Notes & Comment -- February 1996
Fair TradeA monetary system for our uncertain times
by Cullen Murphy
BY tradition the poet laureate of Great Britain annually receives not only a stipend of 70 pounds but also the value of a tierce (forty-two U.S. gallons) of wine, paid in cash at seventeenth-century prices, and, famously, a butt of sack (that is, 130 gallons of it). This is the sort of arrangement--by turns quaint, feudalistic, and humane--that we have for centuries been conditioned to expect from Britain. And yet there are signs that such arrangements are being eroded. It used to be that servants at Buckingham Palace received a free supply of hand soap; now, the palace has announced, the servants will instead receive an extra 15 pounds a year. It used to be that those who served at royal social functions were allowed to take home two miniature bottles of liquor on each occasion; now they will instead receive an extra 45 pounds a year. Even the poet laureate, Ted Hughes, seems to have his eye on the cash. Last year, according to a newspaper report, he made known his intention to sell his butt of sack at 4 pounds the bottle, the vintage to be marketed under the name Laureate's Choice. Wisely, I think, Hughes seems not to have followed through on this scheme.
There is something fundamentally honest and compelling about economic exchanges "in kind," in which the value of goods or services is calibrated at least in part in terms other than monetary. Such exchanges are the economic version of the judicial sentencing that consigns criminals to grimly appropriate activities (crooked slumlord must live in his own building; crooked speculator must teach high school economics) rather than to time in jail. Money can be delusory. It is a commonplace that the value of one currency relative to another can cause a country's exports or imports to surge, even though nothing about the exported or imported products themselves has actually changed. In contrast, transactions in which the ancient idea of barter plays a role put more of a premium on true equivalence. And there are many indications that, despite what may be happening to feudal vestiges in Britain, the world economic system is finding barter to be congenial in more and more instances--for governments, for corporations, and for individuals. By one estimate, some 20 percent of the world's economic transactions are now in the form of barter deals, up from only about five percent thirty years ago. In the American domestic economy the value of barter deals is growing by about 15 percent a year.
One of the biggest barter transactions in history took place in 1990 between PepsiCo and Russia: a $3 billion exchange of cola syrup for Stolichnaya vodka. To assist hurricane victims in Florida and Hawaii, a broker several years ago arranged for the exchange of 500 Fujitsu laser printers for 1.7 million "meals ready-to-eat" left over from the Gulf War. The government of Peru is settling some of its debt to overseas creditors with iron pellets, fish meal, copper wire, and alpaca cloth. The slow thaw in relations between North and South Korea has been helped along by a barter arrangement involving flour and zinc. There now seems to be a potential barter aspect to almost everything. A 1991 survey by an organ-donation network sampled opinion on whether organ providers or their families might barter body parts for funeral services, or whether people who agreed to become organ donors might be given preferential placement on waiting lists in the event that they themselves needed a replacement. In Israel last year the country's gravediggers sought a labor agreement stipulating that workers receive two grave sites for every five years of service.
It is when institutional fact seems to be coming unraveled that brute fact reasserts its importance. Imagine a world in which new countries with laughable currencies materialize almost monthly; in which ruinous inflation here and there radically warps individual and mass behavior; in which companies and citizens alike accrue benefit from economic activity that occurs in the shadows--imagine such a world and it is not hard to understand the resurgence of barter.
In between barter and what we now think of as money there used to be a step in which bits of paper were actually promissory notes ("Pay the bearer . . .") that could in theory be redeemed for some valuable commodity, such as gold or silver. These notes fell into the category known as contract money. The United States abandoned contract money when it went completely off the gold standard, in 1971, and I recall a slight sensation at the time of having slipped a mooring. Indeed, I still miss the assurance that our currency is supported by something other than the full faith and credit of the United States of America.
One wonders: Would it not be a confidence-building gesture in this uncertain age if major world currencies were once again pegged to commodities of relatively stable worth, thereby re-endowing money with some of barter's simple ballast? For the United States an obvious opportunity presents itself early this year, when the most significant overhaul of U.S. currency in six decades is scheduled to begin. The overhaul, prompted by the need for new designs that can foil counterfeiters, is to begin with the $100 bill, followed at half-yearly to yearly intervals by the other bills in descending order of value.
I would propose that, coincident with the new design, the U.S. Treasury peg the new $100 bill to the value of a commodity whose worth in the national affection gives promise of constancy--for instance, a pair of Nike Air Jordan athletic shoes. Henceforward, no matter what happened to the value of America's money, that $100 bill--a "Jordan" or "J-note," as we'd no doubt eventually come to call it--would always be good for a pair of Nikes. Walk into a store with a J-note in A.D. 2005 or 2025 and you'll walk out with the shoes. On the redesigned bank note itself, to drive the point home, athletic shoes would replace the traditional arrows and olive branch in the American eagle's claws.
Along similar principles, the new $50 bill, which will probably be introduced later this year, could be pegged forever to the value of four seats in a major-league ballpark (and an engraving of Doubleday Field, in Cooperstown, could grace the reverse side). The $20 bill could be redeemed for a tankful of gas for an American-made compact car. The $10 bill would be exchangeable for Big Macs and small drinks for a family of four. The $5.00 bill would always be good for a paperback edition of any nineteenth-century novel. The $1.00 bill would allow you to talk to your mother on the phone from anywhere in the world for one minute. If that is impracticable, then it should at least always get you a decent cup of coffee. Although there are no immediate plans to redesign the $500, $1,000, $5,000, $10,000, and $100,000 bills, I am certain that imaginative equivalences can be found for them as well. I would be grateful, for instance, if the value of the last of these denominations could be locked in as the equivalent of the cost of four years of education at a private college or university. The image of Woodrow Wilson on the $100,000 bill might be replaced by that of John Harvard or Lord Jeffrey Amherst.
No monetary system is perfect, and this one will reveal flaws as time goes on. Inflation will still be possible, though it will take a more visible and immediately annoying form (for instance, the form of shrinking Big Macs, gas tanks, and semesters) than it often does at present. But in a world where money's value can change by the nanosecond and its physical reality can be no more substantial than an electronic impulse, some compensating loss of abstraction would surely be welcome. And for $6.00, a cup of coffee and Treasure Island will always be a good deal.
Illustration by Tina Vey