One of modern barter's key concepts is triangular trade.No longer must swaps be conducted on an all-or-nothing basis. Computerization has enabled the establishment of credit and debit accounting, and thus of fractional, multilateral commerce. In the close-ended system of a given barter club, figuring out what is sales, what is revenue, what is cost-of-goods-sold, what are expenses, and what is income can be as absorbing as an Escher etching.
The rule is that swaps are made at fair market value, whether retail or wholesale. (Recognizing a problem, one club -- Business Exchange International Inc. -- has set up two separate trading categories; others, however, maintain that competition will keep "prices" in line, just as it does on the outside.) Essentially, a club member merely exchanges its goods or services for business needs that another member's goods or services can satisfy. Let us say that Company A, an office-furniture dealer, has listed for trade two desks worth $250 at retail. Company A would like some photos made for its catalog, and a printer to print it. Photographer Z, a sole proprietor, has pledged up to 20 hours of time at $25 an hour. Corporation M, an importer, offers cameras worth $250 each at wholesale. The situation is ripe for trade.
The club's brokers talk Z into taking a camera, and M is issued credits worth $250. M could use a desk, so it agrees to put A's wood-grain-effect model in its outer office; M gives A the credits. Trade credits in hand, A consults Z to arrange for 10 hours of shooting. Z receives A's credits and pays them into the barter club's "bank," thus wiping out the debit for the camera. Mirabile dictu! Not only have the business needs of each entity been met without its having to expense them in cash as on the outside, dollar economy, but each has clearly made a profit as well. Such set-ups, repeated as required, may be just the elixir a tired economy can use.
But how can it be that all three participants are smiling? Does barter provide endless income? It seems that way, even though each business's cost is different. Company A has bought its inventory at wholesale -- say, 50% off list. Therefore, it earned $125. Photographer Z's cost is virtually zero, since she isn't doing anything else with the time; she thus makes a cool $250. Perhaps importer M's margins are narrower, but it, too, prospers: If the cost of the camera is 80% of wholesale, M gains $50.
If each company continued to barter with others, it would profit at the same rate. So who needs cash customers?