University of California College of Agriculture Agricultural Extension Service Berkeley, California ORGANIZATION AND OPERATION OF BARTER ASSOCIATIONS IN CALIFORNIA E, W. Braun June, 1933 Contribution from the Giannini Foundation of Agricultural Economics Mimeographed Report No. 26 • ♦ -1- Ta"ble of Contents Page I. Introduction 2 II. Questions relating to the organization and operation of barter associa- tions in California 2 1« What is a barter association? 2 2. When or under what conditions should a barter association be organized? 2 3. Have barter associations proven themselves to be a disadvantage to local merchants? 3 4. Should the association incorporate?.. 3 5. Should the members join under a membership agreement? 4 6. Is it necessary for laborers working through the barter association to be covered by state workmen's compensation? 4 7. What are the steps in organizing a barter association? 6 8. How large a membership should a barter association have? 6 9. Should the members leave the entire running of the association to a manager or management? 6 10. What special offices or positions are necessary in a barter association? 7 11. How often should the management meet? 7 12. How often should the membership meet? , 7 13. How can the original purpose of the association be maintained by the membership? , 7 14. What are the points to consider in choosing a location for the trading post? 7 15. How can an accumulation at the trading post of worthless articles in the nature of "junk" be avoided? 8 16. Should the association endeavor to operate without the use of money?.... 8 17. Is trading facilitated by the use of scrip? 8 18. Can scrip be given in payment of labor in California? 8 19. If neither money nor scrip is used, what are the methods commonly used of evaluating commodities and labor offered for exchange? 9 20. Are trucks which are used exclusively by non-profit barter associations subject to commercial trucking registration fees by the State Department of Motor Vehicles? , 9 III. Summary and Conclusion , 9 rv. References (Selected) 10 Digitized by tine Internet Arcliive in 2014 littps://arcliive.org/details/organizationoper26brau -2- ORGANIZATION AMD OPERATION OF B.ARTER ASSOCIATIONS IN CALIFORNIA E. W. Braun Barter as such is very old. Historical accounts of the early development of our country make frequent reference to the use of prime "beaver skins as a standard of value. Barter today springing up in the midst of, and functioning within, a high- ly developed and highly specialized society is a new thing. No fixed forms of or- ganization or methods of doing business have been established. Hence anything that is said regarding them must be largely suggestive in nature. Since the beginning of the present depression, barter associations have been established in practically every part of the country. These organizations represent groups of individuals associating themselves for the purpose of gaining mutual bene- fit through the direct exchange of goods and services. Most of the barter associa- tions that have been established are located in industrial centers and represent self-help efforts on the part of the unemployed. The members offer their services in return for commodities instead of money. These commodities are generally brought together at a central point and then distributed according to some criterion of need. Through some direction of their efforts it is possible for the associated members to supply themselves with much food, clothing, shelter, and furnishings. In connection with their food problems urban barter associations are anxious to establish better contacts than they now have with agricultural districts. Rural communities are not confronted with unemplo3niient to the extent that in- dustrial and commercial centers are but they are confronted with the fact that at the present time the commercial sale of their produce in many instances does not bring a return sufficient to make it possible for them to purchase certain living necessities and operating equipment, to say nothing of professional services. Be- cause of these conditions, many rural communities are looking toward the possibil- ities of relieving this distress through the means of barter. The following ques- tions and answers regarding barter exchange associations have been prepared with a view of being helpful in this connection. 1. WHAT IS A BARTER ASSOCIATION? "Barter" means the direct exchange of goods or services for goods or services without the use of money. The phrase "barter association" means a group of indi- viduals organized for the purpose of trading either goods or services or both. These organizations are frequently called "barter exchanges". The phrase "barter association post", more often termed "trading post" or "barter post", refers to the meeting or trading place of the barter association, 2. WHEN OR UIxTDER WEi\T CONDITIONS SHOULD A BARTER ASSOCIATION BE ORGANIZED? When certain essentials of life and certain equipment items essential to the productive operations and living needs of a number of individuals in a community can Extension Specialist in Agricultural Economics and Associate on the Giannini Foundation of Agricultural Economics. The writer is indebted to Dr. B, E. Mallary of the Division of Vocational Education for his council