7.4: Modes of Exchange
The idea of exchange was first explained by Marcel Mauss in terms of two types of exchange: non-capitalist gift exchanges (which have to do with social relations and building, which require a gift for exchange), and impersonal commodity exchanges. Impersonal commodity exchanges are more common in Capitalist societies which don’t link those who are exchanging with one another, aside through the use of cash. These aspects are also characteristic of egalitarian societies. Later, Marshall Sahlins used the work of Karl Polanyi to develop the idea of three modes of exchange, which could be identified throughout more specific cultures than just Capitalist and non-capitalist. These are reciprocity, redistribution, and market exchange. Although these modes of exchanges are drastically different, aspects of more than one mode may be present in any one society.
Reciprocity
The oldest mode of exchange is Reciprocity which is used in egalitarian societies, like that of the Ju/’hoansi. There are three different types of reciprocity: generalized, balanced, and negative reciprocity.
- Generalized reciprocity is an exchange where return isn't expected right away and the value of this return isn’t specified. This is based on the assumptions that all exchange balances out, like that between family members. This is largely based on trust as social situations can become hostile as an individual could use an exchange to build a debt in their favor.
- Balanced reciprocity (or also known as Symmetrical reciprocity) is when exchange is made with the expectations that those who give an amount will get the same in return. This, unlike generalized reciprocity, has a specified time limit as to when the return should be made. The Ju/’hoansi, who use reciprocity in their societies in all forms, use balanced reciprocity. They distinguish between what they barter, which requires immediate balanced exchange (this is similar to our shopping experiences, where it's expected that money will be immediately exchanged for goods). Within the Ju/'hoansi, this also includes hxaro, which establishes that this exchange entitles obligations between the two in the future.
- Negative reciprocity is when a party tries to exchange without having to give up any value, which is the opposite of balanced exchange. "This can range from haggling prices to outright seizure." [12]
Reciprocity, the most ancient mode of exchange, is the exchange of goods and services of equal value. Generalized reciprocity can be defined as when the individuals involved just assume that the exchange will balance out. Nothing is expected immediately and a value of return is not established before the exchange is made. This type of reciprocity occurs often between parents and children. Balanced reciprocity, the opposite of generalized, is when a specific value of return and under an established time limit is expected. This exchange can be found between those in relationships. For example, when boyfriends and girlfriends exchange gifts of equal value and expect the same in return at Christmas. Negative reciprocity is the exchange of goods or services when at least one party attempts receive something for nothing in return without suffering consequences. This type of reciprocity can involve haggling or in some cases seizure.
Redistribution
Redistribution is a mode of exchange that involves some sort of centralized social organization. Members of a group contribute items such as food, money, clothing, etc. to the central organization, and the organization then redistributes the items to the members of the group. An example of this on a humanitarian level could be Goodwill, a food bank, etc.
Redistribution can occur on a small scale or a very large scale. A small scale example of redistribution is a class party. Each person is assigned something to bring – chips, salsa, pop, brownies, napkins, utensils, etc. On the day of the party, everyone brings in their items to share with each other. The Salvation Army is a good example of a rather medium-sized scale of redistribution. The Salvation Army collects money, clothing, household goods, cars, and even airline miles to redistribute to those in need. A large scale example of redistribution is the Internal Revenue Service. The IRS collects taxes from citizens and redistributes the money throughout our governmental system, to education, post offices, road construction, and the like.
One widespread local example of redistribution is church potlucks. For special events, several churches hold potlucks, (potlucks with noteworthy Native American origins). Every family contributes to the meal. All the contributions are placed in a central area, and when everyone has arrived, the congregation can eat a meal together from the assortment of dishes.
Another example of this is under Big Man/Big Woman political groupings in the South Pacific where the leader, chosen by favor, is in charge of general affairs, and collects a certain sum (i.e. a pig) from their group and redistributes it. This gives the Big Man/Big Woman the label of generous, although they personally don’t give any more than anyone else. This is also an example of the tradition of potlatch, where group members all give goods to one, who evenly distributes these goods among the community. The main point of this is to redistribute wealth.
