Humanity's Ponzi Scheme


Photo of Chinese shore by Bryan Welch 

A Ponzi scheme, also known as a “pyramid scheme,” is a scam in which an unethical financial entrepreneur promises investors big returns, which he fraudulently generates from the contributions of later investors. Bernard Madoff is the most notorious recent perpetrator. He raised tens of billions of dollars from thousands of investors before he went to jail in 2009. New investors heard about the big returns earned by earlier contributors to the scheme and eagerly put their money in, which allowed the con artist to fool several successive new generations of victims over the course of two decades. Every Ponzi artist faces a day of reckoning. Eventually, he runs out of new investors. His actual returns have never been equal to the dividends he paid out, but he made up the difference by draining new accounts. Eventually, he can’t pay dividends any more. He doesn’t even have the money to return to late investors because he’s spent their money paying off earlier contributors, building his reputation as a genius.

Our economic dependence on population growth bears a disturbing similarity to a global Ponzi scheme. It’s relatively easy to create “economic growth” so long as there are more consumers every year. Directly or indirectly, we are all dependent on population growth for our livelihoods. But eventually, resources run short. Every pyramid scheme eventually collapses when the supply of new investors dries up. If we accept the obvious fact that this planet’s resources are not unlimited, then eventually the global supply of new consumers will be constrained.

The connection between population growth and economic prosperity was clearly recognizable 600 years ago. One of the earliest recorded treatises on economic expansion was written by an Arabian philosopher, Ibn Khaldun, in 1377:

“When civilization [population] increases, the available labor again increases. In turn, luxury again increases in correspondence with the increasing profit, and the customs and needs of luxury increase. Crafts are created to obtain luxury products. The value realized from them increases, and, as a result, profits are again multiplied in the town. Production there is thriving even more than before. And so it goes with the second and third increase. All the additional labor serves luxury and wealth, in contrast to the original labor that served the necessity of life.”

Six centuries ago an Arabian philosopher understood the basic machinery pretty clearly. Economic growth is generated by population growth, augmented by technology and motivated by improving lifestyles.

1/14/2012 11:23:27 PM

Start with false premises and you wind up with false conclusions. The relatively primitive ag practices of the 3rd World are unsustainable. A crop picks up elements out of the soil which are carried away with the produce. If they are not replaced, then the soil becomes depleted. Modern commercial ag does replace those elements, but that process is heavily dependent on energy consumption. Right now that energy is supplied mostly by fossil fuels which are not renewable, but may well be replaced by improved technology. We have about 3 centuries to figure it out (natural gas should last us that long.)...The main problem with our population reaching the limit of the carrying capacity is one of quality of life: at the limit, competiton for the limiting resources is at it's maximum. Most natural species live at that point where the Law of the Jungle rules. Our species, living in industrialized countires, thanks to rapidly improving technology over the past few decades, has been lucky in that we have been living way below our limit in a veritable Garden of Eden with little real competition for those commodities. ...I agree our condition would be better served if we could limit population growth, but as I stated below, as long as population grows, then the economy must grow with it just to keep individual wealth status stable. ..Please note that the western industrialized nations have limited their population growth over the past 30 yrs. The notable exception is the US, thanks to unwise immigration policies.

Peter Salonius
1/14/2012 1:41:48 PM

HOW OLD IS HUMANITY'S PONZI SCHEME? -- I thought you might be interested to read a thesis that traces "evidence of human overshoot of carrying capacity" back to the advent of cultivation agriculture 10,000 years ago. POPULATION AND ECONOMIC GROWTH -- the 10,000 year misunderstanding HOW LONG HAS THE HUMAN FAMILY BEEN ENGAGED IN AN UNSUSTAINABLE RESOURCE DEPLETION SPIRAL? I hope you will be interested in the view that capitalism has been facilititated by the long-term draw-down of non renewable resources and the incremental destruction of ecosystem productivity that followed the adoption of the ecologically unsustainable cultivation agriculture which has used the soil resource (eroding its mass and depleting its fertility) non renew-ably. The evolution of money systems, that were designed to represent (or be a proxy for) real natural resource wealth, allowed the commodification of natural resources. Unfortunately while natural resources are limited --- the ability to create (print) money / debt that is supposed to represent natural resources is unlimited. As you read John Feeney's short article below, you will notice that there is a link to an OILDRUM article of mine that deals with the need for population reduction down to a level that can be supported by the productive capacity of the Earth that remains, after millennia of abuse by our exponentially increasing numbers --- ---increasing numbers that would not have been possible without the adoption of unsustainable cultivation agriculture. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++ It may be reasonable to suggest that human population overshoot of basic solar energy-fueled ecological carrying capacity began as soon as cultivation agriculture began the non renewable draw-down of arable soil productivity by the destruction of tight-rooted perennial forest and prairie species assemblages (MOVING OUT ON THE LIMB OF VULNERABILITY TOWARD RESOURCE EXHAUSTION), by migration to new lands as soil productivity was exhausted (MOVING FURTHER OUT ON THE LIMB OF VULNERABILITY TOWARD RESOURCE EXHAUSTION), and more recently by augmenting solar energy with temporarily available fossil fuels (MOVING AWAY OUT ON THE LIMB OF VULNERABILITY TOWARD RESOURCE EXHAUSTION). Soil degradation is starting to catch up to us, and there are no more lands to migrate to ---- even as we anticipate the growing scarcity of the fossil fuels that we have relied on to drive the most recent ~200 year exponential population and economic expansion. I hope you have time to read an essay dealing with our very long-term (10,000 year) shaky relationship with the ecosystems upon which we are completely dependent -- which suggests that massive population reduction is now away overdue. ++++++++++++++++++++++++++++++++++++++++++++++++++++ SEE: John Feeney's SHORT(and well referenced) article entiltled: 'Agriculture: Ending the world as we know it' at: This essay deals with the reality of the human condition, and how our willingness to destroy natural ecosystems with population and economic expansion for the last 10,000 years has brought us to the point where serious population reduction (planned or orchestrated by resource scarcity) is now inevitable in our future.

Dave Gardner
1/13/2012 2:19:40 PM

Kudos to Bryan Welch for highlighting how people are actually economic pawns, drones in service to an economic system addicted to growth. This aspect of overpopulation is too seldom written about. Dave Gardner Director of the documentary GrowthBusters: Hooked on Growth

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