Many small barter systems fail simply because of the difficulty of achieving critical mass in terms of both member numbers and marketplace offerings.
Below are some steps which a barter exchange can take to overcome these problematic issues:
Starting Out
During the initial launch of any exchange it is difficult to overcome the reluctance of participants to put their products and services “at risk” in return for an unknown commodity.
Unlike cash, cheques and credit cards, whose acceptance has reached the level of the sub-conscious, the use of barter exchanges requires a directed effort. In order to “kick-start” both the marketplace and the desire for participants to list and purchase, the new barter exchange must present a “wedge”.
There is the often cited example of Deli Dollars in Great Barrington, Massachusetts. When restaurant owner Frank Tortoriello's lease expired, he was refused a loan by the local bank which would have allowed him to move to a new location. Tortoriello decided to print his own notes, Deli Dollars, which could initially be purchased for $9US and would be redeemable for $10US worth of food in six months time. During those six months, Tortoriello moved his store with the nearly $5,000US he raised, and, more interestingly, the notes took on a value of their own. Trading in Deli Dollars was happening all over town. By assuming a large future commitment to return goods (sandwiches, in this instance) to the community, Tortoriello created the wedge which spurred trading activity.
The Three-Pronged Wedge
Creating a wedge has involved significant planning, creativity and development, not to mention careful timing and involves the following activities:
1. Co-operative involvement
2. Services & commodities in return for stock/shares
3. Rewarding referrals
The largest, most successful barter exchange in the world is undoubtedly the Swiss Wir, which was established to act as a solidarity-oriented self-help organization where members were expected to draw as much as possible on other members to cover their goods-and-services needs which, in turn, triggered additional turn-over.
The Swiss WIR system (Wirtschaftsring-Genossenschaft = Economic Circle Cooperative) was founded in 1934 by Werner Zimmermann and Paul Enz, both adherents of the "free-money" theory of Silvio Gesell. Small and medium-sized businesses were especially hard hit at that time by the depression following the stock market crash of 1929. Sales had receded massively, and many employees had lost their jobs.
The new self-help organization was intended to provide a remedy. It started with 16 members and an initial capital of CHF 42,000.
The WIR-founders were not alone at the time. All around the globe similar organizations were springing up. Whole towns and associations of people of the most diverse types were seeking effective remedies to the crippling mood of the great depression, using tools like non-cash barter circles and self-created money. These groups followed the same general approach:
In Scandinavia many self-help organizations with their complementary currencies were able to survive up to the time of the Second World War. But then they were all dissolved, sometimes owing to internal problems and sometimes to the wartime turmoil. The WIR Cooperative in Switzerland also experienced difficulties. But after the war it made a new start, and in the post-war boom period its membership rolls grew rapidly. This demonstrates that the basic complementary currency idea is advantageous not only in times of economic crisis. The demurrage feature that burdened accounts with a storage fee was done away with. Such a strong stimulus for spending money rapidly would have been inappropriate to the fast-moving business climate of those years. But the interest-free feature was maintained, and has remained constant to this day.
The WIR Cooperative now numbers over 70,000 members, who amongst themselves create transactions worth approximately CHF 2.6 billion annually, or approximately $2.65 billion Australian Dollars. Considering that payments on average are made only from 30-40% in WIR and the remainder in Swiss francs, the total value of goods and services traded in the Cooperative more than doubles that amount.
The success of the WIR can be attributed to the following facts:
Every member must amortize his/her debt by selling goods/services for WIR within a specific time-frame
The first portion of the selling price of goods/services must be in a minimum percentage of WIR francs
The service is run as a co-operative and is member owned – thereby providing a greater stimulus for trade acceptance and new membership generation
The organization, unlike retail barter exchanges, operates in the same way as a bank and publishes its annual accounts, issues credit according to standard banking practices and does not operate an interest causing trade deficit account
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