The Atlantic has a fascinating piece on the myth of the barter economy entitled (of course) “The Myth of the Barter Economy” (Feb 26, 2016, Article here.). Its premise is based on the assumption that pre-modern societies organized their economic systems on an arbitrary formula of 16 chickens to 20 potatoes is in fact more historical myth than historical fact and that this as with so many other historical economic myths can be traced back to Adam Smith’s Wealth of Nations.

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Everything is fine until the inevitable inflation.

 

The persistence of this idea Ilana Strauss argues comes from a general misunderstanding of the long term use of money as the lubricant of economic exchange. After all, as she points out, many ancient societies used different kinds of currency. I think Strauss is on to something here. Most people I know (and yes, this research is anecdotal) honestly believe that past societies, whether North American or European used a barter system whereby neighbours would exchange a certain amount of goods for something in return.

The reasons for the longevity of this myth are not hard to explain. Smith’s Wealth of Nations pretty much serves as the foundational text for modern economic theory. It is almost impossible to underestimate the extent to which Wealth of Nations informs our understanding of economic theory and that Smith’s impact has not been equaled by anyone and I include Marx in that statement. But that is a different debate for a different blog post. Furthermore, it is hard to dispel such a myth when image of a barter system is so ingrained in the collective imagination. To this day, I still remember seeing pictures and hearing the stories of how Europeans traded their baubles for native goods and who doesn’t remember that Manhattan was worth the price of a song? I would argue however that this is evidence more of European mendacity than the basis of a First Nations’ economic system.

imagesSmith as a product of the Enlightenment sought to describe the rational rules that governed the economy in order to understand and control it. As such, he maintained, along with a great number of his Enlightenment contemporaries, a distaste for the medieval period where Smith saw incontrovertible proof of the presence of a barter economy. Yes, the Romans had a currency, but they were an anomaly and with the fall of Rome this was last and Europe sank into an economic swamp until Europe rediscovered large supplies of gold through Arab African traders in the 15th century and Peruvian and Argentinian silver in the 16th century.

 

Strauss’ deconstruction of Smith’s argument notes correctly that the barter economy did not exist, but what did was an economy based on gift giving. This is one of the more interesting aspects to her piece. Given the length of the article, Strauss dies elaborate in great detail, but it is an idea that is vital to grasp what was happening in pre-modern societies.

When I used to teach, I taught a course in medieval culture/history and of course one of the texts students were required to read was Beowulf_Cotton_MS_Vitellius_A_XV_f._132r.jpgBeowulf. It has been become a cliché of Medieval Studies departments to assign the Germanic epic, but for good reason of course. Who doesn’t love Beowulf? Beowulf is more than just its narrative; it represents a depository of a Germanic cultural memory. When the Anglo-Saxon monks transcribed the 6th century into a 10th century text, they preserved, as in amber, not only a long-standing narrative, but also a historical and cultural memory of a post-Roman world. One of the aspects of this Germanic world was the existence of gift-giving.

Granted Beowulf is not Picketty, but the few mentions of wealth indicate a much more sophisticated economic model than the 16 chickens = 20 potatoes calculation. Gift giving was based on currency, sometimes that currency took the form of the non-tangible, such as prestige and family connections. Sometimes it was based on the exchange of actual physical currency. The act of gift giving was a social act that served to reward a person or group for the successful completion of a task, or to bind a follower to his (and almost invariably a he) to his lord. It could serve as a means of cementing an alliance between peoples to end or prevent further violence between the groups as seen in reason for Beowulf’s offer of help to Hrothgar who has offered hospitality to Beowulf’s father years earlier after he had committed murder.

And while Beowulf is not interested in the lives of the common folk, there is little evidence to suggest that a gift giving economy did not exist among them as well, albeit on a smaller scale. In the European context, Rome’s decline may have reduced the supply of coinage, but it not entirely disappear. The hoards of coins found throughout Europe, dating

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“All this can be yours for the price of an island, but wait there is more. If you act on this once of a lifetime opportunity in the next day, we will throw in a ginsu knife and smallpox for no extra charge.”

past the Roman period indicate that whatever the reason for hiding the money, the fact is people were using liquid capital throughout the medieval period.

 

This is a fascinating idea to me for another reason; the rise of the sharing economy. There have been many others who have written about this in greater depth, but what I find interesting is how people argue the sharing economy is a return to a kind of barter system. I don’t believe this is the case, nor is the sharing economy a return to a gift giving system either since once the transaction (whether a car ride or apartment rental – full disclosure, I’ve used AirBnB and loved it) requires no social capital. Once the transaction is over, there are no more obligations, economic or otherwise.

As a means of exchange, it does seem to represent a further evolution of a post capitalist society. But the sharing economy is a not a barter economy as it is still based on the exchange of money (whether in specie or digitally). It will be interesting to see how the sharing economy develops in the next few years and although history does not offer much hope that we will get it right for the millions who will be disrupted by these advances, one thing is certain, what comes next will not be a barter economy – we can’t return to something that never existed in the first place.

Jason Sa1412398_10154859963010455_7885151444313832678_oger is a historian of French history with an interest in current affairs. You can reach him at facebook.com/jasonbsager or on twitter: @drjasonsager.

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