Web Hunter: How to get what you need when you don't have the cash

Russ Kratowicz, P.E., CMRP, executive editor, demonstrates a time-honored way to get what you need despite budget cuts.

By Russ Kratowicz, P.E., CMRP, Executive Editor

Most manufacturing plants already have put their corporate spendthrifts on short leashes. When economic pessimism rules the day, maintenance spending has a nasty way of dropping to zero while the need for tools and parts continues on, heedless of the economic punditry on the telly.

For centuries, mankind has managed to exchange goods and services in the absence of cash, credit, banks and the other institutions we now think are so necessary for functioning in the real world. We’ve lost our ability to haggle in an unstructured marketplace. We’re not sure how to do it anymore. That uncertainty becomes the launching point for this opportunity to root around in the chaos we call the Internet in search of some credible, practical, zero-cost, noncommercial, registration-free resources that can shed some light on barter and trade for the industrial world. Remember, we search the Web so you don’t have to.

Getting started

There are three main variants of the cashless transaction and quite a few benefits accruing to a company from using such exchanges. So says Nigel M. Healey in his article titled “Why is corporate barter?” Pay a visit to http://findarticles.com, where you’ll see “Find Articles in:” and select “Business.” This lets you browse publications in alphabetical order, and you should select the letter B to zero in on a publication called Business Economics. Scroll to the lower part of the page, click on April 1996, and read this eight-page article (including three pages of footnotes and references) to learn about the variants, the benefits derived from engaging in industrial barter and an analysis of the domestic barter industry. The article examines a selection of barter-related material published since 1974.

Case studies

The typical plant warehouse probably holds several examples of excess unsold inventory, each item of which represents cash that should be deployed in far more productive ways. Companies that have found themselves in this situation include MTD Products Inc., AT&T, Konica U.S.A. and Heineken U.S.A. Inc. It was some form of barter arrangement that helped each of these companies liquidate that inventory. Maybe you could help ease your budget crunch by doing the same thing. All that’s needed to get things moving might be some case studies, in which case you should open your book to www.industryweek.com and access the drop-down menu at the top right corner under the word magazine. The past issue you want is dated May 18, 1998, and the article you want is titled “Corporate Barter: Out Of the Dark?” In it, Karen M. Kroll shows you how these companies disposed of lawn mowers, sunglasses, handheld consumer products and, amazingly, office space. Now, you can go forth and be the financial hero of the moment.

Money source

In the beginning, there was barter. Ancient peoples had unmet needs, but no mints, coinage, paper or printing presses to make greenbacks. They had no choice but to use other readily available items as a medium of exchange. Society had an inexorable desire to improve, so the beads and trinkets ultimately were abandoned in favor of coins. That scenario appears to be a point of contention between Nick Szabo and Mencius Moldbug, a pair of bloggers, the former at George Washington University and the latter being a pseudonym for someone out there. When you have enough time on your hands, you can get a sense of the give and take between the two by reading Szabo’s “Logical emergence of money from barter,” and the subsequent online debate. The material is located at http://unenumerated.blogspot.com, and you should scroll down to the archives in the right-hand column and select the March 2008 issue. When that loads, drop down to the March 5 entry (they’re listed in reverse chronological order) and click on “Links to this post” found just below the last line of the posting. That will get you the original essay and the comments from both parties.

Everybody’s doin’ it

If your company isn’t actively investigating the barter concept, you folks might be missing out on something good. But, don’t take my word for it. The skeptics out there in readerland might have an interest in the next Web site. It presents the basic idea of how the different barter exchanges operate and highlights the dollar volume trends in the world of bartering. Toss your mouse at http://news.thomasnet.com and enter the word “bartering” in the search feature at the upper right corner. You’ll want to select the article titled “Small Biz Owners Revisiting Age-old Tradition: Bartering,” by Jorina Fontelera. It’s a link-rich page that will take you many interesting places.

For the Pacific Northwest

Martin Kagan runs The Capital Asset Exchange Ltd., Beaverton, Ore., which seeks to be a forum and trading environment for its members. To that end, the organization established the Oregon Trade Expansion Network (OTEN) to act as a clearinghouse for barter transactions among members in that state. Of course, there’s a Web site associated with both entities and I’d like to direct your attention to a specific page there. Head on over to www.capex.com to access the link that takes you to OTEN. The new page has a link to an article titled “Trade Economics 101.” Kagan says that it will help you determine whether barter can give you a competitive advantage in terms of getting new business, selling surplus, conserving cash or alternative financing. Kagan’s prose is a bit too abstract for my tastes and the graph that’s supposed to be on the page is missing, but there’s a message here that might prove to be of value to your real-world problems.

Funky markets and pricing

Money is the true, indifferent medium of exchange. Going outside the normal market and money economy obscures the value of the commodities being traded. The effect is especially pronounced when such extramarket trading becomes regionalized. Fragmented markets make it difficult to price offerings properly to reflect the cost of manufacturing them. These arguments come from Gregg Economou, senior systems programmer at Carnegie Mellon University, who uses the nickname isildur, one of Tolkien´s characters. The rest of his musings are available for public inspection at www.vaxpower.org/~isildur, where you should scroll to the bottom of the page for the link to the article titled “Towards the new barter economy.”

Worst practices

The Soviet Union disappeared in a puff of smoke because, among other things, its command-and-control economy didn’t work very well when the rest of the world was booming. The profit motive was absent, and greenbacks, or whatever they call their ruble equivalent, were in short supply. What’s a good Soviet citizen to do? The same thing that we might be forced to do: Use nonmonetary transactions. Before you jump into that game, you should learn from history to avoid making the same mistakes as those good comrades. To make that possible, I direct your digital attention to “Explaining rise of barter in Russia: Virtual Economy vs. Monetary Issues,” an April 2004, master of science research paper written by Tuvshintulga Bold at East Carolina University. It examines the two main schools of thought concerning the collapse of that economy. It shows how the value applied to something used for barter can shift an economic burden to one party or the other. Before you barter, learn how this happens at www.ecu.edu, where your commissar orders you to enter the author’s first name in the search box to access the 25-page document.

Domestic barter

According to the next Web citation, from the historical perspective, barter is an inefficient form of exchange because it’s merely a response to, and not a remedy for, market adversities, inefficiencies and uncertainties. In her 2003 paper, “U.S. Domestic Barter: An Empirical Investigation,” Barbara Cresti at the Université Catholique de Louvain in Belgium explores the developments in the North American barter industry that came into being during the 1950s. She points out the difference between corporate and retail barter. Also, you’ll learn why the robust financial infrastructure this country enjoys explains why barter works in the United States and how the lack of such advantage indirectly led to the collapse of the Russian economy. You’ll find this scholarly work by traveling to www.uclouvain.be/en-econ.html to click “Publications” on the left. Then, click on “Discussion Papers” and select the “ECON DP 2003” option, also on the left. Scroll down to select the entry listed as “2003/36” to read the full report.

Reduce the national deficit

Those who enter the bartering arena can find some deals that make good economic sense. But you’ll need to keep track of the details so you can pay taxes on whatever results when the dust settles on your exchange and, thus, help us get through this financial downturn. Learn your reporting obligations by visiting our hired hands working in Washington’s Internal Revenue Service at www.irs.gov and performing a search on the word “bartering.” When I searched the IRS site, I found nearly 300 Web pages that have something to say about your cashless swap. Maybe you better get your CFO involved in this matter.

Without comment


E-mail Executive Editor Russ Kratowicz, P.E., CMRP, at russk@putman.net.