A few years ago I wrote a story about an online pyramid scheme that operated as a fantasy stock market. Without going into how it was supposed to work, one of the things that fascinated me was the willingness of so many people I found to be rational and articulate to send money to a faceless entity in the Caribbean with the expectation that they would get a big return. Many explained their readiness to send thousands of dollars into the ether by pointing to the real securities markets in the United States, where the technology/Net bubble was expanding fast. “Take a look at that,” they’d say. “That’s the real Ponzi scheme.”
Soon enough, real securities regulators busted the fantasy stock market and most of the people involved lost all or almost all of the money they’d entrusted to the operators. The real stock market unraveled, too, drawing the attention of the same regulators, and many people who’d jumped in during the bubble lost all or almost all of the money they’d entrusted to what securities laws and the business pages would have identified as “legitimate companies.”
I didn’t buy the simple, cynical line that there was no difference between one world and the other. Real companies actually created goods and services to generate revenue, for instance. (OK, except for Enron.) All the obvious differences aside, though, I was uncomfortable observing how similar the behavior of the phony market and real market looked, how much the world of “legitimate” finance seemed to justify the suspicion some of the pyramid scheme players voiced.
Because I can feel a long, convoluted essay coming on and I really need to go to bed, let’s jump-cut to today. The New York Times has an excellent story on what’s happening with early retirees who have had their pensions “realigned” and health-care benefits cut:
“For Americans heading into retirement, the contrast to the previous generation is stark. The typical household headed by a 47- to 64-year-old is poorer today, in constant dollars, than a similar household was in 1983. The main reason is the disappearance of the traditional pension, according to Edward N. Wolff, a New York University economist who analyzed Federal Reserve wealth data.
Still, it’s not a tale of Dickensian woe — none of the people the Times talks to are being put out on the street, and we all still live in this amazingly prosperous land that has the power to decide to blow $200 billion or $300 billion on projects like arresting Saddam Hussein and installing a group of Shiite fundamentalists in his place.
Still, it’s a story of betrayal; of people who have worked in good faith for companies that have decided that they can’t afford to honor the commitments they made — breaking faith with former workers won’t hit the bottom line, I guess, unless the workers sue and win. You wonder about the deeper price, though, in shredding the already frayed trust people have in our whole enterprise — the American corporate one — and making it look like little more than a Ponzi scheme.