and to Carl Rhodehamel of the Unemployed Exchange Association for his cooperation in the preparation of this paper. -3- not be made available through the regular channels of sale and purchase, direct bar- ter tends to be resorted to. In many instances it involves also the exchange of labor and professional services for commodities. No definite statement can be made as to when a barter association should be organized in a given community. That must be determined by the collective opinion of the people of the community. It will de- pend largely upon the type of articles needed, the articles available for trade, and the number of people interested in doing trading in this manner. It should be looked upon as an emergency measure rather than a permanent thing. Before a rural community resorts to barter to the extent of establishing a barter association, there should be definite evidence that more benefit might arise from so doing than through the use of the regular channels of commercial trade. 3. HAVE BARTER ASSOCIATIONS PROVEN THEMSELVES TO BE A DISADVANTAGE TO LOCAL MERCHANTS? Barter associations, on the v/hole, have not proven a disadvantage to local merchants because by their very nature they have onl^*" supplemented cash expenditures. All available cash tends to be used in local purchasing in much the same manner as would be true if the barter association did not exist. Individual specialized mer- chants might, in some cases, be affected by barter posts. For example, in a given case, extensive food supplies might be exchanged for wood or fuel from another dis- trict in which case local fuel dealers might be affected. The evidence, hov/ever, is not too clear because it is not at all certain that the people obtaining fuel through barter could have purchased it from local dealers if the barter trade had not taken place. It is, however, entirely likely that the local merchants as a whole would benefit under such conditions through improved morale on the part of the people in distress. Less charity work would be required. Members of barter associations learn to appreciate the functions of a local merchant. Likewise local merchants inclined to condemn the barter groups should make an effort to learn what they are attempting to accomplish before passing judgment. 4. SHOULD THE ASSOCIATION INCORPORATE? The answer to this question hinges around the matter of liability. The liabil- ity of members of an unincorporated association, like that of a partnership, is un- limited, California Code of Civil Procedure section 388 provides as follov\rs: "When two or more persons associated in any business transact such business under a common name, whether it comprises the names of such persons or not, the associates may be sued by such common name, the summons in such cases being served on one or more of the associates, and the judgment in, the action shall bind the joint property of the ■ party or parties served with process, in the same manner as if all had been named defendants and had been sued upon their joint liability. " This brings up the ques- tion as to what is "business". Section 9 of California Jurisprudence Vol, III, page 356 states: "The decisions are by no means in harmony or determinative as to the meaning to be attached to the word 'business' in this connection, , the later and perhaps more favored rule is that the term 'business' as used in the statute has a common and general application to all sorts of enterprises which engage people's attention and energies; that it refers to an association of two or more persons who join themselves together for the purpose of transacting as a single body any kind of business, whether for profit to themselves or for charitable or philanthropic pur- poses; that where persons so associated, to effectuate the specific objects of their associations and for the benefit thereof, create liabilities against themselves as such associates, they may be proceeded against by their common name in any action to enforce the liabilities so created, " T 1 -4- Incorporation limits liability to the assets of the association as a corpora- tion. Sections 593aa to 606yy inclusive of the California Civil Code provide for non-profit corporations. Section 409 of the California Political Code indicates that the fee for filing the articles of incorporation for a non-profit corporation with the Secretary of State is five dollars. The Unemployed Cooperative Relief Association and the Los Angeles Cooperative Exchange, large organizations in Los Angeles, are not incorporated.v^/ The Unemployed Exchange Association, Oakland, is also not incorporated. The Natural Development Association, Salt Lake City, is incorporated ."4/ 5. SHOULD THE MEMBERS JOIN UNDER A MEMBERSHIP AGREEMENT? In all formal organizations it is well to have membership agreements. Member- ship agreements help keep the purposes and aims of the organization well defined and serve to define member responsibility in the organization. Also, the agreement needs to be terminated when a member wishes to withdraw from the association. In the case of a barter association, membership, with membership agreements, keeps a steering com- mittee or management constantly informed as to the identity of the members. Knowing who the members are, learning their needs, and knowing what they have to offer, great- ly facilitates making arrangements for trades. Signing membership agreements makes each individual of the group aware of the fact that he is a part of the organization and has an interest in its destiny. 