Sustainable economy: keeping wealth (wellbeing) in our families and communities

Bryan Innes

Before industrialisation, economy mainly referred to local economy and household economy, based on cooperative and competitive processes. How can we shift from today’s centralised and global economy to a resilient local economy?

Our universities traditionally focus on macroeconomic models based on assumptions of profit maximisation and competition. It is taken for granted that money must be created as interest-bearing debt. The Greek word oikonomia — household management — points to an interpretation of economy as the management of material resources. My understanding of economics is based on the energy transactions that underpin ecological relationship. I use the design tool of sector analysis — the study of flows of energy (including materials) into, through and out of a site. This chapter explores a system of exchange that mimics the energetic exchanges that occur at the boundaries of natural systems.

Ecology and economy

The reality of nature is that all is connected with all.

Darwin’s principle of the survival of the fittest is not so much about comp-etition as about fit to niche. The better the fit to niche, the more diversity and resilience and the greater the energy efficiency and organism success. The “fit” is actually the system of exchange between the organisms (or complex of organisms) inside and outside the niche.

One can view the niche as a site with flows of energy in various forms into and out of the site. The fit of the organism determines the level of efficiency it exhibits in energy harvest and management. Economy is the description of those flows.

Economy has relevance at all levels and within all parts of the universe; it is observation-based, that is, science-based; it deals with physical reality and bears little relationship to classical economics.

Systems have boundaries across which exchanges happen. If there are no exchanges then systems cannot exist. If more energy leaves a system than enters it, the system winds down and collapses. If more energy enters a system than leaves it, the system grows and ultimately self-destructs. Living cells are bounded by semi-permeable membranes across which exchanges happen.

Energy is continually being exchanged everywhere. Put a boundary around any site and there is an economy of exchange. Economy permeates all. It is not a subset of anything.


Ecology reveals that organisms are at least as cooperative as they are competitive.

For example, fungi in the soil have no trouble dissolving minerals in rock particles. Canopy trees have no trouble harvesting energy from sunlight to photosynthesise water and carbon dioxide into sugars. What happens at the root level is a trade between trees and fungi, sugar for dissolved minerals. Give-and-take between organisms weaves complex beneficial relationships throughout ecosystems.

The principal of reciprocity applies to all bounded systems. This is a natural law. Interest (usury) violates this principle. Exponential growth is the result of violation of this principle. Self-destruction is the outcome.

Reciprocity is at the heart of sustainability. It is the principle of balanced giving and receiving. It is at the core of agreement between humans and has been for hundreds of thousands of years. Our cultures have always demanded that we honour our word when we make declarations of agreement.

We make a paradigm shift when we view economy as a social exchange process that we share in rather than compete in.

The JAK Bank

In 2005, Eva Stenius, a board member of the JAK Members Bank of Sweden, spoke at the first Ecoshow in Manukau City about interest-free banking.

The core of the JAK Bank system is reciprocity. This is manifested through concurrent savings and payments, a system invented by a Swedish engineer, Per Almgren. The system ensures totally balanced flows. The service, performed by the member-owned bank for the individual member, is fully reciprocated by the member.

The JAK Bank is a centralised banking system which is government regulated. Even though it is a non-profit bank the JAK Bank carries a high internal overhead (equivalent to a 3% interest rate) required to service the 40-odd employees, the bank infrastructure and compliance costs.

Establishing a similar model in New Zealand is a most unlikely prospect. Bank startup in New Zealand requires $35,000,000 of equity before any overheads are considered.

The Genuine Wealth System

After visiting the JAK Bank in Sweden I decided to use the basic values and systems of the JAK Bank and embed them in a new system based on personal agreements creating bounded, shared economies. In most societies there is freedom of association. This means there is freedom to act collectively.

The Genuine Wealth System (shared economy system) is a system where people who freely associate combine their contributions, governing their relationships through agreements that cover how they cooperate together just as we can in our families.

Each member’s contribution is accounted for. The management and ownership of the aggregated deposits stays with the group. On-line accounting systems make it possible for the accounts to be viewed by any member of the group at any time.

Group protocols govern how money is accessed and moved.

Members can use funds in the common account, interest-free, to purchase and create assets owned by the group.

How do concurrent contributions and payments work?

Example: 10 people contribute money on a regular basis into a common pool. At some point a member asks to use $5,200 and is given the use of the money.

A member making payments of $100 per week into the pool for a year will have returned the $5,200 but not reciprocated the service received from the group.

Instead, the member is asked to make deposits of $100 per week — $50 for payments and $50 as contributions — for two years, after which the member will have reimbursed the original $5,200 and contributed $5,200. The contributions are then available to uplift. In the meantime other members of the pool are able to make use of the first member’s contributions. Reciprocity is satisfied. This is a perfectly-balanced arrangement, totally fair.

Purchase agreements

An asset is purchased or created for a member of the group according to prior agreement.

When taking possession (of a house for example), the member enters into a purchase agreement covering the amount, the payments, the concurrent contributions and the term.

