Pyramids Everywhere

Pyramids Everywhere

American media blamed the massive collapse of Albanian pyramid schemes in 1997 on greedy small-time investors unschooled in the free market. It could never happen here.

People gather outside of the National Bank Of Albania after the collapse of the pyramid schemes in February 1997. (In Pictures Ltd./Corbis via Getty Images)

Tales from Albarado: Ponzi Logics of Accumulation in Postsocialist Albania
by Smoki Musaraj
Cornell University Press, 2020, 216 pp.


One day a villager was walking by Akşehir Lake when he saw Nasreddin Hodja pouring a bowl of yogurt into the water. “What are you doing, Hodja?” the villager asked.

“I’m making yogurt,” he replied.

“Come on, Hodja, that won’t work,” the villager said. “The lake can’t turn into yogurt.” Hodja looked up, and said with a gleam in his eyes, “But what if it does?”

—Nasreddin Hodja, c. thirteenth century

In September 1996 a woman named Drita did the sort of thing many Albanians were doing at the time: she sold her family’s apartment for $25,000 and poured the money into investment firms that promised to double her funds. The Los Angeles Times interviewed her a few months later, after the collapse of the firms, which turned out to be pyramid schemes. Trying to make sense of the frenzied financial speculation much of her country had participated in, Drita recalled the thirteenth-century Turkish folk hero Nasreddin Hodja. “We thought the water in the sea would turn to yogurt,” she said.

It was a time of spectacular transformations. Albania was rapidly transitioning from a Stalinist command economy into a pro-Western capitalist democracy. From “the first atheist state” where religion was criminalized, it became a playground for Moonies, Mormons, and Jehovah’s Witnesses. In Tirana, the capital, a grand marble pyramid housing the Enver Hoxha Museum—built after the dictator’s death in 1985—sprouted a Voice of America broadcasting antenna and became the local offices of George Soros’s Open Society Foundations. For a brief period, Hoxha’s old villa turned into a fast-food restaurant called “McMarriot,” complete with golden arches. Anything was possible.


In 1995 the International Monetary Fund (IMF) declared Albania a “success story of free market reforms.” Meanwhile, local media was lauding the owners of the pyramid firms as trailblazers of homegrown capitalism. The firms’ monthly rate of return grew from around 6 percent to 44 percent—enough to more than double the principal in two months. By late 1996 roughly half the country had invested. A number of Ponzi schemes popped up across postcommunist Eastern Europe, but the scale of the Albanian pyramids was unprecedented. At the time of their collapse in January 1997, their nominal value amounted to $1.2 billion, equal to half the country’s GDP.

The effects of the 1997 crash were similarly unprecedented. Anti-government protesters in the country’s south stormed military depots deserted by the police and army. The president responded by opening up depots in the north for his supporters. In all, 656,000 arms and 1.5 billion rounds of ammunition disappeared from government stockpiles—especially staggering numbers for a country of 3 million. Around 2,000 people were killed in the ensuing violence, which, alongside the devastating financial losses, accelerated an already massive exodus from the country. Thousands of Albanians piled into unseaworthy vessels bound for Italy. Hundreds drowned. The word nëntdhteshtata (year ninety-seven) remains today a heavy cultural symbol, weighted with the trauma, loss, and uncertainty following the pyramids’ collapse.

How did such fraudulent enterprises take over an entire country? For the American correspondents who parachuted in, the answer was obvious: Albanians were “emerging from the dark ages” (Chicago Tribune) and were too ignorant to understand capitalism, which they regarded “with childlike naivete—and grown-up greed” (Washington Post). What can you expect from a country where, according to the Los Angeles Times, “the term ‘work ethic’ is an undeveloped concept”? Against this portrait of a grotesque aberration from “real” capitalism, major U.S. newspapers reassured their readers of American savvy: “By Western standards, the schemes are breathtakingly transparent. The guarantees of huge profits were impossible,” the New York Times reported. “The advertisements, dwelling on images of fast cars or exotic beach vacations, would raise an immediate red flag in the United States.” Albanians, it seemed, were overcome by mania, too eager and unsophisticated to recognize an obvious con. It could never happen here.


“When I began my research in 2008, the stock market had just crashed in New York City, sparking a global financial crisis,” Smoki Musaraj writes in the introduction to her book Tales from Albarado: Ponzi Logics of Accumulation in Postsocialist Albania. “It was no longer possible to think and write about the Albanian firms as an isolated speculative bubble.” Musaraj, an economic anthropologist at Ohio University, instead points to the booms and busts that have followed neoliberal economic reforms across the Global South. Though such speculative bubbles are often dismissed as the result of mania, they are the product of common underlying conditions: political and economic transformation, rapid capital expansion, and unregulated informal financial practices. Musaraj argues that in the case of the Albanian pyramids, the underlying conditions were largely the outcome of devastating economic programs imposed by the IMF and the World Bank. Rather than blame the bubble on an Albanian ignorance of capitalism, she examines the people, the organizations, and the ideas on which Ponzi logics of accumulation thrive.

