Mahatma Gandhi Community Forum

Prof. Dr. Yogendra Yadav
Senior Gandhian Scholar, Professor, Editor and Linguist
Gandhi International Study and Research Institute, Jalgaon, Maharashtra, India
Contact No. – 09404955338, 09415777229
Mailing Address- C- 29, Swaraj Nagar, Panki, Kanpur- 208020, Uttar Pradesh, India

Barter System and Mahatma Gandhi

Barter is a system of exchange by which goods and service are directly exchanged for other goods or services without using money. It is distinguishable from gift economies in that the reciprocal exchange is immediate and not delayed in time. It is usually bilateral, but may be multilateral and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money as the method of exchange in times of monetary crisis. Economic historian Karl Polanyi has argued that where barter is widespread, and cash supplies limited, barter is aided by the use of credit, brokerage, and money as a unit of account (i.e. used to price items). All of these strategies are found in ancient economies including Ptolemaic Egypt. They are also the basis for more recent barter exchange systems. While one-to-one bartering is practised between individuals and businesses on an informal basis, organized barter exchanges have developed to conduct third party bartering which helps overcome some of the limitations of barter. A barter exchange operates as a broker and bank in which each participating member has an account that is debited when purchases are made, and credited when sales are made. Modern barter and trade has evolved considerably to become an effective method of increasing sales, conserving cash, moving inventory, and making use of excess production capacity for businesses around the world. Businesses in barter earn trade credits (instead of cash) that are deposited into their account. They then have the ability to purchase goods and services from other members utilizing their trade credits – they are not obligated to purchase from who they sold to, and vice-versa. The exchange plays an important role because they provide the record-keeping, brokering expertise and monthly statements to each member. Commercial exchanges make money by charging a commission on each transaction either all on the buy side, all on the sell side, or a combination of both. Transaction fees typically run between 8 and 15%.
Oh yes, mass production, certainly, but not based on force. After all, the message of the spinning-wheel is that. It is mass production, but mass production in people’s own homes. If you multiply individual production to millions of times, would it not give you mass production on a tremendous scale? But I quite understand that your ‘mass production’ is a technical term for production by the fewest possible number through the aid of highly complicated machinery. I have said to myself that that is wrong. My machinery must be of the most elementary type which I can put in the homes of the millions. Under my system, again, it is labour which the current coin, not metal is. Any person who can use his labour has that coin, has wealth. He converts his labour into cloth; he converts his labour into grain. If he wants paraffin oil, which he cannot himself produce, he used his surplus grain for getting the oil. It is exchange of labour on free, fair and equal terms hence it is no robbery. You may object that this is a reversion to the primitive system of barter. But is not all international trade based on the barter system? 1 I approve of the proposal to invite an essay on the barter system. The prize does not seem to be attractive. Who should be the judges? They must be men with special qualification. I cannot just now think of them. 2
About the barter essay I have not been idle. Shri Vaikunth Mehta’s name has been suggested by Prof. Shah. K. suggests Prof. Ranga. Who is Prof. Rao of Lucknow? Is he an Andhra man? May the prize be given if the best and the most convincing essay are against the barter system? 3 Shri Uppulur Venkatakrishnayya is the trustee of the Khaddar Samsthanam which was started in the year 1927 at Gunadala near Bezwada. He is an ardent believer in the system of barter, and has been practising it to some extent in his institution in its internal and external dealings, especially with reference to the production and distribution of food and clothing. He believes it to be the only remedy for the present economic depression and thinks that it can solve the many evils arising from the present monetary system. He further believes that the adoption of barter is essential to the development of agriculture, revival of khadi and other handicrafts and cottage industries in India, and the propagation and practice of the doctrine of non-violence. He holds that it is implied in non-violence itself. He fervently desires to know how far his views can stand the test of a scientific study and examination of the system. He therefore offers a prize for the best essay on the subject, and he has chosen me as his instrument for announcing his intention. I have gladly consented to be the medium for inviting essays on the system of barter. The prize-winner will be given at his choice Rs. 500 in cash or Rs. 500 worth of genuine, durable khadi woven in the Samsthanam itself. The cash amount is deposited with me.
The essay (which should be in English) should trace the early history of the barter system, the causes of its decline, and the possibilities of its revival at present. It should also describe the purpose it served in the past and the part it can play in the future economic life of the world, with particular reference to its adaptability to the Indian village life concerning some or all of the departments of its activities. The essay should discuss the conditions congenial for its successful working and development and to what extent the assistance of the ruling power is required for the same, and should indicate the nature and mode of exchange if the adoption of the system is recommended. The essay should also discuss the effects of the barter system on the development of the internal and international trade of India. Prof. K. T. Shah, Shri Vaikunth L. Mehta and Prof. J.C. Kumarappa have kindly consented to act as examiners. Prof. Kumarappa will also act as Secretary to whom all essays should be sent addressed Maganwadi, Wardha. The essays should reach Prof. Kumarappa not later than the noon of August 31, 1936. No prize will be awarded if no essay reached the standard to be determined by the examiners. The result of the examination will be announced not later than 31st December 1936. The copyright of the prize essay will vest in the Khaddar Samsthanam. I do hope that there will be keen competition for winning the prize not for its monetary value but for the importance of the subject. 4
Readers will remember that a prize of Rs. 500 was announced for the best essay recommending a barter system. The terms were also given. The time for sending the essays having elapsed, the Board of Examiners entered upon their task and has reported that none of the essays fulfil the conditions laid down. The following is their report. The prize has not been withdrawn by the donor. The examiners, Prof. K. T. Shah, Shri Vaikunth Mehta and Prof. J.C. Kumarappa, have kindly signified their readiness to examine any further essays that may be sent. I would, however, advise competitors, if any are willing, to strictly conform to the requirements lay down by the examiners. It is clear from their note and it is but natural that no essay will pass muster unless it reaches the level expected by them, and none will reach that level unless writers are industrious enough to study the necessary literature on the subject and build on their study an original thesis. It may be that the prize is not sufficiently tempting for such an effort. If that is so, I can only say that those who write for the mere monetary value of prizes hardly ever realize the expectations of donors. Without love of subject itself, high merit is not to be expected in difficult competitions like the one about the system of barter. The time for handing in the essays is fixed as 31st December, 1937. All essays should be addressed to Prof. J.C. Kumarappa, Maganwadi, and Wardha. No further extension of time will be given, and if no effort succeeds the prize will be finally withdrawn. 5


1. Harijan, 2-11-1934
2. Letter to G. Sitaram Shastri, May 14, 1935
3. Letter to G. Sitaram Shastri, July 30, 1935
4. Harijan, 31-8-1935
5. Harijan, 1-5-1937

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