Barter & Trade In Developing Markets: why cellphone minutes can be worth more than fiat currency

It’s always been amazing to me that the architecture of a slum in Central America looks exactly the same as a slum in Uganda…which looks exactly the same as a slum in India. Corrugated tin has global omnipresence. But the residents of the slum don’t notice that. They’re a part of it. You’ve got to step outside of it to fully understand it.

In the same way, it’s hard for the Westernized world to understand life without currency, because we’ve never been without it. First-world citizens don’t barter goods for goods; we have capital to serve as a medium between our labor and our needs.

In reality, the financial system we take for granted doesn’t mean anything for most of the planet. The figure of “extreme poverty”, described by the Western world as living under $2 a day, isn’t entirely accurate. It doesn’t take into account the agrarian lifestyle that the majority of poor across the world live: a lifestyle of farming, goats, chickens, eggs, rice, barter, and trade. Cash doesn’t exchange hands for all of these items necessary for survival: the cash often just isn’t there.

Because of that, I’ve recently become interested in the application of barter to developing economies. As anyone who has walked through a third-world market can tell you, the art of the haggle is alive and well in most of the world.

Value is still being exchanged. Things are sold, things are bought. Yet it doesn’t necessarily involve the use of traditional printed currency.

I often read the economics writer Charles Hugh Smith, and he has some interesting thoughts on currency.

“Those who believe states can never lose control of their currency should consider what happens in hyper-inflation. When states debauch their currencies and push them over the cliff, people abandon the currency in favor of money that holds its value and acts as a means of exchange […] When official money loses its purchasing power, even phone-card minutes can act as money.”

And that’s what I’ve often seen in Africa, specifically subsaharan East African countries like Uganda or Kenya. In countries where the central bank has devalued currency by 100–1000x, citizens barter cellphone minutes (an item that fulfills many of the traditional features of money like tangibility, divisibility, fungibility, and portability) for food or fuel or other necessities.

Nearly every Ugandan, even the poorest of the poor, has one or two cellphones. I vividly remember visiting a remote village a few hundred yards away from the Nile River. It took the Ugandan driver about five hours in a Land Rover to drive us there from Jinja; we got out and walked around the little village. I felt as disconnected from the outside world as I could possibly feel. And then, I walked past a guy sitting on the threshold of a mud hut listening to Call Me Maybe streaming on his cellphone.

The proliferation of technology affects literally every person on earth: applying first-world economics (already artificial & facing instability) to the developing world is the worst mistake a nonprofit can make in efforts to improve the economies of the global south.

Originally published at gilgildner.com