In the 1990s, Albania underwent a raucous transition from a one-party communist state into a multiparty, unstable democracy. Student protests, hunger strikes, and stormings of foreign embassies were everyday events. At one point in 1997 Prince Leka, the son of the late deposed King Zog, showed up to reestablish the Albanian monarchy, initiated a gun battle in downtown Tirana, and then fled the country.

Albania’s economic transformation was perhaps the most drastic and sudden of any postcommunist country. In Communist Albania, all forms of making money from money were banned, and most private property rights were abolished; all housing, land, and livestock belonged to the state. The total lack of any market-based practices in Hoxha’s Albania, far beyond the norm in other Communist bloc countries, made it particularly unsuited to the rapid changes demanded by the conditional loans of the IMF and the World Bank. Nevertheless, Albania became one of the most enthusiastic implementers of shock therapy, a set of policies that included, as Musaraj writes, “the liberalization of markets, strict monetary policy, and privatization of public services and infrastructure.”

Factory closures and unemployment soon followed. Inflation and currency devaluations wiped out savings and welfare entitlements. Similar to privatization in other postcommunist countries, politically connected businessmen appropriated the profitable parts of state assets in an upward redistribution of wealth of world-historic proportions. Food subsidies were slashed; hunger rose. The protest symbol of late ’80s and early ’90s Albania was a bundle of leeks—often the only available food—in an upraised fist. Shock therapy was so ruinous that the period of the brandished leeks would be a high-water mark; it wasn’t until the early 2000s that GDP returned to its late-1980s levels. In the 1990s, Albanian capitalist democracy survived on foreign loans, oil smuggled into sanctioned Yugoslavia, and remittances sent home from undocumented workers in Greece and Italy. Those remittances, to the tune of $300 million annually (as much as 15 percent of GDP), were the fuel for a speculative bubble emerging from informal finance firms.

International organizations like the IMF privately supported the appearance of informal finance in the early 1990s; the firms, the thinking went, provided an important source of credit and liquidity in a country where state banks weren’t lending and private banks didn’t exist. It wasn’t until 1995, after the pyramids had effectively taken over the entire country, that international economic advisers became concerned. It would be another year before they understood the firms’ full scale and nature.

To ensure a lack of oversight, pyramid firms accumulated political and social legitimacy in familiar ways. They sponsored soccer teams and the 1996 Miss Albania pageant. They owned radio and television stations and were frequent newspaper advertisers. From their beginning, their status was ambiguous, obfuscated with official-seeming contracts of unclear legality. No meaningful financial regulation or monitoring interfered with them. They openly funded political campaigns and gave kickbacks to politicians. One of Musaraj’s interviewees, a manager at Vefa, one of the largest firms involved in the bubble, recalls voicing concern at the more than $30 million in bribes the company had paid out. The firm’s owner, Vehbi Alimuçaj, dismissed it as an insignificant business expense.

As return rates skyrocketed in November 1996—two months after Drita sold her apartment and two months before the pyramids’ collapse—Alimuçaj hosted a televised, star-studded spectacle in which he bestowed medals of honor on the prime minister and the speaker of parliament. Later that month, President Sali Berisha gave an impassioned speech defending the informal firms, insisting on the “cleanness” of Albanian money. Investors took this as a sign that the firms had the full backing of the government, at least until the upcoming elections in March, and continued to pour money into them. The entanglements went even deeper. In his book Modern Albania: From Dictatorship to Democracy in Europe, Human Rights Watch researcher Fred Abrahams notes that it was widely assumed that the Socialist Party, the Communists’ successor, had a direct hand in running some of the schemes.

Musaraj’s book is replete with details that help us understand how the pyramids established their social credibility. The cash flowing into the schemes was mediated through kinship networks, relying on familial bonds of trust to convince people to part with their money. Most low- to mid-level managers in the firms handled money exclusively from family or village connections. And while unfamiliarity with money in the commodity form and the absence of investing norms certainly played central roles in the growth of the pyramids, Musaraj shows that many of their victims assumed the firms were fraudulent; they just thought they’d be able to pull their money out in time, particularly given Berisha’s full-throated support. It was less a case of ignorant hysterics believing in magical gains than of gamblers making unwise bets.

