Why the Global Economy Is a Ponzi Scheme and We Are All Bernie Madoffs

By Joseph Romm, Climate Progress. Posted March 10, 2009.

Madoff’s scheme was typical of a Ponzi in its structure, but differed in its pace and marketing. Rather than offer (suspiciously) high returns to all comers, Madoff offered modest, but steady returns to an exclusive clientele, produced in both up and down markets. Although the investment method was marketed as a “too complicated for outsiders to understand” … the true secret to Madoff’s success was his lifetime involvement with non-profit charities, and the tax law knowledge he gleaned from that experience over many decades.

Charitable foundations were the basis, as well as the side-victims, of his surreptitious strategy…. The slow pace and ongoing cliquish “insider” word-of-mouth marketing enabled the deception to survive for several decades. It grew beyond the expectations of a common Ponzi….

Mitchell Zuckoff, professor of journalism at Boston University, author of Ponzi’s Scheme: The True Story of a Financial Legend, explained … “By targeting charities, Madoff could avoid the threat of sudden or unexpected withdrawals,” Zuckoff suggests that years ago, Madoff “solved the two interlocking puzzles that usually prevent Ponzi schemes from becoming perpetual money machines: sustaining growth, while maintaining stability.”

But humanity has made Madoff look like a penny-ante criminal.

By enriching the authorities, as noted, we encouraged those with the most power to solve the problem to do nothing.

By enriching those who did the most plundering the most, we enabled them to fund lobbying and disinformation campaigns to convince substantial fractions of the public and media that there is no Ponzi scheme -- that global warming is “too complicated for the public to understand” and nothing to worry about.

And by “paying ourselves” with the wealth from future generations -- indeed, from the next 50 generations and next 100 billion people to walk the earth (see NOAA stunner: Climate change “largely irreversible for 1000 years,” with permanent Dust Bowls in Southwest and around the globe) -- we cleverly took advantage of victims not yet born, those not able to even know they were being robbed.

Madoff is reviled as a monster for targeting charities. We are targeting our own children and grandchildren and on and on. What does that make us?

I have spent a lot of time on this blog looking at the catastrophic climate impacts we face if we don’t reverse emissions trends soon (recent overview here). But I haven’t spent as much time looking at the implications of the major transition from abundance to scarcity we will be forcing down the throats of the next 50 generations. That will be a key focus of this series.

One final note. As I’ve said before, technically, we are the subspecies Homo sapiens sapiens. Isn’t it great being the only species that gets to name all the species, so we can call ourselves “wise” twice! But given how we have been destroying the planet’s livability, I think at the very least we should drop one of the sapiens. And, perhaps provisionally, we should put the other one in quotes, so we are Homo “sapiens” sapiens at least until we see whether we are smart enough to save ourselves from ourselves.

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