Michael Lewis, in his 2010 bestseller, “The Big Short,’’ brilliantly explained what caused the collapse of our nation’s financial system. Lewis brought readers inside an amoral subculture of Wall Street investment bankers who managed risk in a style reminiscent of free-wheeling Las Vegas casino gamblers. “Boomerang,’’ his new book, zooms out to the wider global financial crisis, exploring the crippled economies of nations such as Iceland, Greece, and Ireland.
Lewis’s rare gift as a guide through the world of credit-default swaps and sovereign debt doesn’t come simply from his deep understanding of how the global financial system works (he worked on Wall Street in the early part of his career), but also from his skill as a storyteller, his ability to tell the larger tale through fascinating human stories of greed, excess, and self-delusion. He shows how systemic problems are the result not of abstract forces but of human error and misdeed, with each chapter taking a look at the problems in a specific country.
For instance, he suggests that Greece’s problems derive from a culture of cheating, of indifference to financial and ethical realities. A tax collector tells Lewis during his stay there that tax evasion is rampant in the country and considered “a cavalier offense - like a gentleman not opening a door for a lady.’’ Indeed, the tax collector notes, “every single member of the Greek Parliament is lying to evade taxes.’’ Fraud has become the rule rather than the exception, he finds. Lewis also explains how Greece entered the euro zone by misrepresenting its true economic and fiscal conditions. To remain part of the euro zone and reap the massive benefits of low borrowing costs, “all they had to do was cook the books,’’ Lewis writes. They did it so well that today Greece is just beginning to understand the exact size of its fiscal hole.
Visiting Ireland, Lewis observes an entire economy foundering and a culture in flux. In the decades after achieving independence in 1922, the nation failed to fully find its legs economically. That is until the 1990s. For a series of reasons, still not fully understood, Ireland went from being a relatively poor nation to a relatively wealthy one.
Historically, the Irish were, by their own admission, “sort of a hard, pessimistic people.’’ But that all changed. “The Irish had developed optimism,’’ Lewis writes of those Celtic Tiger boom days, an almost American belief in the possibilities of personal reinvention. Foreign money rushed in. Irish banks handed out loans to real estate developers like it was water, with few questions asked. Fueled by a real estate bubble, the economy boomed and then went bust amid the growing global crisis.
Lewis shows the interconnectedness of all this global debt. It’s not just Greece but your hometown that’s in danger of drowning. When he visits California, Lewis speaks with the mayor of bankrupt Vallejo, who’s forced to slash public employee pensions, police, and reduce levels of public service to depressingly low levels.
In the end, Lewis notes, it’s not just a problem of public deficits but of moral deficits. Americans, he says, faced with easy credit and a culture of instant gratification, had “been conditioned to grab as much as they could, without thinking about the long-term consequences.’’ We wanted to consume above our means and worry about the bill tomorrow.
And Americans, it turns out, were not the only ones. Whether we can make things right is another matter.Chuck Leddy, a freelance writer who lives in Dorchester, can be reached at email@example.com.