The financial scams that brought Albania to the brink of war

**Ortenca Aliaj** (0:00)
When communism fell, there were three state-run banks that were terrible because they lacked two key functions. They didn't really take in deposits, and they couldn't really lend.

**Robin Wigglesworth** (0:11)
Okay, I'm spotting a few weaknesses here in their business model.

**Ortenca Aliaj** (0:15)
There was no financial sophistication among Albanians at this point. I would say the vast majority were just under this illusion that this is how capitalism works.

**Robin Wigglesworth** (0:35)
Today on The Story of Money, we are going to be covering what has to be one of the weirdest financial debacles of my lifetime. It was like a bizarre lab experiment carried out on an entire nation that went horribly wrong. I'm talking about Albania, after the fall of communism, when the whole country got sucked into a vortex of pyramid schemes, essentially financial scams, that triggered a near civil war when they imploded. It's 1990s nightmare was huge. Relative to the size of its economy, it was the equivalent of a thousand Bernie Madoffs. And Albania's experience does have lessons for us today. It's a classic example of how human mass psychology can interact with finance in frightening ways, especially when there's a hot new thing in town.
Gillian is sadly traveling today, so he's stuck just with me. I'm Robin Wigglesworth, and this is The Story of Money from the Financial Times.
Despite Gillian's absence today, I'm thankfully not alone. I'm fortunately joined by a colleague, Ortenca Aliaj. She's the FT's banking editor, and probably even more importantly for us today, she's also a born and raised Albanian. Ortenca, thanks so much for being here.

**Ortenca Aliaj** (1:58)
Thank you for having me. I'm honored to be here.

**Robin Wigglesworth** (2:01)
Well, obviously, we want you here for your banking knowledge as well, but this is also a personal story for you, because like I said, you were born in Albania.

**Ortenca Aliaj** (2:11)
Yeah, so this is, I guess, touches on two of the key facets of my life, which is sadly banking and gratefully being Albanian.
But I was born in 1990, so about six months before communism fell later that year. And it was an equally exciting and terrifying time to be in Albania.
We had this new sense of liberation and freedom after one of the most brutal communist regimes that there had been in existence. And it was an amazing time for my parents. And I still remember actually my dad wearing one of the coolest jackets I have ever seen, which was an Adidas multicolored jacket. And that was sort of the sign that the economy had opened. But aside from that, it was also a time of a lot of joy, community reality. People were excited about what was to come next. They'd had these snippets of what life was like abroad in places like Italy and Greece. And they really thought that Albania was going to become that.

**Robin Wigglesworth** (3:17)
I mean, a multicolored Adidas jacket sounds like a far better signifier of Western influence than David Hasselhoff blazing out over the wall. But let's go back to 1990 So, yeah, Enver Hoxha is the dictator then. Even for behind the Iron Curtain, that was a fairly unusually insular, brutal dictatorship and almost more similar to North Korea than like a Poland, right?

**Ortenca Aliaj** (3:44)
Yes, absolutely. So Enver Hoxha took power in 1945
So he was there for the best part of four decades.
He was famously known to be very paranoid. And that paranoia led to him, you know, sort of killing a lot of allies as well as rivals, cracking down on dissidents. And one of the key things that he did was really isolate Albania. So initially Albania was aligned with the USSR. He broke with the USSR and then aligned with China in the late 1970s, also broke with China. So at this point, Albania was really alone. Oh, wow.

**Robin Wigglesworth** (4:24)
Okay. So yeah, I'm not the guy to keep friends, unfortunately. So in 1990, for Albania, it must have been just an enormous shock, right? Going from isolation, even in Eastern Europe, to suddenly the world changing. It's kind of like an alien's landing. I don't know.

**Ortenca Aliaj** (4:42)
I think the only way I can describe it, honestly, is like someone turning the lights on. You know, they'd all been living in this really, really strict regime where you couldn't do anything without the government having oversight of you. And my grandparents own a farm in the north of Albania. All of the produce that they made would be taken redistributed. So it was really a very hard facing regime that people were so used to, and they didn't really know what was on the other side. And then of course, what happens is that the regime falls and all of a sudden, boom, Albania is open.