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Our Global Ponzi Economy

By   Follow Me on Twitter     Message Ross McCluney     Permalink
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View Ratings | Rate It Headlined to H3 10/14/09

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In a 7 October Plan B 4.0 "book byte" Lester R. Brown, Director of the Earth Policy Institute wrote:

"Our mismanaged world economy today 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. It creates 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 can last only as long as the flow of new investments is sufficient to sustain the high rates of return paid out to previous investors. When this is no longer possible, the scheme collapses--just as Bernard Madoff's $65-billion investment fund did in December 2008.

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"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 support it. But 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.

"In a 2002 study published by the U.S. National Academy of Sciences, a team of scientists 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 percent. 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 that we're doing very well in agriculture---but the reality is that an estimated 400 million people are today being fed by overpumping, a process that is by definition short-term. With aquifers being depleted, this water-based food bubble is about to burst.

"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 started. But 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 Ponzi schemes running in parallel in agriculture.

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"And there are more such schemes"."

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 product. We can just as easily have an economy that is based on healing the future instead of stealing it. We can either create assets for the future or take the assets of the future. One is called restoration and the other exploitation."

Lester Brown pointed out that the larger question is whether our continuing with business as usual--with overpumping, overgrazing, overplowing, overfishing, overloading the atmosphere with carbon dioxide, and, I would add, overpopulating--can be sustained.

"How long will it be before the Ponzi economy unravels and collapses? No one knows. Our industrial civilization has not been here before." "Bernie Madoff's Ponzi scheme was set up with the knowledge that it would eventually fall apart. But our global Ponzi economy was not intended to collapse. It is on a collision path anyway, because of market forces, perverse incentives, and poorly chosen measures of progress."

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These are policy issues, generally set by "leaders" in industry and government, but they are failing to lead us away from the danger, the cliff toward which we approach. Most of us feel like we're the little guys, can't change large-scale misguided policy, don't have access to the powerful leaders in big cities far away from us. By banding together in growing numbers, however, we can affect national policy. The more we write to our leaders about the folly of past policy decisions, and the failures of new government and regulatory policy to change the rules of the "game" toward true sustainability, the more likely it will be that our "leaders" will get the message. The more we work to change our individual and local community behaviors, then communicate these changes to our leaders, the more likely they'll get this message: their leadership has failed and for them to keep their current job positions, perhaps they should start doing a little "following" toward more rational, sustainable, and stable policies.


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For 30 years Dr. McCluney was principal research scientist at the Florida Solar Energy Center, a research institute of the University of Central Florida. He holds B.A., M.S., and Ph.D. degrees in physics and has published over 60 popular and (more...)

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