6, IS IT NECESSARY FOR L^^ORERS WORKING THROUGH THE BARTER ASSOCIATION TO BE COVERED BY STATE WORKI^EN'S COMPENSATION? This phase of the problem comes under the jurisdiction of the Industrial Accident Commission of the State Department of Industrial Relations. V/here the barter association is strictly charitable in character, for the purpose of allevi- ating distress and involving no regular working hours with no accompanying regular salary, the Industrial Accident Commission is of the opinion that no employer and employee relationship exists and hence does not come under the Workmen's Compensa- tion, Insurance, and Safety Laws, The following account of a specific case is given by an attorney of the Industrial Accident Commission:"^/ "In Van D eVenter vs. Ind ustrial Acc. Com ., First Civil No. 8439, a man by the name of Van DeVenter applied to the Associated Charities for relief. He was given groceries, milk, and a small sum of money to purchase meat, and in return was required to work one v/eek out of three for the Associated Charities in its assembly room preparing baskets of food for delivery. While doing this work he was injured. He filed a claim for compensation with the Industrial Accident Com- mission as an employee of the Associated Charities. The Commission held that he was not an employee of the Associated Charities within the meaning of the Workmen's Com- pensation Act; that he was really not an employee but the recipient of relief. The ,3/ United States Department of Labor, Bur. of Labor Statistics, Monthly Labor Review 36:4; 717, April, 1933. ^ Ibid, No. 4, p. 451, March, 1933. State Department of Industrial Relations, Industrial Accident Commission, State Building, San Francisco. Mimeographed letter. a -5- case was taken to the First District Court of Appeal and the ruling of the Commis- sion was affirmed by said Court," The Industrial Accident Commission states further: "There are, also, certain provisions of the ?/orkmon's Compensation Act which should be clearly understood by all persons making work available to such unemployed workmen. "There are several provisions of the Workmen's Compensation Act excluding certain types of employers from liability under the Workmen's Compensation Act. Persons who employ what are known as casual employees are not subject to the pro- visions of the Workmen's Compensation Act. The term 'casual' means an eraplojrment where the work contemplated is to be completed in not exceeding ten working days, without regard to the number of men employed, and where the total labor cost of such work is less than $100, and where the work being done is not in the course of the trade, business, profession or occupation of the employer. "Employers of farm, dairy, agricultural, viticultural, or horticultural labor, or employers engaged in stock or poultry raising, are not subject to the provisions of the Act, provided their annual labor payroll is less than $500. If the annual payroll of such employers exceeds |500, such employers are presumed to have elected to come under the Workmen's Compensation Act unless they have elected not to be subject to the Act by filing Notices of Rejection with the Industrial Accident Com- mission. "Now, with reference to the question of the status of persons who have or- ganized themselves into Unemployment Associations, or obtain work through Unemploy- ment Relief Councils, Committees, etc., and offer their services in exchange either for food, shelter, clothing or cash: "The Industrial Accident Commission is inclined to the view that the last mentioned methods of relieving unemployment, such activities all being part of the . general attempt to alleviate distressed conditions, falls into the same class as work which is done through charitable organizations as outlined above. This precise ques- tion, however, has never as yet been presented to the Industrial Accident Commission in an actual case. This office is nevertheless disposed to believe that the Commis- sion will look at such situations along the lines indicated and hold that such work- men are not employees within the meaning of the Workmen's Compensation Act. "I might say, however, that the Industrial Accident Commission would never- theless very much like to see such organizations make arrangements, insofar as possi- ble, to insure medical treatment to such workmen in the event that they are injured. This might be done by contacting the various county hospitals and making arrangements with them that, in the event of injury, such injured workmen will receive efficient medical treatment. There should be no difficulty, as we see it, in making such ar- rangements, as the county hospitals in a.ny event are at all times available to per- sons who have not the financial means to obtain proper medical care. However, we feel that it would be an extremely wise action for barter organizations and all re- lief associations, committees, etc., to make such arrangements, advising their respec- tive members or persons obtaining work through them, that such arrangements have been made, and that