The intergenerational ponzi scheme

A ponzi scheme is a classic scam that despite being guaranteed to collapse continues to work and leave people penniless. It goes something like this. John tells Jane that he has a fantastic money making opportunity. If Jane invests she will get an annual return on that investment of 20%. Wow! Jane invests and sure enough next year she gets a payment of 20% of her original investment. Other people hear about her success and sign up. Soon John has many investors and a large amount of money in circulation. But none of that money was ever invested.

The second person that signed up to John’s scheme was Jack. John simply took 20% of Jack’s money and gave it to Jane. The rest he pocketed (and most probably promptly spent). Just like he pocketed Jane’s money. Of the third person’s money, John took 20% for Jane and 20% for Jack. The fourth person’s money paid the 20% of the first three. And so on, until John is unable to recruit enough new people to pay the returns of the current list of ‘clients’. There’s a short delay during which John avoids calls, perhaps changes address and if he’s sensible hires a good lawyer (with whatever money is left). Then the whole system collapses in on itself. Well, that’s the basics. Real life ponzi schemes can be much more complicated than that. But they all work on the same principles. Why they work, why people get sucked in and lose perhaps everything they have, are very interesting questions. Questions that get asked quite a lot since Bernie Madoff. If you rip people off to the tune of $18 billion dollars I guess that will make the news for some time.

Here’s an idea. We are currently operating an intergenerational ponzi scheme*. We are using up finite resources at an increasing rate. There are no plans to replenish these resources. The assumption is that someone else will figure out how to live in a world with less oil and gas. They will also figure out how to adapt to a climate that is degrees warmer than today and how to grow the food needed to feed 8-9 billion people when supplies of phosphate fertilizer begin to run out. Who are these geniuses? Future generations. We are not borrowing resources and environmental conditions from these people, but directly taking from them. Or rather, the best that we seem to be able to do is to take finite resources from them in return for the promise of technlogical, scientific, social and political developments that, by the time they exist, will allow them to solve the problems that were in large part caused by our actions. But is that really the case? Do we really believe that? These transformative advances sound rather like the incredible financial returns that Bernie Madoff claimed. Are our actions in any meaningful way guided by the welfare of people that do not yet exist and have no voice and so input into contemporary decision making?

To what extent the welfare of these future people should be considered now, is a fascinating question that seems to cut deep into our notions of right and wrong and fairness. I first came across Derek Parfit’s book Reasons and Persons twenty years ago as an undergraduate (Twenty years ago! Good grief…). This had a profound impact on me, particularly the final section that discussed obligations to future generations. For example.

If I shoot an arrow out of my back garden and if that arrow travels over several houses before hitting someone in the chest and kills them, then I’m just as responsible as if they were at the bottom of my garden (making the assumption that in both instances I didn’t mean to hit the person – it was an accident). Having the consequences of your actions seperated in space doesn’t diminish the responsibility to not shoot out arrows randomly or anything else that may recklessly endanger someone else.

Imagine shooting the arrow with superhuman strength so that it travels half way around the world before killing someone. Next time you release the arrow with such energy that the arrow flies off and into orbit where it stays for many years, perhaps decades before finally falling to Earth and, yes, unfortunately for the person concerned, hitting and killing someone. In fact, by the time the arrow comes back to Earth, you may be but a memory, having died after a long and happy life. If every time you drew back the bow you knew that you could be endangering someone’s life then it doesn’t seem to matter where or when the consequences of your actions finally play out. We seem to be in something of a state of denial about the consequences of our actions on future generations by assuming that by the time the impacts of our behaviour are felt, the world will be so changed that these impacts will no longer be harmful, in fact in some sense beneficial. From arrows to ploughshares.

We pull back, release and see our actions take flight with the empty promise that when they fall back to the ground they will have been transformed from mortal hazards to intergenerational largesse.

* Within the context of  ecological/environmental sustainability, I think the first use of the expression ‘intergenerational ponzi scheme’ was this article by Kim Stanley Robinson. The expression had been used prior to that, but with respect to the sustainability of social welfare systems (in the USA).

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