The Earth Is a Ponzi Scheme on the Verge of Collapse

By Matthew Stein, Huffington Post. Posted April 28, 2009.

Bernie Madoff sure made a name for himself, didn't he? First he made a name for himself as a "Wall Street Genius" whose coveted firm not only promised, but consistently delivered, extraordinarily high annual returns on investment, even when the economy was down. More recently he made a name for himself as the architect of the largest and most notorious "Ponzi Scheme" in history, bilking investors out of as much as 50 billion dollars!

So what is a Ponzi scheme, anyways? A Ponzi scheme is a fraudulent investment operation that promises, and delivers (at least for a while) exceptionally high and consistent financial returns to investors. These returns are paid to its investors from their own money, and the money paid by subsequent investors, rather than from any actual profit earned by bona fide income generating investments (such as manufacturing, mining, or rental income). In ways similar to "pyramid schemes" or "chain letters", in order for a Ponzi scheme to work, it must continuously attract an ever increasing pool of investment from unsuspecting customers, in order to provide an ever increasing supply of money to draw upon to maintain payments to its ever increasing pool of investors. The trick is to promise such glorious results that the greed factor overcomes its victim's common sense as they turn a blind eye to the fact that the scheme lacks a solid foundation and can't go on forever. It is absolutely critical to the success of all Ponzi schemes that an aura of respectability and impeccability be maintained for as long as possible, for as soon as suspicions spread concerning the fraudulent nature of the business, new investments dry up and the Ponzi scheme collapses, since it has no source of true earned income with which to maintain payments to investors.

So, is it true that we are running our planet like a Ponzi scheme? And if this is true, does it mean that we must inevitably face collapse, as all Ponzi schemes must eventually end in catastrophe?

The illusion that the "Free Market" is the logical savior of our world has been maintained by the promise of riches and an ever increasing standard of living and lifespan that has been demonstrated by the industrialized world for the past several hundred years. On the surface, who can look at the apparent success of America, and not come to that quick conclusion? However, when you look deeper, you will find that this success is built on a business model based upon exponential growth, and that this growth must be fed by a similar exponential growth in consumption of energy, natural resources, raw materials, and in the continuous expansion to new markets. All of this is well and good when the world has an abundant supply of undeveloped lands and unused resources, but it starts coming apart as that same world approaches its natural limits to growth and consumption.

Our world-wide Ponzi scheme got its start with the industrial revolution in Western Europe, and it was colonialism that provided ever increasing sources for the raw materials and markets that kept this giant Ponzi scheme rolling. It spread to America with the colonial takeover of vast untapped resources and huge tracts of lands previously occupied by Native American hunter-gatherers. As America industrialized, its population grew and its resources were drawn down, the giant Ponzi scheme continued to grow through globalization and it continued to feed its ever growing appetite by drawing down the natural resources in the world's oceans, forests, and more remote areas, and by expanding it markets into the farthest reaches of the globe. We are witness to a five hundred year run on this giant ever-expanding global Ponzi scheme, and unless we change the way we are playing this game, that run is now drawing dangerously close to a natural and catastrophic conclusion.

Here is a brief summary of a few current trends that illustrate my point:

1. Trees: About 1/2 of the world's forests are already gone (most were cut in the last 50 years), and a significant percentage of the rest are in trouble. At the current rate of destruction, it has been estimated that the world's rainforests will be completely eliminated within forty years. Trees play a necessary role in stabilizing our planet's weather, atmosphere and soils. A single large mature tree has the evaporative surface area on its needles or leaves equivalent to a 40 acre lake. A process called "desertification" occurs near areas that have been deforested once the trees stop recycling moisture back into the atmosphere to fall as rain somewhere down wind. A recent study shows that deforestation contributes roughly 25% of global greenhouse gas emissions every year.

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Matthew Stein is the author of When Technology Fails: A Manual for Self-Reliance, Sustainability, and Surviving the Long Emergency, from Chelsea Green.

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