Redistribution requires some form of centralized social organization. Those who own the central position of the organization receive economic contributions from all members of the group. With the contributions they receive from all members of the group they redistribute those goods to all the members of the groups in fair amounts to meet the needs of every member of the group. A potlatch is a good example of redistribution. When people go an event and are provided with food they then take that food and redistribute it to all members of their family or some kind of group they belong to. An example of this is the indigenous Americans of the northwest coast of North America. This is a very common mode of exchange among tribes and groups in all part of the world. It is a fair and normally well organized mode of exchange and valued by the members of most tribes and groups.
Potlatching
Potlatches are ceremonies held by First Nations peoples on the Pacific Northwest coast of the United States and Canadian province of British Columbia such as the Haida, Tlingit, Salish and Kwakiutl (Kwakwaka'kawakw). The potlatch takes the form of a ceremonial feast traditionally featuring seal meat or salmon. In it, hierarchical relations between groups were observed and reinforced through the exchange of gifts and other ceremonies. The potlatch is an example of a gift economy, whereby the host demonstrates their wealth and prominence through giving away their possessions and thus prompt participants to reciprocate when they hold their own potlatch. Although this sort exchange is widely practiced across the planet (consider, for example, the Western practice of buying one's friends rounds of drinks), the Northwest Coast potlatch is of a massive scale, and also served to redistribute goods from coastal to inland ecological zones.
The native peoples of the Northwest Coast of North America institutionalized this ceremonial redistribution of food and gifts. The southern Kwakiutl people were the most elaborative on this custom until 1904 when the potlatch was outlawed, however the ceremony did continue to be practiced in many societies. In 2004, the Tlingit clan members re-enacted the ritual in Sitka, Alaska, for the 100th Anniversary Commemoration of "The Last Potlatch". The clan members dressed in traditional Tlingit attire and practiced Tlingit traditions for the two day long celebration.
Market Exchange
Market Exchange is used in Capitalist societies and relies on private trade of goods and services. Value is assigned based on a standard symbol, typically money. Although trade and money were developed independently, they are used together to create market exchange. This is the dominant mode of exchange in Western Societies.
Market Exchange was invented by the capitalist society that uses an economic system in which wealth are privately owned rather than commonly, publicly, or state-owned. It is where currency exchange takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Trade, money, and market institutions developed independently and were not invented to work together. Capitalism is unique because the three (trade, money, and market) ended up working together. This was first done in the societies of early modern Europe. It is said that different modes of exchange often co-exist within a single society meaning that each society has their own way of operating and exchanging good in their day-to-day lives.
For example, in the United States we use the market mode or exchange, but you can still find redistribution and reciprocity. Reciprocity if you recall is the most ancient mode of exchange, was the exchange of goods and services of equal value and redistribution requires some form of centralized social organization. In families in the U.S., most parents have an income and then redistribute that income to their children and loved ones. Parents using their income to buy their children food and clothing without expecting return is an example of reciprocity. Some people believe that you cannot properly understand the exchange process without first fully understanding the production process.[19]
Currency
Currency is a system of money that is used as a medium of exchange such as banknotes, coins, or digital currency. Systems of currency, such as the Euro, U.S. dollar, bitcoin, etc., are often produced and monitored by governments. Governments often give value to banknotes, referred to by some as fiat currency. The values of the independent currencies are often influenced by the economy in a global market driven by trade and foreign exchange markets. Usually monetary values remain within the boundaries of its intended nations and states.
Alternative Currency
Some forms of currency are given value by the global market and have no tie to a state, namely commodities such as gold, silver, and oil as well as stocks, bonds, derivatives, and cryptocurrencies. These currencies can be traded on the global markets, some being traded at every hour of the day. Physical commodities are given value by their practical uses, appearance, and even superstitions, regardless, they are transacted with and accepted as payment.
Bitcoin is a form of cryptocurrency and it is given value via the inherent principle of scarcity programmed at its core. Bitcoin is limited by computing power of its competitive network and the collaborative confirmation by the millions of nodes in its network of every single transaction. Each in every bitcoin transaction is in a sense, public information.
A more familiar type of alternative currency is currency that can only be used within a certain brand or company such a "Starbucks Stars". This is an example of currency brought about by a nation recently formed in the Pacific Northwest. Not all forms of currency are ancient and currency that begins from a company can be recognized worldwide.