Yes, homo “sapiens”
sapiens have constructed the grandest of Ponzi schemes, whereby current generations have figured out how to live off the wealth of future generations. Yes, we are all in essence Madoffs (many wittingly, most not) or at least his most credulous clients. What comes next will be the subject of a multipart series.
I had been planning to write something on this for a while when NYT columnist Tom Friedman interviewed me for “The Inflection Is Near?” which appears in Saturday’s New York Times:
“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.
“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate …’ Real wealth is something you can pass on in a way that others can enjoy.”
A few years ago I thought that aggressive action by governments around the world to push clean energy could spare the public dramatic lifestyle changes in the coming decades, but I have been convinced otherwise by
- the failure of U.S. leadership [thank you George W. Bush and the conservative
- the remarkable shift in our understanding of climate science in the past two years
- China’s decision to join the Ponzi scheme full throttle and emulate our rapaciousness (see here and here), and
- a recent, brilliant talk I heard (a teaser for a future post).
The adults, in short, are not standing up. Sadly, most haven’t even taken the time to understand that they should.
And so every generation that comes after the Baby Boomers are poised to experience the dramatic changes in lifestyle that inevitably follow the collapse of any Ponzi scheme.
What exactly is a Ponzi scheme? Wikipedia has a good entry:
A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit. The term “Ponzi scheme” is used primarily in the United States , while other English-speaking countries do not distinguish colloquially between this scheme and pyramid schemes.
The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.
In our case, investors (i.e. current generations) are paying themselves (i.e. you and me) by taking the nonrenewable resources and livable climate from future generations. To perpetuate the high returns the rich countries in particular have been achieving in recent decades, we have been taking an ever greater fraction of nonrenewable energy resources (especially hydrocarbons) and natural capital (fresh water, arable land, forests, fisheries), and, the most important nonrenewable natural capital of all — a livable climate.
The system is destined to collapse because the earnings, if any, are less than the payments.
Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities.
Yes, well, the authorities (i.e. world leaders, opinion makers, the cognoscenti) haven’t been doing much interrupting over the past two to three decades since, unlike a typical Ponzi scheme, they are heavily invested in the scheme and addicted to the returns!
As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.
Well now I do think that the scheme has come to the attention of many of “the authorities,” at least to many leaders around the world and to progressive ones here at home. Conservative authorities simply have too much invested in the status quo (see here and here).
Knowingly entering a Ponzi scheme, even at the last round of the scheme, can be rational in the economic sense if a government will likely bail out those participating in the Ponzi scheme.
But Friedman quotes Glenn Prickett, senior vice president at Conservation International, explaining, “Mother Nature doesn’t do bailouts.”
We aren’t all Madoffs in the sense of people who have knowingly created a fraudulent Ponzi scheme for humanity. But given all of the warnings from scientists and international governments over the past quarter-century — it has gotten harder and harder for any of us to pretend that we are innocent victims, that we aren’t just hoping we can maintain our own personal wealth and well-being for a few more decades before the day of reckoning.
But it is interesting to see just how clever Madoff was:
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, professo
r 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.