“If you borrow a lot of money to create a false prosperity, you import the future into the present. It isn’t the actual future, so much as some grotesque silicone version of it. Leverage buys you a slice of prosperity you haven’t really earned.”
If there was ever a moral to the current debt crisis, that’s it. Banks, politicians, ordinary people all bought a vision of the future fuelled by debt only for it to collapse. Michael Lewis goes further in his analysis by looking at mankind’s inherent character flaws. Whether Lewis looks at Iceland, Greece, Ireland, Germany or the USA, the moral is the same. Debt has got us into this mess. It led to people cheating others.
Michael Lewis poses the question “what happens when governments (that were presumed to rescue any business) cease to be credible?” Texan hedge-fund manager Kyle Bass, whom Lewis introduces to us in the prologue, is apocalyptic. Security is to be found in gold ingots and guns. Extreme as it sounds, the thought lingers with the reader.
Wherever Lewis goes, mankind’s character flaws of greed and corruptibility result in disaster. Whether it was Icelandic Bankers’ debts of 850pc of Iceland’s GDP or Irish property developers’ beliefs that their property bubble would not pop; readers are left in awe. Germany, on the other hand seems, to be the innocent victim because she played by the rules and did not overpay – the CEO of IKB’s salary was a mere €805,000pa. But Germany’s character flaws – a desire to be “near the shit but not actually in it” – combined with a very German naïveté that everyone would be honest, led to Goldman Sachs traders duping them.
This is not just banks or politicians that got us into this mess. Profligacy was, and is, endemic. For instance, Greek railways had annual revenues of €100m, but had a wage bill of €400m plus €300m in other expenses. Lewis retorts that it would be cheaper to put all of Greece into taxicabs. The average railwayman’s pay is €65,000pa and the average civil servant’s is €70,000. This cannot be matched by the private sector. The debt spiral continues. Whenever there is a riot, rioters attack workers for the audacity to do an honest day’s work. Combined with an endemic culture of tax evasion and bribery, it is hard to see a solution.
Yet this is not uniquely Greek. He notes how in the USA, policemen have also corrupted their ideas of public service to get the best deal for themselves. No politician would want to be seen to be in conflict with the police (c.f. the NHS in the UK) so they cannot oppose them on pay. He highlights how local communities in the USA are on the verge of bankruptcy and how lives are being ruined because of this. For all the similarities portrayed, there are key differences – and these national character flaws have each contributed to our crisis point.
This book is solutions-lite. Lewis flirts with the idea of a North/South Euro-schism and the possibility for a Greek default. It also lacks the deeper insights as to how systems can be reversed. For a British reader, it is highly disappointing that the UK is barely mentioned, and deprives us of a warning. Yet, it still provides a gripping insight into the workings of humanity and money and how, after the disasters of 2008-10, we are still going in the same direction because nobody wants to stop.
The blurb describes it as a “tragicomic”. It’s half right. Lewis litters the book with amusing anecdotes, like the Irish MP who jumped from the public gallery so that he could vote, or a Californian who thought Arnold Schwarzenegger was Bill Clinton which really livens up the book. But tragedy is also a misnomer. A tragedy leaves you with a sense of catharsis, that things will slowly rebuild themselves after the crescendo of doom. Lewis does not do that. He leaves the tragedy playing out.
But then again, that could be the greatest tragedy of all.