• July 25, 2014

We Are All Madoffs

Our relationship to the natural world is a Ponzi scheme

We Are All Madoffs 1

Adek Barry, AFP, Getty Images

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

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).

Comments

1. cwinton - August 31, 2009 at 09:00 am

Well said, but the author ignores the greatest Ponzi scheme of all; namely, the unbridled growth of human population, which after all is what ultimately undergirds all of these other Ponzi-like extravaganzas of human misbehavior.

2. fputnam - August 31, 2009 at 01:02 pm

Too true. And the solution (or at least a suggestion) is ...?

3. weizhang2009 - August 31, 2009 at 06:09 pm

A great piece. But like fputnam, I am also wondering what the solutions are (or at least a suggestion)? Prof. Barash criticized the current consumerism mode in which our society operates. But what is the alternative mode? To look out in the future, it is better to be optimists than pessimists. The past experience told us that technological innovations have always came to rescue us, if we kept trying to save ourselves. It would be difficult to convince people that it is not gonna work this time.

4. jdeng - August 31, 2009 at 06:45 pm

Modern entrepreneur-ism paints itself an outfit of social welfare - look, how much money we donated for kids or for Africa - but is just the very driving force to push people falling into the consumerism sinkhole. Technology? That doesn't really help either, look how much Microsoft and Google, along with the iXXX brands, have made us keeping on thinking about more and more, faster and faster.
I regard this a spiritual problem, and wouldn't count on any physical solution, nor on Darwinism to take effect (before the huge silence - as Neruda put it - falls upon us). The solution would only come from a renewing of our mind. Using another piece of biblical wisdom, "piety with contentment is great gain".
I agree with the author, that there's a bit of Madoffs in everyone of us. Yet we need to tame that beast, now.

5. lairdwilcox - August 31, 2009 at 07:46 pm

Most of the issues addressed in this article are the result of uncontrolled population growth. Imagine a world with far fewer people in it and you'll see how much better our environmental situation would be. In the United States, for example, the optimum population would be between 100 and 125 million people and we're now passing 300 million.

6. alpern - September 01, 2009 at 09:27 am

No, population is not the major issue, greed and lack of appreciation for the natural world are the major issues.

7. swish - September 01, 2009 at 10:16 am

"We need to tame that beast, now," says jdeng. Sure, let's do that. Change the humans. Problem solved.

Most people I know would say that religion and spirituality are important in their lives. And most would say that they are on the side of the environment. But they still drive their SUVs all over tarnation, avoid revolving doors, run their air-conditioners nonstop, or whatever their particular wasteful behaviors may be.

Religion, or spirituality, or ethical appeals just aren't effective in changing behavior, at least not longterm. Financial incentives and penalties are more effective, but our corporations are highly motivated to stop our government from imposing them.

I guess we'll have to move to another planet, if we can locate a good one and build the spaceships in time.

8. davidso - September 01, 2009 at 10:27 am

Both population and per capita consumption matter. To give one example, the US has about 3% of the global population and yet is responsible (directly and indirectly) for 25-50% of global carbon emissions. Small populations whose behaviors are far from sustainable can be extremely damaging to the environment. Large populations whose behaviors are sustainable can present no environmental problems.

9. jaysanderson - September 01, 2009 at 10:58 am

It is foolish to cite population and carbon emissions as the only statistics used to determine the value of a nation or a people. One should include the astonishing number of medical and scientific advances that have been shared with the world as a result of American consumption. Vaccines, cancer treatments, medical imaging devices, space exploration (and the thousands of resultant discoveries and technologies)--the list is quite long.

The intentional, singular, villification of America and Americans is not only tiresome, it is false. Peddle the gloom and doom to whomever will listen, but in the event that the current administration, this article's author, and most of the commenters accomplish the destruction of this nation, the world's best hope will have been destroyed as well.

10. rattushomo - September 01, 2009 at 11:16 am

Actually both greed and population growth are at the heart of this. And what can be done at this point, not much, unless you have a magic wand which get reduce human reproduction rate and greed. It will eventually fix itself when the whole system collapses.

11. markwitte - September 01, 2009 at 05:34 pm

I guess it's nice when someone in another social science expresses some shallow level of interest in what economists think, and even goes so far as to find a quote from the likes of Keynes.

