Boomerang: The Meltdown Tour by Michael Lewis, Allen Lane, 2011, 212pp
New books by Michael Lewis on the financial landscape are almost guaranteed to become instant classics. His best-known is Liar’s Poker, a fast-paced account of the heady days of the 1980s financial markets in which Lewis vividly describes the excesses that marked this era.
Lewis’s latest offering, Boomerang, is a companion to his earlier book The Big Short, which looked at how a handful of canny investors exploited the chaos surrounding the global financial crisis of 2007 and 2008.
Boomerang casts a critical eye over some of the countries that have become the latest fatalities of global financial meltdown. He describes how a number of European countries ― Iceland, Ireland, Greece, Germany, as well as California ― became victims of their own hubris, stupidity and folly.
The book is based on a reworking of a number of articles Lewis published in Vanity Fair. It does not pretend to provide a deep analysis of the economic malaise that many countries now find themselves but does supply some unique insights into the causes of the global financial crisis.
My Allen Lane edition, published in England, has the subtitle “The Meltdown Tour.” The US edition, published by W. W. Norton & Company, possesses a more pertinent subtitle: “Travels in the New Third World.” It suggests that one-time rich countries have dragged down their economies, such that, in just a few years, they will be on the verge of becoming members of the Third World.
The book moves at a cracking pace, and many of Lewis’s insights come from his conversations with members of the government, businesspeople and just ordinary folks on the street.
Lewis’s colorful accounts of government and business stupidities test one’s credulity and seem more like an updated version of Gulliver’s Travels. The problem is that the world Lewis describes is not imaginary but all too real.
Calling himself a Financial Disaster Tourist, Lewis uses telling vignettes to describe the evolving debacle. For example, at Dublin Airport he notices that the short-term parking lot is full but with no cars appearing to move in or out of it. After making some enquiries, he discovers that the cars belong to Polish construction workers who fled the country after the building boom suddenly ended. And so, we are introduced to the Irish financial miracle built on the property bubble.
Even Germany proved no less vulnerable. Having prided itself on being one of the few responsible members of the few sane members of the eurozone, Lewis finds that they also have skeletons in their wardrobe. During the 2000s, its bankers were sucked into dodgy derivative deals that they soon discovered were based on worthless scripts.
The US doesn’t miss out either, and Lewis singles out California and its dysfunctional political system as a prime candidate for Third World status. While it may seem far off, according to Lewis, California is going in that direction. To support his arguments, Lewis visits Vallejo, the largest city in Solano County. There he encounters a town on the edge of collapse and would not look out of place in the poorer parts of Rio de Janeiro or Karachi. The bankrupt municipality has no money, so traffic lights are set to permanently blink and no cops patrol the streets. Lewis visits the Town Hall only to find it empty.
In many ways Boomerang is a morality tale of what happens when governments fail to do their job. As neoliberal ideologues strip governments of taxes, and therefore the ability to do their job, societies teeter on collapse, as has already occurred in Greece and is threatening to happen to the once mighty USA.
Boomerang is quite a short book ― just 212 pages ― and, unfortunately, does not contain an index. If I had one criticism it would have been for Lewis to extend his tour to include other financial basket cases ― Italy, Portugal, Spain and Japan. It is a sad fact that there is a lot more material out there for Lewis to produce many other fine books.