The Chronicle Review

We Are All Madoffs

Our relationship to the natural world is a Ponzi scheme

Adek Barry, AFP, Getty Images

Two young people scavenge plastic cups and bottles from a polluted river in Jakarta, Indonesia.
August 31, 2009

Everybody hates Bernard Madoff, and for good reason. He bilked hundreds—thousands—of people out of billions, perhaps tens of billions, of dollars, destroyed numerous life savings, ruined the future prospects of many of those who had trusted him, all the while living in ostentatious, and, it is now painfully clear, despicable luxury.

He did all this via what may be the largest Ponzi scheme in history. There is no question that Madoff was a perpetrator and not himself a victim: He was (and presumably still is) highly intelligent and sophisticated in the ways of the financial world. He knew precisely what he was doing, and did it nonetheless. In addition to celebrating his prison sentence, disinterested observers and victims alike therefore found themselves wondering aloud: What was he thinking?

Beyond the illegality of Madoff's scam, why didn't he consider his responsibility to his clients, to their future, and even to his own? Didn't he know that there would be a day of reckoning, that he couldn't keep up the crazy, fancy footwork indefinitely, that sooner or later his whole deceitful house of cards would come crashing down?

As pleasurable as it is to cast stones at genuine villains, let's pause and redeploy the above housing metaphor, as in "people in glass houses shouldn't throw stones." Or try a biblical admonition, as in Matthew 7:3: "And why beholds thou the mote that is in thy brother's eye, but considered not the beam that is in thine own eye?"

Because the horrifying reality is that in our fundamental relationship to the natural world—which is, after all, the fundamental relationship for everyone—we are all Madoffs.

As we have all read, Ponzi schemes are also called pyramid schemes: A relatively small number of initial investors (the pointy tip of the pyramid) get paid off by money received from an ever-larger number of subsequent investors, who can, in turn, only profit if there are yet more investors. By this time, the investors can be identified as "suckers," because their payoff, instead of being founded on solid reality, depends on another round of entrepreneurial artifice.

It may be counterintuitive, but there is nothing inherently evil about pyramid schemes. They aren't like murder, rape, or assault and battery, in that no one is necessarily injured, either physically or financially, during their operation. Indeed, early participants can come out ahead, and there is no guaranteed point at which even later investors are bound to lose out. The problem derives from one simple, incontrovertible fact: Pyramid schemes aren't sustainable. Eventually they fail. It isn't possible to keep recruiting a never-ending supply of suckers.

Of course, as the great John Maynard Keynes once famously noted, in the long run, we are all dead. Although Keynes directed his quip against complacent fellow economists who were inclined to point out that all financial crises eventually resolve, when it comes to the nexus of pyramid schemes, economic "progress," and ecosystem sustainability, the long run is precisely when things do not work out.

Make no mistake: Our current relationship to the world ecosystem is nothing less than a pyramid scheme, of a magnitude that dwarfs anything ever contemplated by Charles Ponzi, who, before Madoff, was the best-known practitioner of that dark art. Modern civilization's exploitation of the natural environment is not unlike the way Madoff exploited his investors, predicated on the illusion that it will always be possible to make future payments owing to yet more exploitation down the road: more suckers, more growth, more GNP, based—as all Ponzi schemes are—on the fraud of "more and more," with no foreseeable reckoning, and thus, the promise of no comeuppance, neither legal nor economic nor ecologic. At least in the short run.

In the long term? We're all dead, along with the planet.

After World War II, business leaders worried how to keep the economy moving; their answer was to make consumption a fetish. "Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals," wrote the retail analyst Victor Lebow. "We need things consumed, burned up, worn out, replaced, and discarded at an ever-increasing rate." And we have done just that. Even as average family size has declined in America, the average house size more than doubled from 1949 to 2006; Americans have used up as much of the earth's mineral resources since 1940 as all previous generations combined; and in the process, in the last two centuries the country has lost half of its wetlands, 95 percent of its old-growth forests, and 99 percent of its tall-grass prairies. Nor are those trends uniquely American or simply a result of advertising-driven consumerism: Over the last three decades, to take just one example, the pace of soil loss in Africa has increased twentyfold, with topsoil disappearing 20 to 40 times more rapidly than it is being replaced. Often, our Ponzi scheme derives less from the nefarious scams of greedy malefactors than as a side effect of how we treat the planet, in a largely innocent effort to get ahead, or merely to stay alive.

Consider the use of antibiotics to combat disease-causing microbes. In a Ponzi-pattern if ever there was one, initial large-scale treatment eventually demands a commitment to more and more antibiotics, as pathogens evolve more and more resistance. Soon, effectiveness requires not only increasing the doses, but introducing more and more "wonder drugs," a treadmill whose every step makes a kind of logical, utilitarian sense, but that ultimately threatens to get us nowhere. Or worse.

At least antibiotics work: They are based on solid ground, albeit a slippery slope. But nearly all current economic models of "development" rely upon an even-more unsustainable assumption: that the discovery of new resources (or alternatively, new inputs of capital, technological saviors of one sort or another, and so forth) will always come to our rescue, enabling us to postpone, indefinitely, any final audit.

In turn, and nearly without exception, economies are growth-based, presuming that the future will always bail out the present, thereby making up any deficits accumulated in the past. The basis of borrowing money—as fundamental to modern economies as one can get—is that money itself, properly employed, can be counted upon to expand over time, thereby enabling one to repay the loan, with interest. And of course, the willingness of lenders to lend depends on their corresponding confidence that the quantity loaned will eventually become greater than if it simply sits around and isn't put to work. In short, the presumption is that value can always be added—the Ponzi/Madoff presumption that there will always be more investors.

