TIRANA, Albania — What makes a 64-year-old disabled pensioner take her last $1,000 and invest it in a risky venture promising unrealistically huge returns?
What makes a retired kindergarten teacher and her out-of-work husband sell their home of more than 20 years and place the proceeds in four pyramid schemes?
"A kind of societal fever took hold here," says World Bank representative Carlos Elbirt. "People who you never imagined would trust these types of schemes were trusting these types of schemes."
Hundreds of thousands of Albanians, in fact, trusted. Some were well aware of the gamble they took when they forked over life savings in order to--supposedly--double or triple their money; others, new to the world of capitalism and free-market free falls, entered blithely into a tragic tangle of naivete, greed and desperation.
A pyramid scheme creates the illusion of financial success by paying off early investors with funds provided by later investors. The scheme eventually collapses when no more investors can be found. When the schemes began to collapse in Albania last month and the money vanished, Europe's second-poorest country (ahead of Bosnia-Herzegovina) erupted into violent riots that left one person dead, scores injured and city halls, courts and police stations in flames.
High-risk, get-rich-quick pyramid schemes have popped up in Poland, Romania, the former Yugoslav federation and the former Soviet Union, where transition economies, lax regulation and vulnerable populations have created fertile ground for abuse.
But only in Albania did the schemes reach such mammoth proportions and operate with the tacit blessing--some say complicity--of the government.
Suddenly Albania, a country that seemed to be emerging successfully from decades of brutal Communist rule and numbing isolation, was plunged into a crisis that has undermined both its wobbly economy and chances for the government's survival, exposed a false sense of prosperity and led to profound questioning of the nominally democratic system that Albania adopted after the belated fall of Stalinism in 1991.
The right-wing government of President Sali Berisha, a gruffly flamboyant autocrat who until recently enjoyed enthusiastic U.S. backing, has not coped well with the disaster, offering promises of partial reimbursement to some investors--and calling out the army to stop demonstrations while arresting and intimidating opponents who were quick to capitalize on the unrest.