injuries, if they occur, will be taken care of in this manner. Need- less to say, in the event of injury, relief in the form of food and shelter would con- tinue to be extended to the injured man and his immediate dependents during the period of his disability, "There have been instances where cities or counties have hired unemployed men -6- to do necessary city or county work. In some instances work, the doing of which has teen under contemplation for some time, was made available in order to take care of the immediate situation. The Commission under such circumstances held these men to be employees of the city and county. You will note that in this latter type of case the men were paid much more than the actual amount of food and clothing and that the } work being done rather than being 'made work' was necessary. At times, the question of whether an employment situation exists in a particular case is close. The Com- mission is determining each of the cases in accordance with the peculiar facts which exist in each case, attempting however, wherever possible, to render decisions which ^ will encourage unemployment relief rather than the contrary, as stated above. " 7. WHAT ARE THE STEPS IN ORGANIZING A BARTER ASSOCIATION? When the need and interest in a barter association is sufficiently high to I warrant establishing a post, a general meeting should be arranged. Prior to the meeting a small group of individuals should make a preliminary survey of the vital needs in the community that cannot be supplied without resort to barter, the nature of supplies available for barter and approximate amounts. Also, an opinion should be * formed as to whether or not trading with posts in other communities is likely and the nature of the trades involved. For example, a trading post in a potato district might well wish to consider the possibility of trading potatoes for oranges held by a trad- ing post in an orange district. Making a survey and arranging for a meeting should be the first steps. Secondly, the facts of the survey should be presented at the meeting. Friendly, serious, courteous discussion is preferable to formal parliamentary procedure. If it is decided that an association and a trading post should be established, the third step is the setting up of some type of democratic management, preferably in the form of a steering committee. The fourth step is to choose the location of the trading post, A fifth step might be the formulation of a membership agreement. Other steps such as determining the frequency of membership meetings, frequency of trading days, would follow naturally, 8. HOW LARGE A MEMBERSHIP SHOULD A BARTER ASSOCIATION HAVE? At the time the association starts it is preferable for the membership to be small enough so that each person knows everyone else, or at least small enough so i that the management knows each member. An exact answer to this question can, of course, not be given. Experience appears to indicate that starting in a small way with people you know is advisable. Once a unit is organized, expansion can be ^ readily provided, 9. SHOULD MEMBERS LEAVE THE ENTIRE RUNNING OF THE ASSOCIATION TO A MAInTAGER OR MANAGEMENT 7 Available information indicates that to leave the running of a barter associa- tion entirely to a manager is a mistake. The continued interest and cooperation of the membership is vital to the successful operation of a barter association. The membership should have the interest and opportunity to be at all times informed of I the problems confronting the group as a whole and be ready to meet these problems collectively. It is vital to have all members contribute toward the solution of com- mon problems. This admittedly often proves to be a slow method but observation of operating units indicates that it is a sound method. -7- 10. WHAT SPECIAL OFFICES OR POSITIONS ARE NECESSARY IN A BARTER ASSOCIATION? It would appear that a management in the nature of a steering committee would be the best form of management for most barter associations in rural sections. Each barter group should have one or more traders and one or more contact men. The trader should be trustworthy, be a natural trader but not a sharp, hard bargain driver. In small groups the trader and contact man might conceivably be the same person. As the name implies, it should be the function of a trader to assist in- dividuals in coming to agreement on separate trades and to facilitate round-about trades involving more than two articles and more than two people. For example, - A may have potatoes he wishes to trade for oranges; B may have oranges but wishes beans; C may have beans but wants potatoes and not oranges. The trader, through the contact man and other ways, would be aware of this situation and help in bring- ing about a satisfactory three-way trade. There are many ways in which a good trader can help bring about satisfactory trades. The contact man should also be trustworthy. His appearance should be neat. The function of the contact man would be in the nature of an agent. It would be up to the contact man to learn about special needs and supplies of the members. It would also be his duty to contact other trading posts in other regions. That is, if his post did not have beans and was particularly anxious to have beans, and was will- ing to