It may be more than a coincidence that the Madoff fraud unraveled at about the same time as the Great Recession of 2008-9, which revealed a comparable fraud at its core. Both involved unrelenting, self-deluding, unsustainable expansion built upon paper profits and a commitment to keep the music playing lest the participants discover that there aren't enough chairs.

We might do well to simply slow down, as Pablo Neruda suggests in his poem, "Keeping Quiet":


If we were not so single-minded
about keeping our lives moving,
and for once could do nothing,
perhaps a huge silence
might interrupt this sadness
of never understanding ourselves
and of threatening ourselves with death.


In ecologies, just as in economies, you simply cannot keep moving and growing and developing and mining your capital, assuming infinitely available resources and a natural environment of such unfailing elasticity that it will swallow our effluent forever and continue to provide a steady supply of resources into the bargain.

In his Critique of Judgment, Immanuel Kant stated that human beings would never be able to comprehend the deep details of the living world. "It is absurd," he wrote "for men to make any such attempt or to hope that another Newton will arise in the future, who shall make comprehensible by us the production of a blade of grass according to natural laws which no design has ordered." A few decades later, Darwin emerged as precisely that impossible Newton of grass.

Two centuries after Kant, free-market economists continue to revel in a version of Kant's error, claiming that we will never understand the complexities of markets and will therefore never be able to manage them effectively. They insist that we must simply let the magic of the market take over, whereupon, in the words of Adam Smith, even though each participant "intends only his own gain … he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

Smith was thinking of social benefit, but his approach has been expanded to include a typically unspoken but widely assumed subordination of ecological costs to presumed economic payoff: Don't worry, we are told, about exploiting the world ecosystem, unbalancing its capacity to absorb insults—just go, go, go, or, as in the mind-bogglingly inane chant of the McCain-Palin ticket during the 2008 elections, "drill, baby, drill."

Although part of my argument is, in fact, a criticism of market-based capitalism, it is not an endorsement of its traditional alternative, communism. In communist countries, production goals have typically replaced profit maximization as the "bottom line," leading, if anything, to even-more-blinkered thinking and environmental devastation. I recall international meetings during the 1980s, attended by environmentalists from capitalist and communist countries, each naïvely expecting that the grass would be ecologically greener on the other side of the ideological fence. Under capitalism, it has been said, man exploits man, whereas under communism, it's the reverse. Either way, the environment has been the real loser.

The Communist Manifesto can be seen not simply as an indictment of capitalism, but also as a breathless paean to its effectiveness. Marx and Engels believed that industrial capitalism had solved the problem of production, leaving only the question of fair distribution. Thus far capitalism has largely been able to regroup and find new avenues for economic growth, even following severe depressions such as those of the 1870s, 1890s, and the 1930s. This time around, however, the ecological demands of this particular Ponzi scheme may be leaving us with a dangerously depleted world.

The standard response of pro-growth economists—and let's face it, nearly all economists are pro-growth—is that innovation generates concrete value, producing healthy growth and ultimately compensating for any resource depletion. And to some extent, critics have largely been kept on the defensive by such compensatory innovations as steam engines, internal combustion, nuclear energy, a previously unimagined petroleum economy, chemical, bio- and nano-engineering, and so forth.

But let's imagine, say, that tomorrow someone discovers a source of cheap, pollution-free, and inexhaustible energy. Even that extraordinary advance wouldn't diminish the fundamental Ponzi-nature of economic activity; at most, it would merely reset the time of reckoning, possibly making it even sooner, since with cheap—even free—energy, the exhaustion of other material resources would only accelerate; it would, for example, be cheaper to build and operate cars, home appliances, and so forth, which in turn would increase the demand for doing so, thereby increasing the rate at which nonrenewable resources used in their construction are consumed.

It is widely assumed that a healthy, clean environment is affordable only when a country's economy is strong. The reality is precisely the opposite: A strong economy is possible only when the environment on which it depends is healthy and strong. A related reality is that endless growth is literally impossible, for economies no less than for organisms, just as Ponzi schemes that depend on an endless supply of new subscribers are certain to be unsustainable.

It is a painful message, one that few of us—including those who self-righteously condemn Madoff and his Ponzi proclivities—are willing to embrace. As the American poet Richard Wilbur put it in "Epistemology":


We milk the cow of the world, and as we do
We whisper in her ear, "You are not true."


But it is true. And no amount of denial or wishful thinking will change the cow of the world into an infinitely productive, everlastingly dependable cash cow, an ecological teat that never dries up. Madoff presumably knew that, but kept sucking—and accumulating yet more suckers.

No one is innocent, and no one gets off the hook.

It is easy to point a finger at Charles Ponzi or Bernard Madoff, and even, perhaps, at their victims—much harder to recognize, as Zen Master Thich Nhat Hanh has written, that we are all grass snakes, arms merchants, sea pirates. We are also Ponzis and Madoffs who profit from economic schemes that are fundamentally unsustainable and thus, in the deepest sense, frauds. Madoff eventually got 150 years in the slammer and worldwide derision. What's in store for the rest of us?

David P. Barash is a professor of psychology at the University of Washington. His most recent book, with Judith Eve Lipton, is "How Women Got Their Curves and Other Just-So Stories: Evolutionary Enigmas" (Columbia University Press, 2009).