GEOG 352: Day 5Alternative Financial Systems (Chapters 3 & 8)

Housekeeping Items• A reminder that the meeting to protect Linley Valley

West is on for tomorrow evening at 7:00 at the Kin Hut in Departure Bay. The bulldozers have already started to roll….

Housekeeping Items (cont’d)

• Please join us to watch the award-winning documentary film SHIFT CHANGE at Vancouver Island University’s Cowichan Campus on Friday, September 20.

The film examines employee-owned businesses that compete successfully in today's economy while providing secure, dignified jobs in democratic workplaces and growing healthy communities. Visiting the 50-year old network of co-operative businesses in Mondragon, Spain---and many thriving examples of such businesses in the USA—SHIFT CHANGE shares the on-the-ground experiences, lessons and observations from the worker-owners on the front lines of the new economy.

Check out this short trailer to learn more about the film: http://shiftchange.org/video-clips/

We will be screening SHIFT CHANGE at 7:00 pm in VIU’s main lecture theatre on the Cowichan Campus. Admission is by donation.

DRAFT SCHEDULE FOR 352 PRESENTATIONSNOTE: Weeks are subject to changeNAME TOPIC WEEK

Genevieve energy self-sufficiency 5

Karly “ “ “ “ 5

Dana “ “ “ “ 5

Ashley #1 “ “ “ “ 5

Taylor affordable housing 5 (will be covering in Week 4)

Jenna “ “ “ “ 5

Graham food self-sufficiency 6

Tim “ “ “ “ 6Robbie reweaving economies close to home 7

Sarah defensive expenditures 8

Kyle #1 “ “ “ “ 8Ashley #2 weaknesses of traditional ways of measuring social well-being 8

Sam human nature 8

Katie “ “ “ “ 8

Kim genuine needs vs. satisfiers 8

Emily role of organizations 9

Corentin “ “ “ “ 9

Cassidy change agents 9

Mallory economic democracy 10

Vahid “ “ “ “ 10Max alternative approaches to ownership 11

Dan forms of ownership 11

Kyle #2 transition – what will it take? 12

Gerald “ “ “ “ 12 Melissa promising economic models 13 Kwon epilogue: the great transition 13

Chapters 3 & 8• In societies where money exists, there is a strong

historical tradition that interest on loans is immoral.• How many of you or your families have a mortgage?

The word comes from the French – “grip of death.” One invariably pays far more in interest than in principal over the life of the mortgage. We put up with this situation because of the promise that, at the end of the road, we will be able to sell out properties for considerably more than we paid, at least in terms of face value.• If you have money it’s easy to make more. If you don’t

have money, it’s easy to lose more (anyone here ever availed themselves of the services of MoneyMart?).

Chapters 3 & 8• What if, instead of paying all this money to the

already rich, individuals, businesses, and governments were able to borrow money without interest? How much more in the way of resources would be available?• Currently, Canadians owe $1.63 for every $1.00

they earn in a year. The federal government debt equals $1.2 trillion.• The financial sector’s profits have gone from 14% a

few decades ago to 37% of all corporate profits. Much of this is the result of compound interest.• Ceilings on permissible interest rates have grown

and, in the UK, there is no ceiling.

Compound Interest

The JAK Alternative• Originated in the 1930s as farmers faced repossession of their

farms. Inspired by the interest-free systems experimented with in Germany.

• The model has since spread to Sweden, where it has 35,000 members, $163 million US in assets, and $147 million out on loan.

• The system relies on community volunteers, offers training programs through a JAK school, and recruits through its own newspaper and educational events.

• JAK believes that compound interest in unjust, that it favours larger over smaller projects, and that it contributes to unemployment, inflation, and environmental degradation.

• Are these beliefs logical?

The JAK Alternative• Borrowers pay a fee for appraising their worthiness for a loan

and the set-up process (about 3.2% of the total loan), and $37 annual membership.

• They also have to make an equity deposit of 6% of the loan. When the loan is paid back, this is fully repaid.

• Borrowers are encouraged to pre-save for a loan. Instead of earning interest, they earn loan points: 1 point per $1.00 saved.

• One can get out a loan equal to what one has pre-saved or more if one agrees to keep saving while repaying the loan over a longer period.

• The authors claim that, on a loan of $20,000 over 10 years, the borrower would save over $6500 over borrowing from a conventional bank.

The JAK Alternative• The details are explained on pp. 76-78.• Since 2000, JAK has been financing enterprises in

addition to individuals.• The initiative comes from members and partners who

want to serve community, animal welfare, cultural, and ecological goals.• Overall, JAK has low management overhead ($144 per

member in 2002), loans are backed by assets, and it is member- and democratically-controlled.• From a resilience perspective, it promotes diversity,

modularity, innovation, social capital, incorporates feedback loops, and overlapping functions.

Chapter 8: Other Alternatives

• Many households in Britain are without savings or chequing accounts and pre-pay their utilities, paying extra in the process;• They are unable to buy in bulk;• They use cell phones instead of land lines, with the

former being more expensive, because of hookup charges;• They rely on retailer credit for household goods, which

makes them more expensive, and• They get ripped off by payday lenders.• In response, a system of Community Banking

Partnerships (CBPs) were set up.

Chapter 8: Other Alternatives

• The CBPs, which borrowed their ideas from Ireland and the U.S., provide lower income people with: advice on money management banking services insurance services deposit services, and credit.

• Clients get referred by municipal governments, housing associations, mainstream banks, and social services.

• The Neighbourhood Trust in Washington Heights (NYC) is another example that has helped thousands of low-income residents (see pp. 192-193).

Chapter 8: Other Alternatives

• While mainstream credit unions are rather conservative, they have 91 million members and $866 billion in assets in the U.S.

• In Canada, VanCity is one of the more innovative credit unions, as is the Latino Community Credit Union in North Carolina.

• Microcredit is another option, as pioneered by SEWA in India, Grameen Bank in Bangladesh, and on-line worldwide versions: Zopa and Kiva.

• In addition to straight financial strategies, unions have been formed of self-employed people, and Mutual Aid Funds (MAFs) have been created to assist to provide loans and other collaborative services for members in similar business or self-employment niches.

Chapter 8: Other Alternatives

• A variety of options (“community shares”) for investing in progressive and more ethical companies now exist that did not exist twenty years ago.• Co-operatively owned retail businesses are another

strategy, such as the Natural Foods Store in Leeds, UK.• Loan funds for affordable housing and housing

renovation are another innovation.• Social and ecological banks have grown up, such as

Shorebank of Chicago, Triodos, Caisse d’economie solidaire Desjardin (Quebec), that have supported the social economy and also influenced numerous non-profits – Ecotrust, in the case of Shorebank.

Chapter 8: Other Alternatives

• These are just a smattering, none of them presented in depth, but discussed much more throroughly in the textbook.• Here are some other examples:

http://ezproxy.viu.ca/login?url=http://digital.films.com/PortalPlaylists.aspx?aid=8601&xtid=35554 .• A final note: because of the haste with which I

write these lectures, I don’t credit my picture sources usually. Please do in your assignments.