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Wednesday, June 12, 2013

Mexico: The "Pyramid Scam" of Neoliberal Economics - Claudio Lomnitz

La Jornada: Claudio Lomnitz*

When back in the 1940's U.S. anthropologist George Foster studied the people of Tzintzuntzan in the lake region of Michoacán, he observed that the campesinos in the region usually spoke about the local economy as a "zero sum game"; that is, they thought that if someone in the community enriched himself, others would be impoverished to the same extent: the wealth of one was poverty for the other. Foster baptized that worldview the "image of limited good", and he postulated that campesino societies tended to that kind of economic theory.
MV Note: A campesino is a person linked to the field (el campo) where crops are grown; before the Spanish arrived, campesinos were esteemed as stewards of the land (Mother Earth) who produced the foods (corn, beans, etc.) that sustained the community. 'Sustainability' was assumed to be essential for 'husbanding' Mother Earth.
At that time, the "image of limited good" appeared primarily as a conservative ideology, blind to the fruits of technological innovation that were capable of multiplying everyone's wealth without impoverishing anyone. And Mexico as a country had fully launched itself in favor of the opposite formula: that of securing "progress" for all to be generated by education and productive innovation. The result was that the second half of the twentieth century and the first decade of the twenty-first century were a time of frenzied expansion, which produced a genuine earthquake in the collective economic imagination of the campesinos.

Today now that we're finally at a time of demographic stabilization, it is worth thinking about the perverse side of the religion of progress--a side that the campesinos, with their "image of limited good", had intuited from the beginning. Together with the growth generated by innovations in production, growth also proliferated based on forced indebtedness--that is, in the impoverishment--of others.

The crazed growth of the last century (population and economic growth, urban growth, mass population movements [country to city]) was handed by the proliferation of forms of extraction [mining, lumber industry] and by completely irresponsible exploitation, to which any sharp and precocious campesino would have objected ... .

These forms of exploitation have the pyramid--or rather, a pyramid scam [Ponzi-like scheme]--as its prototype.

Let me explain. The campesino economy of "limited good" seeks to institute exchange systems that might be called "circular"; that is, they favor reciprocity ("today for you, tomorrow for me") and redistribution ("the richest pay for the [community's annualfiesta"). These forms of exchange are consonant with a society that imagines itself to be an entity that reproduces itself, that endures. The economies of galloping transformation, such as the one that Mexico has had for awhile, are based on an image of a future in which all of today's problems will be resolved in another way, by which all responsibility for the acts that we do today is blurred. Changes, sometimes enormous, are introduced with the idea that now everything will even out, thanks to the law of supply and demand, and unlimited capacity for innovation. In that sense, the runaway growth economy is based on a bet on the future and is, therefore, an economy that is open to pyramid scams.

We might think, for example, about environmental depredation. Quick money is earned from extraction of a resource, with the idea that future generations will depend on an economy that might no longer require the resource, or that there will be some new technology that will allow its generation in some other way (although this technology is still completely unknown, and in reality might not ever be invented). Environmental degradation can also be understood as a Ponzi scheme, where resources appropriated by today's operators will be paid for by future generations (yet unborn). It's just one example, but there are many others: the abuse of easy credit (which led ... most recently, to the 2008 financial crisis); the construction of Pharaonic public works that increase political capital, but that shift high costs to the future; the promotion of comfortable or easy technology solutions that will be repaid by a population that might benefit little from them (for example, promotion of the private car as a means of urban transport). And a long et cetera.

When Octavio Paz wrote his "critique of the pyramid", he was targeting the State, which he imagined to be a solid stone pyramid, reddish in color from the blood of those sacrificed. Today, the prevailing critique is of a "scam pyramid". Unlike the pyramids of old, this "scam pyramid" has pure speculative smoke at its base, and it cyclically collapses in clouds of dust that ill-conceal a sea of ​​ruin.

Particularly striking is the quantity of businesses that, without being 100 percent fraudulent, nonetheless have the structure of a Ponzi scheme. Think, for example, of the enormous popularity achieved in Mexico by corporations based on what is euphemistically called multi-level marketing and that have the pyramid structure: Amway products, or those of Herbalife (both with roots in Mexico's low- and middle-income groups, despite the fact that both have had to defend themselves in international courts over allegations of fraud, justly based on their use of schemes very similar to the scam pyramid [Ponzi scheme]). Businesses engaged in migrant remittances have also had such features: the sale of domestic appliances on installment plans to relatives of migrants "hooked" on a flow of dollars and that can only be repaid so long as the migrant has work and is willing to continue sending monthly remittances.

In summary, we could say that the Mexican population, in the main, proceeded from imagining its economy as a labor based on limited, scarce assets that could not be reproduced except through their own work; to imagining its economy as a labor based on property that they do not need to care for, because now they will sell it to generations that will have to pay the piper.

The interesting thing is that today Mexico has stopped growing demographically. For the first time since the early nineteenth century, the Mexican population has stabilized. It is possible that this change, which will have profound consequences, might finally lead us to a new "critique of the pyramid" that will focus not so much on the question of the State as a monolith, but on the economy as a Ponzi scheme for future generations. Spanish original

*Claudio Lomnitz was born in Chile and earned his undergraduate degree at the Autonomous Metropolitan University at Iztapalapa (Mexico City) and his Ph.D. from Stanford University (1987). Dr. Lomnitz focuses on the history, politics and culture of Latin America, particularly Mexico. "Evolución de una sociedad rural" (Mexico City, 1982) was a study of politics and cultural change in Tepoztlán, Mexico. His conceptualization of the nation-state as a kind of cultural region culminated in "Exits from the Labyrinth: Culture and Ideology in Mexican National Space" (California, 1992). He has also concentrated on the social work of intellectuals, developed in works on the history of public culture in Mexico, including "Modernidad Indiana" (Mexico City, 1999) and "Deep Mexico, Silent Mexico: An Anthropology of Nationalism" (Minnesota, 2001). Recent works include "Death and the Idea of Mexico" (Zone Books, 2005), a political and cultural history of death in Mexico from the 16th to the 21st centuries. He is currently finishing a book on anarchism, socialism and revolution in Mexico (c. 1910) that inspects the cultural and political history of trans-nationalism.