Though the desire for rapid financial gain was obviously a motivation for investing in the pyramids, almost everyone Musaraj spoke to said their goal was to achieve a life of European modernity—a degree of stability and a house larger than the cramped Communist apartments where two or three generations might live together. The primary motivation wasn’t unbridled greed, but a desire for common dignity.

Musaraj also notes the creation of a “historically specific register of entrepreneurship” that legitimized the pyramid schemes: a kitschy and awkward pastiche of a patrimonial ethos, moralizing nationalism, and capitalist notions of financial acumen and power. The firms claimed to be “the incarnation of humane capitalism,” promoting “dynamism and intuition,” and representing a “contemporary tendency in the field of the application of technology”—cringeworthy and meaningless marketing babble that nonetheless wouldn’t be out of place in a Silicon Valley pitch deck. Newspapers portrayed the firms’ bosses as trailblazing entrepreneurs “dominating” foreign hard currencies—their “inevitable prey”—and showed them smoking cigars and buying yachts.

Following the pyramids’ collapse, local media outlets changed their narrative. They presented Maksude “Sudja” Kadëna, a Roma woman and the only female pyramid boss, as the face of the entire phenomenon; suddenly, the firms were no longer modern displays of masculine power but an instance of fraudulent magic. American journalists joined in, fixating on “the gypsy fortune-teller” who came “complete with a crystal ball.” The Baltimore Sun wrote that “Sudja the Gypsy Woman” was “tiny and unattractive” and that she “charms” people out of their money. In fact, her firm was relatively small, and she was the only pyramid boss to confess to a crime and turn herself in. But once the blame was focused on Kadëna and cast in gendered and ethnic terms, the systemic issues behind the bubble—including the spectacular corruption and complicity of politicians who were praised as champions of free-market democracy by the United States and the European Union—could escape closer inspection.


A 2001 IMF report on the pyramid schemes provided both an analysis of speculative bubbles and unintentional insights into the neoliberal logic that shaped Albania and the rest of postcommunist Eastern Europe. Rather than assign blame to the Ponzi victims, the report highlighted the “corrupt relationships between the companies’ operators and the highest levels of the Albanian government.” It also stated that

The pyramid schemes were not a product of circumstances unique to Albania. It is tempting . . . to believe that [the pyramid schemes] could not have happened in a more developed country. The isolation of Albania until recently and the population’s unfamiliarity with market institutions seem to reinforce this argument. But it does not hold water. . . . It is worth remembering that most of the British aristocracy, including the then Master of the Royal Mint, Sir Isaac Newton, fell for the South Sea Bubble.

Nevertheless, the report’s central finding was that “the direct effects of [the pyramids’] rise and fall appear to have been limited.” Within a year of the collapse, macroeconomic indicators were back on track, partly because the crisis gave the IMF leverage to implement shock therapy even more aggressively. (It granted emergency loans on the condition that the government increase the value-added tax from 12.5 to 20 percent, at a time of unprecedented poverty.) The report concluded that the main effect of the pyramid schemes was on asset distribution. “A few thousand people got richer, some of them much richer; many more got poorer, some of them much poorer, but on aggregate the real wealth loss to the economy was very limited.”  In other words, the consequences of a monumental pyramid scheme collapse on asset distribution were identical in form to the consequences of IMF market liberalization.

Just as the IMF had been premature in declaring Albania a “success story of free market reforms” in 1995, it was premature in celebrating the end of the fraudulent practices. Its report failed to mention that the minister of finance put in place to implement the post-collapse reforms was a former high-level employee of one of the larger Ponzi schemes. Berisha, meanwhile, made a political comeback as prime minister from 2005 to 2013 and reinstalled the same finance minister who oversaw the rise and fall of the pyramids. The decade also saw the emergence of new speculative financial practices.


With the end of Communist residency limitations, Albanians flooded into urban centers. Tirana’s population quadrupled in ten years. The attending construction boom has been the main growth sector in Albania’s economy since the collapse of the pyramid schemes. Much of this construction is financed through klering contracts, in which a developer pays for land, materials, and labor with the promise of a given number of apartments in the future building. It functions as a form of speculative finance whereby developers shift risk downward onto subcontractors, and subcontractors onto workers. If the building isn’t completed (a common occurrence) or the apartments fail to sell at their predicted value, a chain of debt is activated that often leaves the suppliers and workers bankrupt. Even in the best of cases, contractors generally can’t pay for labor until the allotment of apartments has been sold, so construction workers may go without pay for months or even years.

