Should we return to the Barter
System?
(By : Shahul Yunus V, Robin Jacob, 1 BBA B)
Could we resolve the problems brought by the currency system by going back
to the barter system? Will the modern society accept the old -age system of bartering
goods and services. Read more to find out!
YES / VIEW (INFAVOUR OF BARTER SYSTEM) :
- Robin Jacob, 1 BBA B.
In June 2015, Zimbabwe began offering 5 US Dollars for 175 Quadrillion
Zimbabwe dollars. In 2008, the rate of inflation hit 500 billion percent, soon after
Zimbabwe abandoned their currency. In simple terms, inflation is too much money
chasing very few goods. The very crucial idea which stops inflation is the Confidence
in One’s currency. The guarantee that a 100 dollar bill is not just a piece of paper.
People in those days traded their goods for other products to satisfy their needs. In
Initial days, there was no concept of money. People got their desired goods and
services through Barter system. The system of bartering has been noticed recently
during riots, wars and famines. The same barter system was used by men to lead their
daily life in early times. Everyone can satisfy their needs by exchanging what they
have got.
We currently use the currency system for trading the products and for goods
and services. The value of money keeps fluctuating according to the exchange rates.
The fluctuation in the currency system is the main reason for inflation.
The Barter system involves much risk.
NO / COUNTER VIEW(AGAINST BARTER SYSTEM) :
- Shahul Yunus V, 1 BBA B.
Absolutely Not. A man trades with someone else who has what you want and
wants what you have. For example if A produces soap and B produces rice, A would
have to wait till a month as most soaps last a month. But A has to consume rice daily.
He will be not able to get rice until B really needs a new soap. The Biggest drawback
of Barter system will be how much should be exchanged for services like teaching.
The main issue of this system is It was impossible to save things and use them in the
future. Exchanging things and storing them for a long time would be tedious process.
To sell my product, I will have to find someone who wants my product and I also
have to make sure that the product sold is genuine and is worth exchanging. There is
also a challenge of pricing in Barter system, How many apples should be exchanged
for a note book. The value of the product keeps changing in this system. I may
exchange an apple with an orange. But from the next day, I may demand 2 apples for a
single orange. So, the number of goods to be exchanged for a desired product keeps
changing. Another problem in today’s situation is “How the Employees will be paid in
barter system." What goods should they be paid with ? Will they demand the same
good as their salary every month? People tend to store things, to secure their future.
How these things will be stored for a very long time, as products have a very short
half-life.
Pricing Inefficiency is the major problem of the Barter system. There wont be
a fixed price for the goods and services. Another problem of the barter system is that
you cant buy things in various quantities. If 1 kg of rice if fixed for 1 Rabbit. How
much rabbit should be given for 1/2 kg of rice?
Then arise the concept of something to exchange.
* Should be a medium of exchange
*Should be a unit of measurement
* Should also be a store of value.
* The product must be universally accepted.
(I.e everyone must be willing to take it in for goods and services.
Gold and Silver was used in the early days as a medium to exchange goods.
Gold was universally accepted as the medium to exchange goods(whatever they want,
whenever they want). Gold satisfied all the criteria mentioned above. The monarchs
started issuing the gold coins. Gold and silver coins were used to exchange goods and
services till recent times. Then came the concept of issuing copper coins. Copper
coins were issued in the place of gold coins and was in use till the British era(in
India). Then came the vast concept of Currency. The currency bills were printed,
making a piece of paper, worth exchanging. Different nations named their currencies
differently(like dollars, pounds etc).
The value of the currency heavily rests in the economy of the nation. The market
value of the currency keeps changing due to exchange rates and inflation. The
changes are less noticeable and does not have very much impact on the nation. ( It may
in case of Boom or depression in the economy).
So, going back to Barter system wont be a intellectual solution to solve the
problems posed by the currency system.
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