A book review of “Boomerang; Travels in the New Third World” by Michael LewisMichael Lewis, author of The Big Short and The Blind Side, has written another winner. In Boomerang; Travels in the New Third World, he brings all of his experience and canny insight to bear in discussing the present global financial woes and what led up to them. Although this book was published in 2011, before the present recovery and reasons for optimism were underway, many of its situations and lessons are still current and applicable. As he investigates the collapse of the subprime mortgage market and the hedge funds that made money off its collapse, he also explores how the national characters of the countries most affected by that collapse contributed to their own demises.
Beginning with Iceland, Lewis describes how the prosperity created by extremely successful fish and aluminum industries resulted in a very affluent society, populated in part by a lot of pampered young people who went to business schools in the U.S., and returned to be financiers. Combining the over-confidence of youth with the natural aggressiveness of Icelanders, they proceeded to jump with vigor onto the real estate boom and credit default swap that was making Americans richer than ever before. Investing like crazy in foreign firms, they soared high and crashed hard when the bubble burst.
In the second section of the book, Lewis takes on Greece. Lewis is aghast that a country which profoundly shaped the western world and every area of learning from math to politics and philosophy to sculpture and architecture could so succumb to the modern contagion of greed. Greed and failure to read the warning signs. Even in the face of staggering national debt, it seems that the Greeks were neither willing to compromise their many government benefits nor to pay any taxes.
“The Greek people never learned to pay their taxes. And they never did because no one is punished. No one has ever been punished.”
When Lewis says that the citizens failed to pay taxes to support their government obligations he means literally that. He quotes from a former tax collector who prefers to remain unnamed: “It’s become a cultural trait,” he said. “The Greek people never learned to pay their taxes. And they never did because no one is punished. No one has ever been punished. It’s a cavalier offense–like a gentleman not opening a door for a lady”(p.50). As he describes a nation that has learned to live on credit without a realistic way to pay the debt, he also writes about corruption and incidents of violence among Greeks who are having trouble adjusting to their reduced circumstances. Everyone is looking for someone to blame. But they still don’t pay their taxes.
In Lewis’s words, “The Irish real estate bubble was different from the American version in many ways. . . .In America the banks went down but the big shots in them still got rich; in Ireland the big shots went down with the banks”(p.102).
Next Lewis talks about Ireland. He describes a people who had long been poor, but who suddenly found themselves making a lot of money very quickly. Unlike the nations who invested mostly abroad, the Irish, always loyal to each other, invested in their own country. For the first time in history, more people were moving into Ireland than out of it. People wanted to buy homes or old abandoned castles in this beautiful country. The top executives of the three prominent banks most affected bought shares in their own companies right up to the moment of collapse. Lewis also points out that “they continued to pay dividends as if they had capital to burn”(p. 102). Loyal to the end to their countrymen, the Irish banks backed their private investors, and the government backed the banks. In Lewis’s words, “The Irish real estate bubble was different from the American version in many ways. . . .In America the banks went down but the big shots in them still got rich; in Ireland the big shots went down with the banks”(p.102).
In the chapter called “The Secret Lives of Germans”, Lewis attempts to describe what he sees as the dichotomy of the German cultural character. He points out that while Germans are meticulously clean, and obsessed with following the rules, they also have an earthy side, which he sees as being anally preoccupied. He cites the numerous expressions, folk songs, folk tales, etc. that involve scheisse, a German word for defecation. He points out that the world’s first museum devoted exclusively to toilets is in Munich. In his view, the Germans like to be close to the dirt without getting dirty. They themselves banked very conservatively, by their own understanding of that term. Because they believe almost naively in the rules, they never entertained the possibility that a bond with a triple-A rating could be unsound. A German banker told Lewis, “For forty years we didn’t lose a penny on anything with a triple-A rating”(p.152). So the conscientious faith in the stability of triple-A bonds, combined with a visceral urge to participate in the primal greed-fest contributed to the German losses. Lewis also comments extensively on the relationship of Germany to the rest of the European Union, and explains how they may have a very crucial role to play in European economic stability, which of course is vital to global stability.
Last but not least in relevance to American readers, Lewis turns the spotlight on the U.S. While I will not attempt to rehash what Lewis has to say about us, I would encourage readers to at least read this last chapter of the book that concerns us most closely. He encourages us to learn from the mistakes of others while we can take their lessons to heart. Early in the book, a comment about one of the above mentioned societies is a passage which I feel summarizes pretty well Lewis’s prophetic message to all of us who are interdependent not only within this nation but globally: “But the place does not behave as a collective; . . .It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good”(p.82). Those words serve as a warning to all of us as Americans and as cohabitants of this planet. United we stand; divided we fall.