February 6, 2012
Michael Lewis' Boomerang is tapping the Zeitgeist, much as The Big Short did just a few years ago. I haven't read the latter yet, but saw Lewis on the news last month promoting Boomerang, and decided I needed to know more about the global financial crisis. It is a short and entertaining read. If you can get past the stereotyping (all Greeks are cheats, for example, and all Germans gullible box-checkers who have a passion for dirt, muck and feces underneath their clean surfaces), there is an interesting narrative being spun here: one of humans as intensely fallible and beset by greed and ego, and yet capable of rising above them when calamity strikes. The latter part of that narrative was replayed on the CBS Evening News this weekend, here http://bit.ly/waq8Ae. They interviewed the very same people Lewis interviewed, telling a tale of the heroic effort to make do with less, which is likely to become a mantra as pressures for belt-tightening mount.
It's a useful and helpful mantra, but one that needs to be paired with similar calls for sacrifice across the board. And are we really prepared, as a society, to make draconian cuts in social services to ensure our taxes stay as low as possible? It's not clear, from multiple analyses, what low, medium, or high tax rates do to economic growth. There are examples of periods when tax rates have been higher and we've done a lot better than we're doing now. I would also say that Spartan social services (such as education, the arts, health care, parks, the safety net or "safety trampoline" as Newt Gingrich would have it, etc.) do not make for a healthy society either.
Human psychology includes extreme greed, and we've seen quite clearly the disastrous effects of greed. Certainly, restraining greed (through appropriate regulation) would be good social psychology, as well as good fiscal policy. Encouraging innovation and supporting creative efforts to prevent disasters in health care costs would make sense too. Another option would be to channel greed so it provides some kind of social utility. From benefit corporations to efficient provision of infrastructure, perhaps there are many kinds of profit and wealth available given the right intentions.
Makes sense to me! But then there are the politicians...and the fact that in America, we have to get individual buy-in on so many levels for a cultural or paradigm shift to occur. Each of us has to see it in our personal interest to make a change that might theoretically be good for the society as a whole. Until that happens, a lot of people will continue to be out for themselves or their smaller group.
(Another important lesson Lewis draws is that when women are more connected to financial decision-making, the less risky the decisions.)
Here are some of my favorite quotes from Boomerang:
"The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for travel: financial-disaster tourism. The credit wasn't just money, it was temptation. It offered entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Entire countries were told, 'the lights are out, you can do whatever you want to do and no one will ever know.' What they wanted to do with money in the dark varied. Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak. Icelanders wanted to stop fishing and become investment bankers, and to allow their alpha males to reveal a theretofore suppressed megalomania. The Germans wanted to be even more German; the Irish wanted to stop being Irish." (42)
"A banking system is an act of faith: it survives only for as long as people believe it will." (97)
Speaking of the Irish, but it could be said of any nationality: "Their loud patriotism is a cargo ship for their doubt." (99)
"The people who had power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn't a public-sector problem; it isn't a problem with government; it's a problem with the entire society. It's what happened on Wall Street in the run-up to the subprime crisis. It's a problem of people taking what they can, just because they can, without regard to the larger social consequences. It's not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They'd been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans." (202)
© 2012 Ravi Chandra, M.D. All rights reserved. All quotes from his book are © Michael Lewis. Boomerang. 2011. New York: W.W. Norton and Company
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