trade potatoes for beans, it would be the contact man's duty to contact by mail or in person, trading posts that would have a surplus of beans and determine whether they would consider trading them for potatoes. The actual trade, however, would be handled by the trader, 11. HOW OFTEN SHOULD THE MANAGEMENT MEET? The management should meet often enough so that they may all be fully informed on rapidly changing problems. This is an important point and requires careful con- sideration. Planning and operating committees in successful unemployed associations in some cases meet daily and in many cases, five times a week. The management of each association needs to work out by itself the matter of meetings. Meeting more often than necessary is less serious than not meeting often enough, 12. HOW OFTEN SHOULD THE MEMBERSHIP MEET? The membership should meet once a week so that the members cannot avoid taking an active part in the welfare of the organization, V/hen the continued active interest of the membership falls off, it is evidence that there is something vitally wrong in the trading post, or evidence that there is no longer need for it. Only the practical f problems at hand should be discussed at the membership meetings. This will help keep the interest of the individuals in the group and help avoid undesirable leadership. 13. HOW CAN THE ORIGINAL PURPOSE OF THE ASSOCIATION BE MAINTAINED BY THE MERffiERSHIP? The original purpose of the membership can be maintained through the member- ship agreement objectives as a goal to strive for, by frequent membership meetings, and by alertness on the part of the management or steering committee. The original ^ purpose of the association may become jeopardized if certain persons or groups of persons try to use the organization for obtaining private gain, 14. WHAT ARE THE POINTS TO CONSIDER IN CHOOSING A LOCATION FOR THE TRADING POST? The trading post itself or commissary should be located as near as possible < f -11 t -8- to a meeting place that is central or convenient for the membership. Locations at or near natural meeting places should be selected, 15. HOW CAN AN ACCUMULATION AT THE TRADING POST OF WORTHLESS ARTICLES IN THE NATURE OF "JUNK" BE AVOIDED? The following measures may be used to prevent an accumulation of junk at the trading post. First, a declaration of policy at membership meetings. Second, it can be discouraged by the trader and contact man. Third, an accumulation of articles can be disposed of by selling them at auction or as junk. In the event that junk does accumulate it should at least be arranged in an orderly fashion, 16. SHOULD THE ASSOCIATION ENDEAVOR TO OPERATE WITHOUT THE USB OF MONEY? Any barter association operating entirely without money is seriously handi- capped. But since such posts are in the nature of emergency institutions, they should be operated with as little money as possible. Such items as postage, gaso- line, telephone, and electricity are generally not available without cash, 17. IS TRADING FACILITATED BY THE USE OF SCRIP? Many organizations are using scrip. It is not, however, without its diffi- culties. It is always necessary to set up the proper measures and facilities for issuing it and for redeeming it. Except in a large organization, the advantages of scrip tend to be offset by the disadvantages that accompany the proper administration of it. 18. CAN SCRIP BE GIVEN IN PAYMENT OF LABOR IN CALIFORNIA? The payment of wages in the common meaning of the term by the use of scrip is illegal in California under the state pay check law. However, an opinion ^/ rendered February 23, 1933, by Attorney General Webb indicates that under certain conditions barter associations functioning for the purpose of relieving want and distress might use scrip in the payment of labor. The opinion of Attorney General Webb in this matter is as follows: "The statute (state pay check law) does not prohibit a contract of barter though one of the parties to the contract barters his services for personal property. The statute does, however, in terms declare that wages due, or to become due, cannot be paid in scrip unless such scrip is negotiable or redeemable in money. But I am inclined to view that this refers to regular and usual employments, and not to employraents given for the purpose of relieving the necessities of the person employed. I think it (the pay check law) should not be held to cover an employment in the course of a systematic effort to relieve want and distress of persons so employed and those dependent upon them. "In this connection, however, at the time the services are engaged, the compensation agreed upon to be paid and the manner of its payment should be fully explained to the persons employed, "The method (use of scrip) should be used at all times in the utmost of good faith to relieve local necessities, to contribute to the support of the unemployed state of California, Legal Department, Opinion of Attorney General re Barter System under State Pay Check Law, San Francisco, February 23, 1933, mimeographed. I. ( y * ■ -9- and the dependent. The use of this method for payment in whole or in part of regular employees by employers having need of such continued services would be violative of the terms of the statute." (Section I of pay check law.) 19. IF NEITHER MONEY