Michael Lewis’s first book on the current financial crisis, The Big Short (2010), was both a bestseller and a hit with most reviewers — but not with me. I felt Lewis had strained but failed to recapture the voice of Liar’s Poker (1989), the wonderfully entertaining account of his own career as a Salomon Brothers bond salesman that broke the mould for writing about the follies of the money world. The problem, I felt, was that the people he chose to write about — a selection of sociopathic hedge-fund geeks who bet that the tottering trillion-dollar edifice of US mortgage-related paper would collapse, as it duly did — just weren’t comic material, however sharp their market insights.
So it is a relief to report that Lewis has not only regained his top form, but has managed to channel something of the great right-wing humourist P. J. O’Rourke as well. Boomerang is ‘financial-disaster tourism’, a whirlwind circuit of post-crash Iceland, Greece, Ireland, Germany and California, and a worthy successor to O’Rourke’s wickedly perceptive Eat the Rich (1998), which voyaged in similar mode from Albania to Hong Kong via Tanzania to mock the entire pseudo-science of economics.
Boomerang is a light read — just five chapters and a preface, based on a series of articles in Vanity Fair — but none the worse for that. After all, millions of words have already been written by others to explain how cheap money and bad government allowed the world to go mad, and many of us are none the wiser. Lewis’s approach, explaining it all in terms of delinquent national behaviour patterns while reminding us gently that he also knows how markets work, is as illuminating as that of any Nobel laureate. And it’s lucky, perhaps, that the origins of this crisis were not found in darkest Africa, or Lewis’s stereotypes might get him into trouble with the politically correct brigade.
But the Icelanders, the Greeks and the Irish seem to be fair game. In Rekjavik, by Lewis’s account, a manly bunch of fishermen found a giant money shoal swimming towards them: British investors alone deposited £20 billion in Icelandic banks, attracted by amazingly high interest rate offers.
In response, the former cod-catchers tried to turn their tiny economy into a high-risk hedge fund, buying every asset they could pick up in their nets and convinced that after 1,100 years at sea they had suddenly discovered a unique and unbeatable ‘Icelandic business model’. ‘As those who know fishermen well have often testified,’ wrote an American economist, H. Scott Gordon, 50 years earlier, ‘they are gamblers, and incurably optimistic’. So Iceland went bust with $100 billion of banking losses, $330,000 for every citizen — and the island’s women are now picking up the pieces after the mayhem wrought by their menfolk.
As for the Greeks, their national weakness is an aversion to taxes. False accounting got Greece into the euro in the first place and long concealed the scale of its fiscal black hole. But now that the facts are known, it is the national pastime of non-payment of tax that impedes any significant shift towards fiscal rectitude. Take the medical profession, not normally associated anywhere with cheating: two thirds of Greek doctors report incomes of less than €12,000 a year and ‘if the law was enforced’, a tax-collector who has been demoted for whistleblowing tells Lewis in an Athens bar, ‘every doctor in Greece would be in jail. I’m completely serious.’
If Lewis is not always completely serious, he is nevertheless a brilliant observer. Ireland’s financial collapse, like Iceland’s
was created by the sort of men who ignore their wives’ suggestions that maybe they should stop and ask directions … but while the Icelandic male used foreign money to conquer foreign places … the Irish decided what they really wanted to do with it was buy Ireland. From each other.
The result was an insane property boom that left little but rainswept dereliction and debt behind: ‘a nation that had finally clawed its way out of indentured servitude was thrown back into indentured servitude.’
This is pungent stuff, mellifluously phrased and lit up (like Liar’s Poker) by the likable presence of Lewis himself, as when he struggles to keep pace with former California governor Arnold Schwarzenegger on an early-morning bike ride.
But do these broad brushstrokes really add to our understanding of why we’re all suddenly poorer than we thought we were before? I think they do. It was The Spectator’s own Christopher Fildes who wrote that ‘finance, after all, is human nature in action’. If we don’t want these things to happen again, we might as well throw away the textbooks of the economics that failed and start again — by studying this sadly hilarious short primer of human frailty.
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