It is hard to imagine a more obvious case of a pyramid scheme than overshoot. Humanity’s resource overuse is clearly robbing the future to pay for the present. It requires constant depletion of our underlying natural wealth to maintain the current income. Ultimately, if not rectified, this ends in ecologically bankrupting humanity.
Given the damage they cause, financial pyramid schemes are illegal in most countries. Yet, ecological ones are still oddly encouraged, tolerated, or ignored. Their potential damage, though, is no less.
Pyramids schemes (“Schneeball-System” in German) are a scam in which you rob Peter to pay Paul. Unfairly, they are often attributed to Charles Ponzi, at least in the US. It’s possibly another gender bias in our depiction of history, because even in the US, fraudster Sarah Howe, also operating in the US, predated Ponzi by at least 40 years. She swindled women in Boston in the late 1870s and 80s.
Even more fascinating is Adele Spitzeder in Germany a few years earlier. This actress and singer ran a "Ponzi" bank with glamour and confidence. She ended up defrauding over 30,000 people, leading to a loss currently valued at 400 million Euros. She managed to run her 'bank' for three years, and was considered the wealthiest woman in southern Germany until she was put to trial in 1872.
There are good reasons to believe that others figured out pyramid schemes even before these two women.
No one, though, has so far been greater at implementing financial pyramid schemes (called Ponzi schemes in the US) than Bernie Madoff, whose version involved $65 billion of client money. His strategy, like his predecessors, consisted of relying on a steady flow of new client investments, which he used to provide “returns” to earlier investors. He took from the future to pay for the present. Once he was caught, the jurisdictional system then took his future to pay for his past, after the 2008 financial crisis became the last straw to break that pyramid scheme's back. In 2021, he died in jail.
Yet collectively, Madoff has been massively outdone: Our current economies are running the largest pyramid scheme ever. We are depleting the Earth's future biological resources to run present activities. Currently, humanity consumes the planet's biological resources more quickly than Earth can replenish them. Whether financial or ecological, debt balloons eventually burst. Humanity's ecological debt shows up as excessive carbon in the atmosphere, collapsing fish stocks, shrinking forests, eroding soils, and ground-water drying up.
Pyramid schemes are bound to come to an end; the question is whether by design or disaster. I much prefer deliberate design over dumped-on disasters. But choosing design requires honest accounting and resolve.
Of course, this ecological global pyramid scheme is not actively set up and run by a modern day scoundrel. Instead, it results from the collective impact of millions of daily decisions by governments, businesses, consumers, citizens, and thought leaders, all acting on outdated assumptions about economic and social dynamics and their relationship to our planet’s ability to support us all.
More realistic assumptions that recognize our context of overshoot can therefore help us find ways to reduce your risk exposure to this pyramid scheme. I’d love to help you with that.
An extended version of this blog I wrote for the International Society of Sustainability Professionals in September 2024. I called it: "Ponzi Schemes Are Destructive, Particularly the Biggest One: Global Overshoot."
For more background on the ecological Ponzi scheme and its implications, consult my chapter "Is the Global Economy Running a Pyramid Scheme?”, Pages 191-204 in Peter A. Wilderer, Martin Grambow, Michael Molls, Konrad Oexle (editors) 2022, Strategies for Sustainability of the Earth System, ISBN: 978-3-030-74457-1 https://doi.org/10.1007/978-3-030-74458-8
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