‘Second Life’ Proves It: Capitalism Is a FRAUD

Valleywag has posted a examination of Second Life’s virtual economy by a real, live financial consultant who actually investigated what happens when you use Linden dollars as an investment to make real dollars. He characterizes the Linden economy as a “pyramid scheme,” because the richest people at the top determine exactly how much money the investors at the bottom can pull out.

It turns out that inside the game, counterparty risk is tremendous. In fact, entire banks will suddenly disappear. Or banks will simply renege on obligations without recourse. Worse yet, the very people who provide the source of nearly all demand-liquidity within Second Life, those guys at the top of the virtual playpen pyramid, are the same ones who effectively set the SLL/USD exchange rate.

Basically, Second Life advertises huge returns in Linden dollars on your investment in US dollars; then they promise you can turn those voluminous Linden dollars back into real cash. It all works, until you try to pull your money out. Then the handful of wealthy SL denizens who control the market change the exchange rate, only letting you have a tiny return on your investment.

The joke of course is this is exactly like real-world capitalism. The SL economy is just an extreme model of a real capitalist economy, minus the few tepid socialist restrictions real governments put in place. The American economy is controlled by a handful of very wealthy individuals, who manipulate markets and lawmakers to protect their wealth and to stifle possible competition. There’s no “meritocracy,” because the very wealthy will always cheat.

They don’t necessarily cheat because they are bad people (although some of them surely are) — they cheat because the capitalist “ethic” tells them that protecting their own interests is best for everyone, and if they don’t do it, someone else will.

Remember — what this consultant labels a “Ponzi scheme” was not designed that way by the creators of Second Life. It’s just what happens when a few people become very powerful, and look out for their own interests. And unlike in a capitalist model like EVE Online, SL players believe they are protecting real money. So they act like real plutocrats.

Wouldn’t it be nice if we lived in a world where ONLY game players were allowed to behave this way?

3 Comments

  1. If you build a scale model of the solar system out of styrofoam and it accidentally falls apart after a month, do you automatically assume our solar system will collapse? There are far too many factors for any simulation to accurately encompass at this particular time. Economies are of such complexity that it’s foolish to base anything off what happens in a simplistic sim like Second Life.

  2. No, but when Newton and Galileo built a model of the solar system based on observations, it was 99.999 percent correct, and Einstein repaired the 0.001 percent.

    Read the post. SL is a simplified, basic capitalist economy with simple rules. No, no model can accurately predict human behavior — sorry, Isaac Asimov. But when capitalism produces a small moneyed elite, which it’s designed to do, and teaches those elites to behave selfishly, THIS is what happens.

    And it doesn’t just happen in the model. HISTORY confirms it.

    So question authority, you dingbats. Maybe not everything they taught you in Junior Achievement is true.

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