MAKING MARKETS. The institutional rise and decline of the Argentine Red de Trueque.

The story of the Red de Trueque in Argentina exposes the problems of creating a market system complementary to the regular economy. The scheme was launched in 1995 by a group of environmentalists whose economic situation was deteriorating sharply with economic restructuring.

They thought it would be mutually helpful to exchange with their neighbours goods and services each one had produced at home. They traded on the basis of mutual credit, which worked well for a while, but proved unsuitable when the group grew. They then printed fiat money to facilitate exchange. In the first seven years, with the Argentine economy melting down, the scheme was rapidly replicated and reached a peak of at least 2.5 million participants in 4.700 market centres across the country.

It became the largest experiment worldwide with a complementary or local currency. Although the initial goal of the RT was to provide an environmentally-friendly income generation scheme for the disenfranchised middle class, it gradually incorporated the structural poor. Due to its impressive growth, the organisers had to decide on the institutions to regulate it, i.e. who was allowed to join, what was acceptable and what was not. The intervention of the state was minimal. In spite of the efforts of the organisers to create rules of behaviour and bodies to enforce them, they were unable to deal 2.5 million users. In a matter of months it collapsed to about 10% of its size and since 2003 it has stabilised at about 5% of its peak scale.

The RT was an extreme case of market building organised from below,in which the set of created institutions included several dozen local currencies integrated in a common monetary system. In the long run, the RT supported the multiplication of new small businesses, helped the unemployed to bridge into regular jobs, alleviated poverty among the marginal population, supported the training of un-skilled workers and provided change value to previously unpaid work (mostly women’s).

Drawing on the Old Institutional Economics (Commons, Veblen and others), this thesis explains the evolution of the Red de Trueque in Argentina as a benchmark among complementary or local currency systems. It analyses why the RT grew, what its effects were and what rules of governance and sustainability it developed. It identifies lessons learnt and proposes guidelines in view of future experimentation with local currency systems around the world.

In theoretical terms, the RT provided an opportunity to research the process of institutional emergence. The thesis advances institutional theory by elaborating on the effects of structural reforms in disrupting institutions,which translates into segments of unstable and uncertain economic action within the social structure. The term ‘institutional gap’ was coined to address situations in which the guidance of existent institutions on actions no longer serves to achieve acceptable solutions. Second, the concept ‘club market’ is developed to describe a market organised by participants on the basis of the voluntary acceptance of its internal rules.

These serve to exclude the general public from taking part in them and differentiate them from ‘public markets’, open to all. The poor may alleviate their condition by exchanging goods in club markets in more favourable conditions than the regular economy. Thirdly, the thesis identifies rules of governance and sustainability for institutional settings in which compliance is voluntary (e.g. when state regulation is minimal).

Finally, it conceptualises the economy of the poor as an economic area driven by the need to survive, thus structured by specific institutions different to those guiding the economic action of the non-poor.