Debt, manufactured by banks without the backing of real assets and inflated over time through compound interest, redirects the wealth created in the productive economy to a non-productive financial sector. Over the last 200 years, several alternative, interest-free financing mechanisms have grown up. One of the most successful is a Swedish savings and loan co-operative, the JAK ("Land Labour Capital") members' bank. By disconnecting finance from compound interest, JAK seeks to turn money from a store of value into a genuine medium of exchange that builds real wealth and sustainable and flourishing communities.
JAK is like a credit union, except that members do not earn interest on their savings or dividends on their shares. Instead, they earn one savings point per dollar they save. The maximum they can borrow is based on the number of points they have accumulated prior to a loan (pre-savings) and contract to accumulate after receiving a loan (post savings). Every loan is backed by the savings of other members. JAK members also can easily establish targeted savings accounts, or Local Enterprise Banks, in order to finance social or ecological enterprises.
More and more people now realize how vulnerable they are to an unaccountable, non-transparent financial system that ultimately strives to reap high profits from debt. JAK enables people to invest in and build local capacity to meet their basic needs. If communities are to become active agents in planning and adapting to the age of energy descent and climate change, the JAK model is a strategic pathway to a future that works.
This article forms the basis for the more extensive investigation of transition finance found in The Resilience Imperative: Co-operative Transitions to a Steady-State Economy, by Michael Lewis and Pat Conaty (New Society Publishers, 2012).