Swapathon

Going back to bartering

In all but the most primitive cultures, I people do not directly exchange one good for another," writes Nobel Laureate Paul A. Samuelson in the eleventh edition of his widely used economics textbook. "Instead, they sell one good for money, and then use money to buy the goods they wish." But in the U.S. today, thousands of people are returning to primitive habits of exchange.

One of the fastest growing trading organizations is Barter Systems Inc. of Oklahoma City. Founded five years ago by three men who had run small swapping clubs, the company now has 62 trading centers around the U.S. that arranged for $100 million worth of barters last year, up from less than $1 million during its first year of business. One Barter Systems missive to some of its 25,000 clients earlier this year: WANTED: $300,000 WORTH OF DRIED MILK OR CORNFLAKES, IN RETURN FOR AN AIRPLANE OF EQUAL VALUE. In another case, Barter Systems helped a tire company trade a jet airplane for $1.3 million worth of coal.

A month ago, Xerox offered to trade 200 desktop copiers worth about $800,000 for an array of goods and services ranging from forklift trucks to airline tickets for employees traveling on company business. As of last week, Barter Systems had traded half of the copiers for some of the things Xerox needed.

There is an element of suburbanite garage sale-flea market economic chic in the new bartering boom. Many traders admit to a strong pride in managing their lives with little money. Says Betty Cordell, 39, owner of a Barter Systems franchise in Atlanta: "I would not pay cash for a haircut, for cosmetics or dry cleaning, dental services, medical services or other costs of everyday living."

Inflation and high interest rates are the biggest spurs to bartering. "Barter is a booming business because of the economic climate," says Moreton Binn, 45, chairman and chief executive of Atwood Richards, Inc., of New York, the nation's oldest (1958) and largest bartering organization.

Last year Binn's company made about $220 million worth of deals, many involving major corporations. Among his clients: Rolls-Royce, Uni-royal and Chesebrough-Pond's. One swap involves the Cosco Chemicals Co. of Indianapolis, a division of Kidde, Inc. Cosco is boosting its production of cleansing products by about 20%, trading the cleansers to Binn for $500,000 worth of services including TV and radio advertising time. Binn plans to trade the cleansers to Hilton and Sheraton hotels, receiving in return room spaces plus food and bar credits, which he will offer to other Atwood Richards clients. At no point during the deal will money change hands.

Old-fashioned bazaar bargaining has now been made easier by computers. The machines locate the parties that might be able to make a trade and then give money-like credits that can be used in future deals. Says James Blunt, vice president of marketing and sales at Barter Systems' six-month-old office in Stamford, Conn.: "We operate very much like a bank--a bank of goods and services instead of cash."

The new barterers, though, still do some things the old-fashioned cash-on-the-barrelhead way. Atwood Richards pays its 58 employees primarily in cash, although some workers gladly accept some of their pay in the form of free hotel and travel services while on vacation.

The very cash-oriented Internal Revenue Service is now closely looking into all the wheeling and dealing, since the benefits received from barter agreements are generally still taxable at fair market value. In order to catch up with members of the new cashless society, the IRS is auditing more than 2,600 barter-ladened tax returns. Yield so far in additional taxes assessed: $700,000.

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