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Ethnography of a Ponzi Scheme

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From the Tulip Mania of the Dutch Golden Age and the South Sea Bubble in eighteenth-century England to the subprime mortgage crisis in the United States, speculative forms of finance have been a staple of capitalist economies the world over. But how do such schemes take hold of people’s finances and imagination? How do they unfold in everyday transactions?

Tales from Albarado: Ponzi Logics of Accumulation in Postsocialist Albania takes an ethnographic approach to the rise and fall of a dozen of Ponzi schemes (firma piramidale) that were all the rage in early-1990s Albania. The schemes emerged alongside the free-market reforms and postcommunist financial institutions that followed the collapse of the communist regime. When the schemes folded in 1997, the country unraveled into anarchy and a near civil war. Looking into newspaper archives and interviews with former investors, Tales from Albarado seeks to gain a better understanding of how people from various paths of life came to invest in financial schemes and, in turn, how such schemes intertwine with everyday transactions, dreams, and aspirations.

Looking into newspaper archives and interviews with former investors, Tales from Albarado seeks to gain a better understanding of how people from various paths of life came to invest in financial schemes and, in turn, how such schemes intertwine with everyday transactions, dreams, and aspirations.

Through this ethnography of the Ponzi schemes in Albania, the book explores more broadly the discourses, materialities, and temporalities of financial speculation.

1. Discourses of Speculation

Looking at newspaper coverage before and after their collapse, Tales from Albarado notes a shift in the gendered representations of key leading figures of the pyramid firms. Thus, while prior to their collapse, these were represented as capitalist firms run by virile entrepreneurs, after their collapse, media representations focused on Maksude Kadëna, a female owner of the firm Sude, depicting her as a Gypsy fortuneteller. The book situates such representations within a broader global and local history of gendered representations of finance noting a common theme of feminization of speculation as a way of delegitimizing some forms of finance over others. In the Albanian context, I argue that, by focusing on Kadëna’s gender and ethnicity as a source of her (and other schemes’) fraudulence, public discourse delegitimated the firms without, however, questioning the institutions that enabled them in the first place.

2. The Materiality and Sociality of Speculation

Scholarly discussions of financial bubbles often focus on the abstraction and anonymity of capital as the fuel of speculation. Tales from Albarado, by contrast, emphasizes the materialities and socialities of speculation. It does so by looking at the circulation and conversion of the value of various material things—stack of cash, privatization vouchers, remittances, housing—through the firms. These materialities, I argue, are embedded in specific economic and social histories and cultural norms.

A key finding in this book pertains to the role of a widespread bottom up economic repertoire: remittances. Remittances were sent to Albanian residents via transnational kinship networks. They were mostly in cash and in multiple currencies as this was a time before the euro. Drachmas, liras, marks, dollars featured prominently in recollections of former invested who often expressed pleasure in dealing in multiple currencies and in carrying stacks and sacs of cash to and from the firms. Cash enabled bundling deposits from multiple investors; multiple currencies enabled cultural cachet and opportunities for arbitrage; social ties of kin, friends, and brokers (sekserë) enabled the expansion of investments to the firms. Accounts by former investors point to the highly personalized transactions that enabled financial speculation. Further, they provide a picture of a bottom-up repertoire—an informal cash economy in multiple currencies mediated by social ties—that continues to constitute an enduring strategy of accumulation in a context of ongoing economic uncertainty and volatility.

3. Temporalities of Speculation

In addition to seeking other means of making wealth, I argue that participation in the infamous pyramid firms was also fueled by investors’ aspirations for changing the temporalities of life and finance. The book looks in particular to the buying, selling, and desiring of homes in conjunction with participating at the pyramid firms. A number of investors sold their recently privatized apartments (formerly state-owned) in order to invest at the firms. At the same time, most investors I interviewed, when asked what they planned to do with their returns, expressed their desire to buy a new home. The new homes were often imagined as an accelerated path towards a capitalist and European modernity. Those who had lost their homes to the schemes lamented their “lagging behind” this imagined trajectory. Housing, thus, became a site for materializing such aspirations and for witnessing their failure.

By examining the discourses, materialities, and temporalities of the speculative schemes, Tales from Albarado identifies economic practices and institutions as well as desires and aspirations that have endured throughout the three decades of neoliberal transformations in Albania. Strategies of value conversion, a propensity for accessing multiple regimes of value, intertwining finance and social ties, desires for a European inclusion and modernity—these are all well-established social and financial institutions that make up the economic and social life in Albania as well as other sites that have experienced similar geopolitical marginality and economic instability. These intertwined economies and socialities in contemporary Albania thus speak to the making of neoliberal economy at the margins of global capital.

*Featured photo by Matthew Lancaster on Unsplash


Smoki Musaraj is Associate Professor of Anthropology at Ohio University and co-author of Money at the Margins.

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