

Now you may ask yourself since credit and the euro already exist in Greece, doesn't the emergence of barter prove Gaeber correct? Not quite.  As the RT report mentioned:

Organizations are arranging swap-shops to exchange clothes, and one town in Greece has even started its own barter currency.

Time has become it's own currency and common denominator in the transactions for these barter markets.  Gaebler's theory is severely lacking when simple, logical deduction is applied.  Robert P. Murphy exlains:

Remember that Graeber says before people traded goods directly, there first developed a system of money as a unit of account. This was how people allegedly kept track of their complex debt relationships, based on the loans made of various goods (and presumably services).

But hold on a second. Without having a network of antecedent barter pricing, how would these primitive peoples know how many units of the money to assign to each type of good and service?

Without the offering up of goods and services initially, time would not have developed as a currency with the Time Bank.  From the report, there appears to be no evidence of a system of credit that preceded the barter system.  The Mengerian theory is once again vindicated.
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That's definitely gonna turn into something eventually, just gotta hammer it out and reorganize it.

For humor's sake I just wanna end with this final nail in the coffin of Rick Perry's campaign:

If you have a plan for downsizing the federal government, you have to be able to memorize more than two words; simple as that.