Barter is as old as human history. According to a story in the Wall Steet Journal, it is yet practiced as a facet of the 21st century global economy. Germany, for example, “sends coal to Brazil for coffee, and imports cattle from Denmark in return for agricultural implements. Finland sends timber to the U.K. for coal. Argentina trades grain to Spain for railway equipment.” And so on.
Farmers markets and yard sales are certainly popular in small town America. Every summer weekend in Texas features some 200 towns with farmers markets. Here in Salmon, Idaho, three summertime produce markets are a welcome respite from the tyranny of our single grocery store. The local radio station has a morning weekdays show called “Swap Shop,” where goods and services are noted, and listeners call-in with their own for-sale items, queries, and promotion of services. The common theme is the lack of a middleman, and transactions in cash or barter. This time of year firewood is a big commodity. And following a recent heavy snowstorm here, I shoveled an elderly lady’s driveway, walks, and wooden back deck. Roughly one hour’s labor: $12; and since she was pleased with my work, a bonus cup of coffee.
The Internal Revenue Service definitely has guidelines for conducting such commerce, and these are mostly ignored: “The fair market value of goods and services exchanged must be included in the income of both parties.” According to Stephen J. Dubner, writing on Freakonomics.com, the current underground economy (both licit and illicit activity) in America makes for a “tax gap” of $345 billion annually, and the IRS mostly can’t touch it. Though estimates vary, beyond our shores it seems that up to a staggering 25% of the global economy is underground, the Third World being especially adept at evading the tax man. For instance, most of Africa clocks in at around 40%.
Growing up in the New York area, I remember the newspapers and TV media occasionally ran stories about the trials of mafiosi being prosecuted and convicted of tax evasion. Wiretapping was certainly necessary to compensate for the fact that the wise guys usually lacked Social Security numbers and left no paper trail of their daily dealings. Throughout their lives everything they purchased from a cup of coffee to a car or a home, to a hit on one of their evil comrades, was paid for in cash. And they had top-flight legal talent like Roy Cohn representing them. I guess Mr. Cohn collected his fees in cash. Hollywood has always romanticized the good fellas as America’s idealized violent swashbuckling entrepreneurs, although I doubt the likes of Carlo Gambino, Vito Genovese, and Frank Costello ever bothered to read Ayn Rand.
I once knew a river dredge gold miner in Northern California named Harold Jones. At some point in his life he acquired the nickname “Cash.” He made gold jewelry (rings, earrings, etc.) in a basement workshop, and sold it as a vendor at county fairs and flea markets. Cash never took checks because he didn’t trust most people who wrote them. Credit cards were so alien to him that he just laughed when a customer happened to broach the subject. During such transactions he’d joke: “Sir, my name is Cash.” Cash passed on some years ago, but I think I know how he would have functioned financially had he lived to see the Age of Obama. “Sir, my name is Cash.” Did Cash even have a Social Security number? It’s likely that he did because he worked at regular payroll jobs during his lifetime.
But is it possible as Barack Obama’s second term proceeds apace, that many upstanding citizens (not just crooks) will start to conduct their financial lives in much the same way? Is all the doom-and-gloom we’re hearing concerning the Fiscal Cliff and the specter of Obamacare on the horizon enough to make people do that? Isn’t this how capitalism was conducted (underground) in the old Soviet Union?
Many of us remember the last decades of the Cold War, when Russians and other poor denizens of the East Bloc had to line-up at government stores for rare foodstuffs and even toilet paper, always in short supply thanks to a sclerotic state-run economy. The black market found behind the Iron Curtain at the time provided life’s necessities or luxuries for the right inflated price along with the common greased-palm political corruption. Toilet paper or champagne, bread or caviar, were available to those with the means to bypass the bureaucracy. Milton Friedman famously said : “If the federal government took over the Sahara Desert, in five years there would be a shortage of sand.”
We’re already reading in media reports that the coming of Obamacare promises a spike in “concierge” medical services, that is, patients (consumers) paying for services with cash, with an initial annual fee or retainer of $500 to $5,000, and extra fees depending on services rendered. This leaves much of the government medical bureaucracy out of the equation. The leviathan nature of Obamacare makes for fertile ground not only for bureaucratic waste and malfeasance (read: 16,000 new IRS agents), but for subterfuge both legal and illegal from the private sector as well. “Sir, my name is Cash.”
It’s going to become commonplace for people (especially small businesses) to try to beat the tax man, more so than just around April 15th every year. They will use cash, barter, and exchange of services to better oppose the official corruption of a federal government that is increasingly seen as a criminal enterprise that Messrs. Gambino, Genovese and Costello would be in awe of.
As for me shoveling driveways in Salmon, Idaho, this winter? “Ma’am, my name is Cash.”