If Professor Barash is actually interested in this topic, which economist have been writing about for over two hundred years, I'd recommend he start with Malthus, move on to John Stuart Mill, then Jevons, Marshall, Pigou, Hotelling, Solow, and Julian Simon. That will leave him just some thirty years behind the field.

Or, he might just want to look at this:
http://www.dilbert.com/strips/comic/1992-03-04/

12. unblinking - September 01, 2009 at 09:00 pm

Those who suggest that time, technology, or "progress" will solve this problem are deluding themselves, and placing the rest of us in mortal peril. Economics has no literal relevance here; Barash is merely offering an apt metaphor. Get a clue!

People who work in the field -- literally, out of doors in the natural world in biology or ecology, for example -- see and understand what is happening. By and large, we / they are horrified. There simply *are* no theories, concepts -- or even *fantasies* -- that might compensate for the loss of habitat function and environmental quality humans have already caused. Unless you're doing (or reviewing) hundreds of hours of formal field research each year, you are insufficiently aware of reality to make an informed statement on such an important topic.

Read the article again; accept that you might learn something; stop pretending economics (or other forms of mindless optimism) can be an answer to actual problems. The reality Barash describes is not correctable, except by elimination of the vast majority of the human race, or its accoutrements. Our current "Ponzi scheme" of consumption is already irreversibly creating the very circumstances that will lead to that elimination. And, it will be *brutal*.

13. mbest - September 02, 2009 at 12:58 pm

Education of women reduces birth rate.

What if Madoff, instead of using all his ill gotten gains for his own pleasure had instead lived fairly frugally and spent his money on education, especially sustainability education and on the issues that prevent education, like poverty? What if he had funded great environmental conservation projects and public health approaches to crime and violence?

We cannot beat death, our own or that of our civilization, but I believe we can birth a new civilization that lives more lightly on the earth. Let us bend our efforts to weaving together all the threads of good that are rising all around us. Let us craft together a tapestry of irrisistable beauty and strength. Let us bend that genetically inherited greed and other tendencies that are no longer contributing to our survival back on themselves until they are contained in harmless domains. In relationship and collaboration, in community and inclusion are our salvation.

14. 11227093 - September 03, 2009 at 09:17 am

There is no connection between pyramid schemes and the use of global resources. The former is based on fraud, while the latter is caused by lack of property rights. We overuse the oceans because no one owns them. The incentive to harvest fish and use the ocean to get rid of waste is not curtailed by having to pay for the cost of them. Environmental degradation is worst in centrally planned economies. Of course, this is not new thought, Garret Hardin wrote Tragedy of the Commons in 1968 and Ron Coase wrote The Problem of Social Cost in 1960.

Gary Wolfram



15. dpbarash - September 03, 2009 at 08:01 pm

I'm grateful for (most of!) the commentators, especially the points made about population. Indeed, if I were to rewrite this article, I'd point especially to population growth as not only a perfect theoretical example of an ecological Ponzi scheme, but also one with deeply destructive consequences. This isn't to say that population growth maps perfectly upon environmental abuse; it doesn't. However, "in the long run," and if we are ever to achieve genuine sustainability, there seems no alternative to achieving population stability - ideally, population decrease - en route.

As to strategies for getting out of our species-wide Ponzi scheme, there is no shortage of specifics. My goal in this piece has been to try to ramp up awareness. And judging from my email in-box, it has been at least somewhat successful.

David P. Barash

16. mjcohen - September 04, 2009 at 05:04 pm

The root of the Ponzi scheme has been identified. It is this: an unreasonable, but bonded, bias in our thinking rewards us for damaging the prime source of our personal, social and environmental well-being.

Our bias PAYS us to ignore that:

- the flow of natural systems, in and around us, has biologically and psychologically designed us to be supportive citizens of the global life community, not conquers of it.

- nature's supportive ways sensibly nurture, purify and restore our well being and this includes our ability to think clearly. 


For more than 99 percent of our lifetime our thoughts and senses are disconnected from direct sensory contact with nature's revitalizing flow. This excessive separation of our psyche from the nature's grace creates problems that we can't solve. It estranges us. We are removed from the source of our ability to think and feel like nature's self-correcting powers work.

