Magazine article USA TODAY

Welcome to Ponzi World

Magazine article USA TODAY

Welcome to Ponzi World

Article excerpt

TODAY'S MISMANAGED WORLD economy has many of the characteristics of a Ponzi scheme. A Ponzi scheme takes payments from a broad base of investors and uses these to pay off returns, creating the illusion that it is providing a highly attractive rate of return on investment as a result of savvy investment decisions when, in fact, these irresistibly high earnings are, in part, the result of consuming the asset base itself. A Ponzi scheme investment fund only can last as long as the flow of new investments is sufficient to sustain the high rates of return paid out to previous investors. When this no longer is possible, the scheme collapses. Although the functioning of the global economy and a Ponzi investment scheme are not entirely analogous, there are some disturbing parallels. As recently as 1950 or so, the world economy was living more or less within its means, consuming only the sustainable yield, the interest of the natural systems that sup port it. Then, as the economy doubled, and doubled again, and yet again, multiplying eightfold, it began to outrun sustainable yields and to consume the asset base itself.

A 2002 study by the National Academy of Sciences concluded that humanity's collective demands first surpassed the Earth's regenerative capacity around 1980. As of 2009, global demands on natural systems exceed their sustainable yield capacity by nearly 30%. This means we are meeting current demands in part by consuming the Earth's natural assets, setting the stage for an eventual Ponzi-type collapse when these assets are depleted.

As of mid 2009, nearly all the world's major aquifers were being overpumped. We have more irrigation water than before the overpumping began, in true Ponzi fashion. We get the feeling we are doing very well in agriculture, but the reality is that an estimated 400,000,000 people are being fed by overpumping, a process which is, by definition, short term. A similar situation exists with the melting of mountain glaciers. When glaciers first start to melt, flows in the rivers and the irrigation canals they feed are larger than before the melting began. Yet, after a point, as smaller glaciers disappear and larger ones shrink, the amount of ice melt declines and the river flow diminishes. Thus, we have two water-based agricultural Ponzi schemes running in parallel.

There are more such schemes. As human and livestock populations grow more or less apace, the rising demand for forage eventually exceeds the sustainable yield of grasslands. As a result, grass deteriorates, leaving land bare, facilitating its transformation into a desert. In this Ponzi scheme, herders are forced to rely on food aid or they migrate to cities. Three-fourths of oceanic fisheries are being fished at, or beyond, capacity, or are recovering from overexploitation. If we continue on this course, many of these fisheries will collapse. Overfishing, simply defined, means we are taking fish from the oceans faster than they can reproduce. The cod fishery off the coast of Newfoundland in Canada is a prime example of what can happen. Long one of the world's most productive fisheries, it collapsed in the early 1990s and has yet to recover.

Paul Hawken, author of Blessed Unrest, puts it well: "At present, we are stealing the future, selling it in the present, and calling it gross domestic produce We can just as easily have an economy that is based on healing the future instead of stealing it. …

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