Guest Column
A Barter Solution
- A Barter Solution
- By Fred Rosen
- The Herald Mexico/El Universal
- May 14, 2007
Back in the days of Vicente Fox’s presidency, the term “micro-enterprise” became a shorthand reference to the administration’s chief anti-poverty program: promoting the creation of small new businesses.
U.S. President George W. Bush would have called it the creation of an “ownership society.”
But it soon became apparent that without substantial institutional support, Mexico’s small-business sector amounted simply to a risky survival mechanism for people who had nowhere else to turn.
It is thus a decidedly mixed blessing that firms employing five or fewer workers comprise one of the fastest growing sectors of the Mexican economy, accounting now for almost half the non-agricultural jobs in the country.
The sector pays wages that are less than half the already low national average.
One of the problems that has long faced the small business sector — in Mexico and, more generally, in Latin America — has been the lack of an adequate internal market to allow for its sustainable growth.
Small and medium-size domestic producers — as the global flow of investment capital becomes freer and easier — must compete with large, transnational firms that can produce at lower cost, sell on global (or at least regional) markets and have the specialized knowledge and skills needed to engage in foreign trade.
Unless local firms can overcome those barriers they are destined to a life of unequal competition that is likely to be brutal and short.
Another barrier is the lack of easy credit for small firms.
Small producers, typically with no accumulated savings, are not considered “credit-worthy” by lending institutions, and therefore must sell rapidly simply in order to stay in business.
They are therefore at the mercy of buyers — especially large buyers — who can successfully bid down their prices.
All these barriers can be confronted (if not easily overcome) by policies designed to facilitate trade within the small-business sector itself. A proposal for doing so, utilizing barter arrangements, is being floated in Latin America by a U.S.-based energy economist named Michael Tanzer.
Tanzer, who has worked for some 40 years as an energy consultant to developing nations, along with a group of his colleagues, has proposed the creation of a Barter Trade Organization (BTO) that could facilitate trade among countries, as well as trade among independent producers across borders or within a single country.
The idea is based on a proposal he initially floated during the oil-price booms of the 1970s.
Tanzer says he has revised the concept so that it “still focuses on non-cash multilateral barter trade, but now concentrates on enterprises, such as workers’ co-ops and … firms (recovered from bankruptcy), where a key problem is the lack of effective money demand for their goods and services.”
Tanzer’s group proposes that a BTO be established in a receptive Latin American country — most likely one of the Mercosur countries — to facilitate non-cash trade among enterprises within that country (or perhaps within the trade association to which that host country belongs), and later on between those enterprises and firms located in other Latin American countries.
The host country (or countries) would have to commit itself/themselves to providing a certain level of financial support to get the project off the ground.
A Barter Trade Organization, of course, can be seen as an instrument in restraint of free trade.
The free-trade oriented Calderón government is therefore unlikely to sign on to such an agreement.
Nonetheless, while Tanzer has been speaking with government officials of some of the Mercosur countries who are less than enthusiastic about free trade, the revised plan could turn out to be a useful one for large sectors of the Mexican economy as well. And there is no reason to believe that governmental support might not be available at a state or municipal level.
In a nutshell, the BTO proposal looks like this: First, “firms and individuals apply for membership. An account is opened with an initial credit balance (based on their membership fee) ... Members post goods and services for sale on the BTO web site.”
Second, “members search for buyers/sellers on the BTO site and contact them through the site … As members of the BTO, sellers have agreed to accept payment in goods and services offered by buyer or BTO currency units ...”
Finally, “to complete the barter transaction, sellers must endeavor to buy goods and services from other members with the credits from their sale. If they have difficulties finding items they want, a BTO agent will help.”
In this regard, the BTO foresees an “active technical assistance role for governments” or for regional trade groups like Mercosur.
In addition, those public agencies, at least initially, will have to subsidize a good deal of this trade.
- As growth stagnates and inequality deepens throughout the Americas, this proposal has become a modest contribution to the creation of an alternative path of development.
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- Contact Fred Rosen at: frosen144@hotmail.com
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