It is like a hire purchase agreement without interest but with contributions. Ownership is not transferred until full payment has been made and contribution obligations are met.

The magic of acting collectively – the release of social capital

A community economy includes much more than the cash contributions the members can aggregate.

Non-cash resources are usually at least as big as cash resources. This is sometimes called social capital. It is the relationships and collective skills, labour, experience, knowledge, materials, contacts and obligations that can be called upon.

Everyone in the group has a vested interest in creating the best results possible at the lowest cost. This leads to the exchange of social capital. The result is a quicker turnaround in creating assets and a shorter financial commitment period for the individual.

Use of social capital results in a dramatic reduction of the cash cost of building a house: it can be at least halved — with variations from group to group — so that the payment time for the individual member can be reduced by 50%.

Contrast with a conventional mortgage

Interest payments typically range from 100% to 200% of principal by the time the mortgage is discharged (excluding set-up fees, brokerage etc.), making costs two to three times the value of the asset. By bringing into play the social capital of the group, under the shared economy system, home construction costs can range from 50% to 100% of the asset’s value.

Example: $80,000 house cost, $200/week outgoings

A community approach to housing can easily save 50% in costs (labour and materials). The balance will require a purchase agreement of $40,000, with $100/week in payments and $100/week contributions.

After eight years the total outgoings are $40,000 (payments) plus $40,000 (contributions). The asset created is worth $120,000.

With conventional mortgage finance for $80,000, without collective input, an asset valued at $80,000 can be paid for over a period of 15 years at $200 per week.

The community approach is three times more efficient than conventional borrowing in this example, creating one and a half times the value in half the time.

Acceleration effect

The combination of purchase payments and contributions increases the cash flow into the collective pot. After each purchase, the next purchase can be made sooner. Soon contributions can be accumulated very fast.


There are now a number of groups of people using this system in New Zealand. They are of mixed age, gender, ethnicity and income levels. They include family groups, groups with a housing focus and groups with no particular focus. Group size is at present from four to fifteen members; the upper useful limit is probably thirty members.

Most of the groups have been formed as a result of public meetings so those who form a group do not necessarily know each other very well.

In one group a request came from a member shortly after start-up for $1,000 to retire credit card debt. The group was a bit nervous, so the person concerned offered to sell his car (worth $4,000) to the group for $1,000. The member uplifted the $1,000 and entered a purchase agreement with the group to buy back the car (and contribute concurrently). Essentially the group had become a pawnshop for this transaction. Now, a year later, the level of trust in this group is very high and collateral is not required.


A game has been devised that replicates the shared economy system but collapses time.

The goal of the game is to create wealth within the local community and minimise total outgoings. The group of players is the community. They are aiming to all be better off after a year’s transactions, with more income and less fixed expenditure.

Individual profile (role) cards are created and handed out at the beginning of the game, with four parameters: income and profession/occupation, fixed costs, discretionary spending and individual goals (short and long term).

To introduce an element of randomness, we have “Opportunity/Crisis Cards” (20-30) also created by the group. These should be applicable to any player, such as “breaking a leg”, “pay rise”, and collective events such as “setting up a free wifi service”, which entices discussion around personal and collective goals.

The players have individual graph papers to plot the development of the four parameters. They each choose how much of their own discretionary spending should go into the group pool, and how much should be used privately (spending and/or savings).

The roles, besides the ordinary players, are the Accountant for the Savings-pool, and the Banker, who is handling the fixed costs/outgoings for each player and adds them together to see how the “leaks” from the collective change throughout the game.

Learning the lessons

The players get together, maybe over a bottle of wine and a shared meal. The time for each cycle of the game is theoretically very short. In practice there is a lot of conversation and laughter. This is the time of learning. How do we cooperate together to get our needs met? Can we create solutions to a player’s problems which may have lower or no costs? What other ways could we cooperate — the usual standard negotiation strategies come into play — what have I got that I value little and you value highly, what have you got that I value highly and you have little value for?

Playing out the community economy system, through the transparency and conviviality, creates opportunities for players to learn and change their contribution and purchase strategies to achieve their goals faster, and by degrees the collective strategies enabling everyone to achieve their goals faster. Players’ non-cash assets very soon become valued and used. The mere tabling of an aspiration, sometimes even a very big goal, can call forth an immediate solution.

The enthusiasm and excitement of groups beginning to understand the richness and benefits of their involvement is palpable.


Community economy is a bounded economy within which the rule of reciprocity applies.

Community economy calls forth cooperation and ethical behaviour. It generates interdependence, the glue that binds and grows community.

Community economy harvests from the wider economy, supports personal and local sovereignty (no bank manager to decide who gets to share in the economy), and develops a wide range of skills including those of management and cooperation.

Community economy engenders a new way of seeing, a way that sees human beings as naturally cooperative and life-affirming.

One unanticipated outcome has been the formation of close, fun, supportive relationships within each community. This is resilience!