Barter & Trade In Developing Markets

It’s always been amazing to me that a slum in Central America looks exactly the same as a slum in Uganda which looks exactly the same as a slum in India. The omnipresence of corrugated tin is staggering. But the residents of the slum don’t notice that. They’re a part of it. You’ve got to step outside of it to fully understand it.

In the same way, it’s hard for us to understand life without currency, because we’ve never been without it. Any first-world citizen has never had to barter his produce on a  weekly basis for other needs; we have currency to serve as a go-between.

But in reality, the financial system we take for granted doesn’t mean anything for most of the planet. The figure of “extreme poverty”, described by the Western world as living under $2 a day, isn’t entirely accurate. It doesn’t take into account the agrarian lifestyle that the majority of poor across the world live: a lifestyle of farming, goats, chickens, eggs, rice, barter, and trade. Cash doesn’t exchange hands for all of these items necessary for survival: the cash often just isn’t there.

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Because of that, I’ve become interested in the application of barter to developing economies. As anyone who has walked through a third-world market can tell you, the art of the haggle is alive and well in the majority of the world.

Items are still being exchanged. Things are sold, things are bought. Yet it doesn’t necessarily involve the use of traditional money.

I often read the economics writer Charles Hugh Smith, and he has some interesting thoughts on currency. “Those who believe states can never lose control of their currency should consider what happens in hyper-inflation. When states debauch their currencies and push them over the cliff, people abandon the currency in favor of money that holds its value and acts as a means of exchange […] When official money loses its purchasing power, even phone-card minutes can act as money.”

And that’s what I’ve often seen in Africa, specifically subsaharan East African countries like Uganda or Kenya. Users will barter cellphone minutes (an item that fulfills many of the traditional features of money like tangibility, divisibility, fungibility, and portability) for food or fuel or other necessities.

Nearly every Ugandan, even the poorest of the poor, has one or two cellphones. I vividly remember visiting a remote village on a shoot for the Kibo Group. It took the Ugandan driver about five hours in a Land Rover to get there; we got out and walked around the little village. I felt as disconnected from the outside world as I could possibly feel. And then, I walked past a guy sitting on the threshold of his mud hut listening to Call Me Maybe playing on his cellphone.

With the proliferation of technology affecting literally every person on earth, I think it’s only a few years before we will see barter and trade transition from physical items (rice for eggs, or a goat for a bicycle) to something that might even be trans-fiat currency (some form of decentralized value trade).