Greece is in big trouble, financially and in other ways.

Michael Lewis, best-selling author of “Liars’ Poker,” “Moneyball,” “The Blind Side,” “The Big Short,” and others, traveled to Greece to understand The Greek Way.  In the October 2010 issue of Vanity Fair, he writes about his findings in Beware of Greeks Bearing Bonds.

What Lewis found is a society in which honesty is a commodity in extremely short supply.

Individuals systematically under-report income for tax purposes, deal only in cash, insist on no documentation, and “buy” their way out of trouble if they are caught.

“What the Greeks wanted to do (…) was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it.”

“The Greek public-school system is the site of breathtaking inefficiency.”

The pension system is a joke.

Hospitals are plundered by doctors and nurses.

Bribery is rampant, and often necessary to secure basic services.

Interestingly, Greek commercial banks are not the problem. “In Greece the banks didn’t sink the country. The country sank the banks.”

The Greek government is as corrupt and dishonest as its citizens.

For most of the 1980s and 1990s, Greek interest rates had run a full 10 percent higher than German ones, as Greeks were regarded as far less likely to repay a loan. There was no consumer credit in Greece: Greeks didn’t have credit cards. Greeks didn’t usually have mortgage loans either. Of course, Greece wanted to be treated, by the financial markets, like a properly functioning Northern European country. In the late 1990s they saw their chance: get rid of their own currency and adopt the euro. To do this they needed to meet certain national targets, to prove that they were capable of good European citizenship—that they would not, in the end, run up debts that other countries in the euro area would be forced to repay. In particular they needed to show budget deficits under 3 percent of their gross domestic product, and inflation running at roughly German levels. In 2000, after a flurry of statistical manipulation, Greece hit the targets. To lower the budget deficit the Greek government moved all sorts of expenses (pensions, defense expenditures) off the books. To lower Greek inflation the government did things like freeze prices for electricity and water and other government-supplied goods, and cut taxes on gas, alcohol, and tobacco. Greek-government statisticians did things like remove (high-priced) tomatoes from the consumer price index on the day inflation was measured. “We went to see the guy who created all these numbers,” a former Wall Street analyst of European economies told me. “We could not stop laughing. He explained how he took out the lemons and put in the oranges. There was a lot of massaging of the index.”

Let me give you another snippet from the article. Lewis made contact with a couple of honest Greek tax collectors:

I walked down the street and found waiting for me, in the bar of another swanky tourist hotel, the second tax collector. Tax Collector No. 2—casual in manner and dress, beer-drinking, but terrified that others might discover he had spoken to me—also arrived with a binder full of papers, only his was stuffed with real-world examples not of Greek people but Greek companies that had cheated on their taxes. He then started to rattle off examples (“only the ones I personally witnessed”). The first was an Athenian construction company that had built seven giant apartment buildings and sold off nearly 1,000 condominiums in the heart of the city. Its corporate tax bill honestly computed came to 15 million euros, but the company had paid nothing at all. Zero. To evade taxes it had done several things. First, it never declared itself a corporation; second, it employed one of the dozens of companies that do nothing but create fraudulent receipts for expenses never incurred and then, when the tax collector stumbled upon the situation, offered him a bribe. The tax collector blew the whistle and referred the case to his bosses—whereupon he found himself being tailed by a private investigator, and his phones tapped. In the end the case was resolved, with the construction company paying 2,000 euros. “After that I was taken off all tax investigations,” said the tax collector, “because I was good at it.” (…)

The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon which otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another. Individual Greeks are delightful: funny, warm, smart, and good company. I left two dozen interviews saying to myself, “What great people!” They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back. No success of any kind is regarded without suspicion. Everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families.

The structure of the Greek economy is collectivist, but the country, in spirit, is the opposite of a collective. Its real structure is every man for himself. Into this system investors had poured hundreds of billions of dollars. And the credit boom had pushed the country over the edge, into total moral collapse.

A central part of Lewis’s story is that of the Vatopaidi monastery. The island on which it is located “has been regarded by the Eastern Orthodox Church for more than a millennium as the holiest place on earth.” But “in a perfectly corrupt society, it had somehow been identified as the soul of corruption.” Lewis tells how, through guile and influence, the Vatopaidi monks parlayed a worthless piece of inherited property into a real estate empire. I’ll let you read Lewis’s description in his article.

As my friend, David R., says, Lewis’s writing wraps technical information around stories of personalities. He is a marvelous raconteur so make yourself a cup of tea and settle in for a good (albeit long) read.

UPDATE: David R. points us to Jaime Lalinde’s interview with Michael Lewis regarding his article. Thanks, David.

-RichardH