July 12, 2012
"Everybody is analyzing policies...as if policies could make any real difference. What really matters is culture," said an Irish friend yesterday.
"Look, Italy has the same policies in the north as in the south. But they are like two separate countries. In the north, the Italians work hard...like Germans...and they're rich. In the south, they don't work. They live on government assistance. And they're poor. It doesn't matter what the policies are. It will always be that way.
"And that's why the Argentines are the way they are. They are mostly Italian...and mostly from the south of Italy.
"And look at the Greeks. They've always been this way. They always default on their debt. Ever since they had debt. Well...I should say in modern times. Who knows what really happened in the age of Pericles. They were different people back then. But now they're Greeks. And Greeks hide their wealth...don't pay their taxes...and default on their debts."
The Wall Street Journal brings confirmation:
Greeks Hide Tens of Billions From Tax Man
If Greece's government was as adept as its banks at figuring out what its citizens earn, the world might be a very different place.
That Greeks have a penchant for evading taxes isn't exactly news — when tax collectors started comparing swimming-pool ownership with incomes, wealthy Greeks camouflaged their pools. And because hidden income is hidden, figuring the size of the tax dodge is difficult.
Armed with data from one of Greece's ten largest banks, economists Nikolaos Artavanis, Adair Morse and Margarita Tsoutsoura recently set themselves to the task. The banks, with tens of thousands of customers across the country, provided loan and credit-card application and performance data. That not only gave the economists access to self-reported incomes, but also allowed them to infer the banks' estimates of true incomes — which are likely closer to the mark.
The economists' conservatively estimate that in 2009 some €28 billion in income went unreported. Taxed at 40%, that equates to €11.2 billion — nearly a third of Greece's budget deficit.
Why hasn't Greece done more to stop tax evasion? The economists were also able to identify the top tax-evading occupations — doctors and engineers ranked highest — and found they were heavily represented in Parliament.
"The Germans are hard-working and disciplined," our friend continued. "As far as I can tell, they've always been hard working and disciplined. That's why they're so scary. When they set out to do something they do it.
"Everybody thinks the Germans are also sensible people. And they are now...sensible and nice. But they're not always sensible. They can have the craziest ideas you ever heard. That's the trouble. They pursue their crazy ideas with the same discipline and hard work they use now to make BMWs. That's what WWII was all about.
"And look at the US. Same laws for everyone. Same policies. Same schools. Same jobs. At least in theory. But very different outcomes. Depends on culture. Asians work hard and send their children to medical school. But there are a lot of groups in America who are very poor...and very ignorant...
"Yeah...the voters..." said an American voice. "I know all about culture. I grew up in Cumberland, Maryland...you know, where that woman who was torturing prisoners in Iraq came from. Well, it was no surprise. Those people who live up in the hills and hollows...we're right next to West Virginia...well, they've got a culture that is really different. You don't see it. Because the people look more or less like everyone else. But it's a different world.
"Did you see the movie, 'Winter's Bone'? It's like that. These are people who've always been a little outside the law... They're outlaws. Poor. They used to be moonshiners. Now they've got meth labs."
"And aren't they of Irish origin...?"
"No...they're Scotch-Irish..." protested our Irish friend. "Very different culture. They're the descendants of Cromwell's troops who conquered Ireland...and murdered much of the population. Brutes, they were. Then, they emigrated to America. But not to the fertile tidewater area. In the colonial era, that was where the English were. That's where you still find those nice Anglican churches. The Scotch-Irish are Presbyterians. They went to the frontier. They were the tough pioneers and frontiersmen. They weren't afraid of the Indians, I guess. Probably, the Indians were more afraid of them. They were always good soldiers. I think they are still the backbone of the US army.
"It's culture that really matters...not monetary policy."
"But what about the Irish?" we wanted to know. "How do they fit into the culture picture?"
"Oh...that's hard to say. Take him out of Ireland and an Irishman can do amazing things. They are leading entertainers, economists, politicians, artists, academics... We're great talkers, you know, great salesmen. But here in Ireland, we look at each other...and we know we are all full of sh*t."
for The Daily Reckoning
Posted by Naxal Watch at 9:33 PM