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09 April 2012

Arnold Schwarzenegger, California and bankruptcy in America

Before I get too distracted with the other excitements of Moscow life and forget, I want to make a brief note about the other excellent journalist that I noted in the post on Saturday (7 April). Russians and others who have not heard of him might like to take note of Michael Lewis, who made his name with his first book, Liar’s Poker: Rising Through the Wreckage on Wall Street, and who has been writing about the interaction of big money and human psychology ever since.
     Published in 1989, Liar’s Poker was arguably the best book about the financial madness of the 1980s. Lewis experienced it at first hand when he took a job, straight from studying History of Art at Princeton, as a rookie bond salesman at Salomon Brothers, on the same trading floor as all the Masters of the Universe or, as they were also called, the “big swinging dicks”. His job was simply “to make money come out of those phones”. He saw the chaos around him, predicted the wreckage to come and wrote about it all in a way that was often hysterically funny. It was one of the most enjoyable reads of the decade, as well as one of the most informative.
     Lewis’s core interest is financial power and the behaviour of those who make it flow around the world. His current special concern is the way the forecasts all went wrong in the mid-2000s, and the mass psychosis on Wall Street which allowed that to happen. If you want to know more about this, watch his interview on the excellent Charlie Rose show, on 3 October last year. At minute 22 in the interview Lewis says: “I’m not an economist, I’m just a writer. But I am phobic about the whole issue of forecasting because most of Wall Street is premised on a false belief in the predictability of unpredictable things.” He goes on to talk about the mass protests against the bailout of the big American banks, saying, “It is outrageous that we have socialism for capitalists and capitalism for everybody else.”
The man from Muscle Beach
     In the piece I am talking of today, Lewis takes these kinds of insights to California in order to meet The Terminator, after he had been terminated as Governor. In a fascinating, 12,000-word article for the excellent New York magazine, Vanity Fair, Lewis went cycling with Herr Schwarzenegger at Muscle Beach, where the big man first started to pump iron after arriving in America to re-invent himself both physically and financially.
     Lewis has previously written in the same magazine equally long, equally fascinating articles about the financial crashes in Iceland, in Ireland and in Greece. This one is about America. But instead of going to Wall Street, he goes to San Jose and other such places to find out why small-town American is bust, just as surely as the country as a whole is.
     The reason is not that democracy doesn’t work; it is that it does work, all too well. “The system is actually very good at giving Californians what they want,” Lewis notes, going on to quote a commentator who said to him, “What all the polls show is that people want services and not to pay for them. And that’s exactly what they have got.” The result: looming bankruptcy. The problem: what happens when real bankruptcy hits and the services can no longer be provided on credit.
     Readers can use the link to read the whole article. Suffice it to say here, that Lewis ends by describing one of the most dysfunctional communities in modern California, Vallejo near San Francisco. There he finds hope for regeneration. When everything is completely bust, to the point where the municipality cannot even afford a receptionist in the city hall, a few people with morals, energy and a willingness to take risks get together and start to sort out the mess.
     This is where the United States is different from most other countries, especially Russia, at least as it has been until very recently. A Russian friend recently sent me an article she had written about her country's tendency to go some way towards the Oriental habit of committing suicide after failure. Here, bankruptcy is a black-mark for life, she says. Lewis says that this is part of the reason for the current crisis with the Euro. Nothing must be allowed to fail. He says at the end of the Charlie Rose interview, talking particularly about Greece:
“There are plenty of stories of going from unsustainable indebtedness, to defaulting, to prosperity. Once you have wiped out the debt you are a good risk again. The idea of personal reinvention or social reinvention or national reinvention is not alive and well in Europe. That’s our idea. The Europeans don’t really go for that. They really think that failure is permanent failure. It’s built into their laws.”
     Can post-Balotnaya Russia, with all the young folk we have read about recently taking an oppositional mind-set into local councils, do things differently from western Europe? Write and tell me if you think that's possible.

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