NOR SCRIP IS USED, WHAT ARE THE METHODS COMONLY USED OF EVALUATING COMMODITIES AND LABOR OFFERED FOR EXCHANGE? Two methods appear to be common in evaluating commodities and labor offered for exchange;- money prices and what may be termed a point system. Both are re- corded by a book entry method similar to that employed in connection with savings bank accounts using credit and withdrawal entries. Services or goods offered are entered as credits and services and goods received are considered as withdrawals. The basis of entry may be the open market price even though no money is used. A second method of evaluation that is commonly used is a point system. Under this method, entries for labor are based upon a designated number of points per hour. Commodities are evaluated insofar as possible in terms of labor. For example, a cord of wood may be evaluated as being equivalent in points to a day of labor. Thus, if one hour is rated at 100 points, a regular 8 hour day would be equivalent to 800 points. If a standard cord of wood was considered as equivalent to a day's labor, then a standard cord of wood would be evaluated at 800 points, A correction factor needs to be added for transportation and other overhead. In the event a member brings an article to the trading post, it can be appraised in points by the trader and a credit entry made in the passbook. When a member receives goods or services through the association a debit is entered in the member's book. Records need to be kept in the central office corresponding to all of the credits and withdrawals made in the passbooks. Periodic balances need to be drawn just as if money was involved. Losses occurring because of waste or in other ways should be pooled and prorated to all of the members from time to time, 20. ARE TRUCKS WHICH ARE USED EXCLUSIVELY BY NON-PROFIT BARTER ASSOCIATIONS SUBJECT TO COMMERCIAL TRUCKING REGISTRATION FEES BY THE STATE DEPARTMENT OF MOTOR VEHICLES? Through the recent passage and approval of Senate bill No. 839, the State Department of Motor Vehicles was empowered to issue permits free of charge for the operation of trucks used exclusively by self-help barter associations. Any coopera- tive association operating without profit, dues, or the payment of salaries, in the distribution, by means of barter, of goods, wares, and merchandise, is eligible to receive such a permit. The number that may be issued under this bill is limited to 600, SUMMARY AND CONCLUSION Barter as a method of transacting business should be considered as an emer- gency measure. Members of a barter association should not, at the beginning, entertain exaggerated ideas as to what can be accomplished by barter. As an organ- ization a barter association must be very democratic. Dr. B. E. Mallary of the Division of Vocational Education, University of California, who has personally ob- served many self-help barter associations in the San Francisco Bay area, offers the following principles for use in establishing and conducting barter exchange asso- ciations: -10- 1, start in a small way, 2, As a nucleus, begin with people you know, 3, Organize within a small district which can be expanded as the unit grows, 4, Select a manager who will carry out the will of the membership; who always realizes he is working for the good of all and not his own ambition, 5, Carry out all commitments to the letter, 6, Get a good trader of experience into the group, 7, Be sure to include in the membership one or more presentable, tactful contact men. 8, Have a membership agreement. Do not be afraid of changing it if change seems advisable, 9, Adopt definite policies at the beginning concerning membership, competition, and cooperation with other groups. 10. The operating board or management should meet daily. 11. The planning or steering committee should meet weekly, 12. The membership should meet weekly. 13. At a membership meeting, permit only a discussion of problems pertaining directly to the group as a barter association. 14. The responsibilities of each department or section head should be clearly and definitely determined. 15. Postpone the use of scrip as long as possible. 16. New members should be fully admitted only after they have given evidence that they understand the motives of the organization; shown that they can cooperate; and proven themselves to be patient in the receipt of benefits. Members should always realize that they cannot obtain more benefit or take more from the organization than they contribute. ...4:. REFERENCES; (Selected) 1. United States Department of Labor, Bureau of Labor Statistics History of Wages in the United States from Colonial times to 1928, Bui, 499; 527, Washington, D,C, 1929. Chapter 2 describes the system of paying wages with produce and other colonial currency. 2. United States Department of Labor, Bureau of Labor Statistics Monthly Labor Review - 36:3;451-495, March, 1933 36:4;717-770, April, 1933 36:5; 979-1038, May, 1933 (Copies of the Monthly Labor Review may be obtained from the Superintendent of Documents, Washington, D.C., at 20 cents a copy.) 3. The Spread of Barter. Nation 135 : 3530 ; 228, March 1, 1933. 4. Barter and Scrip. American Bankers Association Journal 25:9;35, March, 1933. 5. Making Money (Scrip). Jacob Baker, Survey Graphic 22 : 2; 106-108, 119, February, 1933,