The World is Your Swap Meet
Posted by Thomas L. Knapp on Aug 17, 2009 in Commentary • 6 commentsIt’s not very often that I give a Republican — let alone a self-described “libertarian” Republican, which I consider a contradiction in terms — credit for a great idea, but Eric Dondero nails it with his recommendation that the best way to move back toward a real market in health care is to revert to “cash and carry” and even more so to barter. Not just versus “ObamaCare” and other overtly state-powered programs, but also versus the existing hodge-podge of “managed care” schemes which primarily serve to funnel health care dollars into the bank accounts of state-privileged middle men. And for that matter, not just in the health care arena, but for virtually any good or service imaginable.
Shattering the state’s monopoly on money is a big part of the anarchist project. A lot of schemes for competing currencies — mutual currencies, commodity-backed currencies, you name it — are already in play in both theory and practice. But there’s a lot to be said, at this particular point in time, for plain old barter. Here’s why:
Almost every currency/money idea requires some sort of centralized system, making it vulnerable, to one degree or another, to a jealous government. If the currency is digital, then offshore servers and encryption can provide some degree of security, but that security is usually not total and the schemes can quickly get more complicated than most people are willing to put up with.
Even a straight commodity currency — coins minted from precious metal and valued according to the quality/quantity of that metal — will generally need to be minted by a widely trusted organization before they can themselves become widely trusted instruments of commerce.
As we’ve seen with e-gold and Liberty Dollars, the state moves quickly to crush such efforts, and it can do so effectively because of the centralization they require.
Barter, on the other hand, is a one-on-one of goods in which any two parties who trust each other can get the job done. A state bust of one barter transaction, or even of one exchange for such transactions, isn’t going to impact the overall viability of doing things that way. And in this day and age, it’s more efficient than it used to be, in two important ways.
First, it’s more efficient relative to “government money” than it used to be. At the time of the American Revolution, the real tax rate appears to have been in the low single digits. These days, between up-front taxation, inflation and costs of regulatory compliance, it’s somewhere in the neighborhood of 50%. In other words, using money instead of making a direct (and presumably unmonitored, unreported and untaxed) exchange of good/service for good service means accepting a 50% discount on value. In order to purchase $500 “worth” of something, one must first earn $1,000 and give the state its baksheesh. But one can trade $500 “worth” of something for $500 “worth” of something else at full value.
Secondly, the main inherent inefficiency in barter — the problem of finding someone who wants what you have and has what you want — has been greatly reduced by the information revolution. In 1709, someone who wanted to trade two goats and a sack of turnips for a ground lens to build a telescope with was going to have to do a lot of walking around to find an optics guy who needed two goats and a sack of turnips, if he was there to be found at all. It was easier to take his goats and turnip to market, sell them for shillings, and use the shillings to buy the lens.
In 2009, the equivalent of that trade — a few cases of homebrew ale for a used PC, for example — can be posted on Craigslist, and the parties will likely find find each other, or at least find other people to barter with until they get “where they want to go” through a series of such exchanges.
Presumably there’s a point at which the effect of the rising real tax rate and the effect of the falling inconvenience of finding barter partners cross each other on a graph of “exchange efficiency.”
“Building the new society in the shell of the old” may very well involve re-inserting some of the old society’s ways into the new.
Thomas L. Knapp is Senior News Analyst and Media Coordinator at the Center for a Stateless Society (c4ss.org).
There are certainly difficulties with some currencies, but what you say about centralisation is not true of all currencies. What you say about metal money is also mistaken.
A number of the best minds in financial cryptography have been working, since late 2005 in some cases, on digital bearer instruments, digital exchange services, distributed audit protocols, and a number of new technologies to simplify these to the point where any number of companies may issue and any number of users may trade with all kinds of things. In several cases, of course, gold and silver are the things. But a large number of other products including coffee, consulting services, and web hosting have been turned into commodity money.
I could actually write several hundred pages on this topic. Perhaps a guest column would be of service?
There are a number of techniques for accepting metal money, including touch stones, weighing, the Archimedes test, a simple paramagnetism test, and bending or biting the coin that make it easy for anyone to validate the metal content of a gold or silver coin. Generally speaking, any three tests will do (e.g., weight, Archimedes, bending). Knowledgeable persons have been trading in gold and silver for over ten thousand years. During most of that time, mint marks have been easily forged and essentially meaningless.
In fact, I would suggest that a better model for metal money is to have silver and copper coins made by a large number of mints. As in many tens of thousands of mints. For several months I've been developing an "open source minting" concept that I plan to release soon. It was actually an idea that came up at the Boston Tea Party national gathering.
What is minting, after all? If you have a blank round of silver, minting is just a guy with a hammer. He puts a "die" which is like a mold for metal against the blank. He hits it really hard with a hammer. If you like, he uses a different die on the other side. You can also have him file down the edges with a rasp to get a "milled edge." But if the coin is going to be weighed anyway, there is little point to clipping edges. Clipping was common whenever a state put a "face value" on a coin and insisted that all coins bearing the face value were worth that arbitrary amount.
Now, sure there are lots of other gizmos that a government adds. Auditors, inspectors, quality control, seignorage, taxes, duties, shipping fees. Many of these things are side effects of having one guy standing in one place striking coins all day. A lot of parasites glom onto such a deal and are hard to unhook.
But the simplicity of minting is one of the features of having many people engaged in minting, say, silver coins. Blanks are easy to come by from various refiners, or you can refine your own from scrap silver. Don't like silver? Copper is harder so it won't wear as fast. Or maybe you can find a big pile of 90% silver and 10% copper – coins minted in the USA before 1965 say.
There are some tips, techniques, ways of standardising the output so the sizes, shapes, and purity are consistent. Automation is easy to add – lots of trip hammers in the world.
And it is not mentally challenging work. So, lots of people could add open source minting as an activity to other things they do. If I don't need a ditch dug, I might be happy to sell widgets for silver minted by a ditch digger.
Jim,
Thanks for a tremendously informative comment. I do hope that you're right in all of the ways that you think I'm wrong. And there's a very good chance that you are.
However, I still think that barter is a great idea and a way for people to begin transitioning away from government/fiat currency without a steep learning curve, without choke points that are vulnerable in a way that allows whole markets to simply be shut down by government thugs, and with the potential to deprive the state of revenue it would like to steal.
I'd love to see a guest column on any or all of various subjects related to all this from you … but I don't exercise editorial prerogatives here at C4SS. I'll definitely be making sure that Brad Spangler is aware of your offer, though.
Regards,
Tom
The ultimate in borrowing is a coopertive which includes medical personnel and facilities in the mix. This is likely the only way to cut costs from the system. Of course, this would annihilate the entire insurance industry, not to mention the banking industry and the financial markets.
Sounds good to me.
Correction: the ultimate in bartering
More availability of information is a boost to barter, true. Though, distances are an issue. Trust is another. The chances are high that the person with the other side of your desired barter trade is going to be someone you don't know, who lives far away.
I think that's why people began to employ popular goods. Silver is popular for its shininess, rarity, its antibiotic properties, its malleability and ductility, and has become more popular since its electrical properties have been discovered. Much the same is true of gold and copper. Tobacco, alcohol, bullets, other metals, and foods have all been used in trade and commerce to facilitate exchanges – bringing them closer and with more trusted counter-parties.
Michael's idea of a health care cooperative with surgeons, hospitals, and other experts sounds very sensible.
After a particularly violent tropical hurricanes that left the island without power for several days, I rolled some cigars and went to a neighbors’house who had a gas stove. Traded the cigars for a jug of steaming coffee. Doesn’t get any better than that.