When we wisely choose to reconnect our psyche with nature, we benefit from participating in the wellness of the web-of-life and its capacity to recycle our stressed or contaminated thinking. This is demonstrated by the renewal that results from even a short walk in the park.

In our excessively nature-separated lives, it is the profound absence of nature's regenerative qualities and spirit that underlies our personal and environmental dilemmas.

Learning how to make lasting sensory contact with nature enables our psyche to bind with nature's healing ways and increase well-being. It empowers us to give nature the space it needs to help our thinking transform our misguided bonds into the beauty of sane, reasonable and balanced relationships. This process is available at http://www.ecopsych.com.

Mike Cohen

17. peterama - September 05, 2009 at 06:15 pm

Immanuel Kant, in refering to himself, called the tendency to think exclusively within a comfortable mental groove and to thereby reduce the complexity of things to irrational oversimplification "dogmatic slumber." If we are "all Madoffs" in some sense suggested by the slumbering Barash, then we are also equally all Mother Theresas and Joans of Arc and, more significantly, every shade of possibility in between. Speaking of Kant, it's especially helpful in thinking about con men that they are only possible thanks to the background ubiquity of trust. The tendency of writers to interpret Darwinian principles wrongly to the point of caricature is heightened in 'popular' writing on these topics, but that doesn't make reading our own human nature and circumstances back as exclusivlely "red in tooth and claw," and selfish, and ignorant, and amoral any less anachronistic and oversimple. One expects more than this from science, and can find it easily in Darwin's "view of life" by refusing to be trapped within his and others' 19th and 20th century metaphors and anthropomorphisms.

18. 11325814 - September 06, 2009 at 10:36 am

Yup, we're all Madoff's now. How tiresome this sustainability "debate" is. It's just another in the long line of blame the US for its profligate ways tropes. The best part of this piece is: for once a sustainabilian admits that what he sees in the mirror is responsible for the problem he imagines. What is a sustainable level of population to these misanthropes? If the US with its 300+ million is overpopulated, with Barash's 100-125 million as "ideal", who will he offer up for his final "sustainable" solution? It's worse than Madoff's visage in the mirror!

Are we deforesting and laying waste the planet with our development? Even Barash's examples struggle: Africa, not the centre of development is losing all that topsoil--is it the fault of US farmers? Consider other alternatives to Barash's dystopia: I've driven through central California for 40 yrs; where there once was grassland is now vineyards. Do the vines produce more oxygen and absorb more carbon dioxide than the grass? Not sexy old growth forests, or even rain forests, but much more surface area is generating crop and oxygen than with the native grasslands. Is the Sacramento Delta snail darter habitat worth thousands of unemployed Hispanic farm workers and more thousands of acres of land returning to dusty desert to pollute the atmosphere with particulate matter better than acres of tomatoes and other crops which feed the population, furnish jobs, generate oxygen, and keep the dust and temperature moderated? Have Barash and his overcrowded earth crew ever considered this: if one multiplies the square mileage of Texas by the number of square feet in a mile, and then dividing that amount by 6.5 billion, one comes up with about 1000 square feet of space for every person in the world. Let's put everyone into Texas and let the rest of the world go back to nature, with cockroaches, coyotes and rats allowed their native habitats--but then that would mean that Barash/Madoff would have to move from coffee-logged (sustainably harvested by empowered peasants, of course) Seattle! It's easy to sit in the ivory tower of UW, overlooking a lake and mountains and pontificate a solution for the hoi polloi who only want a job, but their "betters" thinking that there are too many of them, call for a return to an imagined better time with smaller populations. My immigrant forebears, peasants all, would be amused by Professor Barash's nostalgia for their less crowded but disease-ridden world, but would choose the one in which Professor Barash and I live.

19. marksmeritt - September 14, 2009 at 10:02 am

My masters thesis -- http://potluck.com/2001/01/the-unsustainability-and-origins-of-socioeconomic-increase/ -- explores the intersections of much of what has been brought up here and more. Population growth is a special case of economic growth, and it is driving an unsustainable increase in the complexity of social structures that parallels the unsustainable economic growth we are pursuing.

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