One reason Albanian developers rely so heavily on klering is because it’s hard to keep enough cash on hand, given all the bribes necessary to secure permits or public construction tenders. As with the pyramid schemes, the political elite are the ultimate beneficiaries of the pyramidification of the construction industry. In Modern Albania, Abrahams shows how the meteoric ascent of the two most powerful politicians in the country today, Prime Minister Edi Rama and recently impeached President Ilir Meta, was enabled by their control over the construction industry. As mayor of Tirana in the early 2000s, Rama gained the nickname “Mr. Ten Percent,” a reference to alleged kickbacks for construction permits. Meta—who was described in leaked American diplomatic cables as “spectacularly corrupt” and whose aide was extradited to the United States on murder, arson, and drug smuggling charges—was known to control public construction tenders in the early 2000s and briefly stepped down from government in 2011 after being recorded discussing a €700,000 bribe related to the building of a hydroelectric dam. “The pyramid way,” as Musaraj’s interviewees refer to it, is alive and well in Albania’s construction industry, to the benefit of many of the same politicians who oversaw the pyramid schemes of the 1990s.

The similarities between klering contracts and the pyramids go beyond their common beneficiaries. An informal financing arrangement of ambiguous legality, klering enables speculative financial behavior without liquidity. And like the pyramid logic of infinite gain, the klering-based building boom is driven by an endless upward projection for the real-estate market, fueled by diasporic Albanians. By linking the pyramid schemes of the 1990s with “the pyramid way” in the Albanian construction industry, Musaraj makes it easier to see the Ponzi logics of accumulation all around us.


American foreign correspondents’ dispatches from Albania in 1997 are fascinating not so much because they reveal a total failure to understand Albania beyond preconceived notions and received wisdom, but because they reveal a deep hubris about American capitalism. While the New York Times was making assurances that Albanian-style speculative bubbles could never occur here, the United States was in the midst of the dot-com bubble, which would burst dramatically three years later. Journalistic coverage of Albania and the broader region hasn’t improved much since the 1990s. Type “Albania” into many publications’ search bars, and you will find sensational articles about the hundreds of thousands of Hoxha-era concrete military bunkers, the pyramid schemes, the actual pyramid in central Tirana, and little else. The editorial focus on these topics cements Albania’s reputation as a wacky and weird place whose foibles and problems are a hopeless joke—and irrelevant to broader international currents. In this context, Musaraj’s book is an important corrective. The Albanian pyramid schemes can’t be dismissed as some isolated occurrence.

Musaraj frequently mentions Bernie Madoff’s $18 billion Ponzi scheme to show that losing your life savings to a massive con isn’t the exclusive territory of Albanians emerging from communism. And in the decade since Madoff, the Securities and Exchange Commission has brought charges against Ponzi schemes accounting for over $31 billion in losses. But the Albanian pyramid schemes remind one less of individual brazen Ponzi crimes and more of the speculative financial logic inherent to our economic system. It is impossible to read Musaraj’s book without thinking of Silicon Valley start-up culture and the ruinous speculative boondoggles that were Theranos and WeWork. Even less overtly fraudulent companies begin to resemble “the pyramid way.” Uber, for example, benefits from breaking local livery regulations and offloading risk onto its drivers, who suffer under an ambiguous legal status. Its future profitability is based on unrealizable projections of monopolizing all road transport. And its existence depends on its backers’ willingness to watch billions of dollars evaporate every quarter, a patience afforded to them by a rapid expansion of capital.

There is a vogue in Balkan studies to argue that the wars of the 1990s weren’t a relic of the past, as they’ve often been portrayed, but a sign from the future. The violent nationalism that destroyed Yugoslavia is the precursor to what Trumpism, Brexit, and rising right-wing populism across Europe have in store for the rest of us. Musaraj wouldn’t argue anything quite so crude, but her book makes the convincing case that places on the margins of global capital have an urgent lesson for the center—if only we can hear it.

The pandemic effected a historic upward concentration of wealth in the United States at a time when tens of millions lost their jobs and hundreds of thousands succumbed to the virus. Total catastrophe was held off with eviction moratoriums, stimulus checks, and emergency unemployment payments. But we watched as death, layoffs, and the stock market all perversely skyrocketed in seeming unison. With college degrees and employment less and less certain to provide a life of financial security and common dignity, why not pour some Trumpbucks into a hive-mind pump-and-dump scheme facilitated by a loosely regulated stock trading app? Why not bet on a cryptocurrency of ambiguous legality? Why not sell your apartment to invest in this hot new firm Vefa that everyone’s been talking about? Why not pour your yogurt into the lake? It might not work, but what if it does? What other options do we have?

Daniel Petrick writes about the Balkans. He is Senior Editor at the Prishtina-based magazine Kosovo 2.0.