THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Friday, January 31, 1997 TAG: 9701310020
SECTION: FRONT PAGE: A15 EDITION: FINAL
TYPE: Opinion
SOURCE: Keith Monroe
LENGTH: 83 lines
P.T. Barnum said there's a sucker born every minute. He might have been describing Albania. Here's an entire country that's been taken in by a gigantic Ponzi scheme.
It would be funny if it weren't so sad. It's the kind of thing that can happen if you've been out of touch with reality for 50 years. Albania was one of the most zealous of the Marxist states. It voluntarily cut itself off from all things Western and lived in hermetically sealed economic lunacy.
When communism collapsed, Albania lacked any benchmark by which to judge capitalism. When the cons began, huge swatches of the population fell. Some of the schemes promised an investment return of 5 percent - a month! Forever! Some promised even more - 300 percent a year.
Well, that was naturally too good to pass up. It was instant retirement, a perpetual annuity, nirvana, bonanza, every man his own Rockefeller. Isn't this the way it worked in the West? Give a guy some money and pretty soon you have profits - power tools, power boats, paintings of Elvis on velvet, the big screen TV and Cindy Crawford lounging on the pool deck. The good life.
So lots and lots of Albanians duly invested in the pyramid schemes. And they didn't just take a few spare leks out of the mattress. No, they sold their farms, their flocks, their apartments to raise capital. That's how you become a capitalist, yes?
No.
As in any pyramid scheme, the early investors were paid out of the investments of the next batch of suckers and so on until the music stopped. When it was all over, as much as $1 billion had been invested. Maybe 300,000 had lost their life savings, maybe one out of every seven Albanians.
Now, there are lots of former Albanian capitalists with no capital, no place to live and a very bad attitude. They have taken to rioting in the streets of Tirana and various politicians are blaming each other for the debacle.
Those who think capitalist is a pretty good idea in need of a little regulation to keep man from being a wolf to man, as I believe the gloomy Thomas Hobbes put it, can't help but be dismayed by this glum melodrama. Once again, the sharpsters have fleeced the country bumpkins. This time, a whole country's worth of them. It's the kind of thing that gives free enterprise a bad name.
It isn't clear what the Albanians can do to put things right. The government that failed to provide any protection - no SEC, no bunco squad, no Better Business Bureau - has promised to return some the money that's been recovered to the ``investors.'' But the vast majority will probably never see a lek.
Maybe something like Pat Robertson's idea of a jubilee could be instituted, a grand economic holiday when everyone's debts are forgiven. Perhaps the Albanians could declare a Ponzi-jubilee where everybody would go back to the way things were when communism came to an end. Everybody gets back their car or house or pig. Kind of like a cosmic Get Out of Jail Free card. Do pass Go! Do collect $200!
Probably isn't going to happen, however. The poor Albanians will just have to suffer, something the 20th century has given them plenty of practice at. But those still solvent might want to take a short course in Graham and Dodd value investing before sticking a toe in the capitalist waters. They also might want to have caveat emptor tattooed on their foreheads. Let the buyer beware!
Our own highflying stock market looks a little dicier after you hear about the Albanian debacle. At the minimum, it ought to dampen one's enthusiasm for the impossible. It so rarely comes true.
When communism collapsed, it was fashionable for a moment to believe that history had ended and that a kind of universal, placid democracy would rule. But that was sounded like an impossible pipe dream. As it was. Somebody forget to tell American militiamen, rapacious Indonesians, expansionist Chinese, fundamentalist Islamics, nationalistic Chechyans, murderous Tutsis and Hutus that history was over.
Now we have begun to hear that the business cycle has been repealed, there won't be anymore recessions, inflation is dead and the economy will continue to float gently upward forever like a helium balloon. And the stock market will rise just as inexorably until we are all rich beyond the dreams of avarice and one share of Netscape is worth more than the entire country of Albania.
Does that sound too good to be true? A lot of sadder but wiser Albanians would probably advise that if it sounds too good to be true, it is too good to be true. Whether it's get-rich schemes, story stocks, economic forecasts, political theories, the same rule applies - caveat emptor. MEMO: Mr. Monroe is editor of the editorial page of the Virginian-Pilot