Greeks, Goldman Sachs, US Goverment–whose mess is it?

Note: this post was inspired by a lively back and forth between the authors of the Monevator and Money Energy on the issues surrounding the Goldman Sachs scandals, the responsibilities of various nations involved and the economic differences between the US and Greece.  You can see those posts and threads here and here.

Watching the Goldman Sachs scandals unfold as a US citizen and resident of France has been an interesting journey to say the least. To me, Goldman Sach’s entanglements with Greece felt to me like an act of war on the European Union. I wondered what the US government would have to say about all this and discovered, to my mystification, that all of Goldman Sach’s questionable behavior both in Europe and the US appeared (mostly!) legal.  See this great Newshour report for a summary of how this is possible if, like me, you still struggle to fathom it–this explanation is for Goldman Sachs’ shenanigans in the US, but the basic principles are the same as with the Greek fiasco.

Blaming Goldman Sachs? Too easy, I’m afraid.

Goldman Sachs did what any an amoral(immoral) corporation would: make money by any means legally possible. They make an easy target for hatred, especially when you see the contents of their personal emails splashed about the news (who are these people?!?) or watch their representatives being vilified by congress (Newshour coverage).  Here’s a gem from Senator John Ensign of Nevada during recent Senate hearings:

I think most people in Las Vegas would take offense at having Wall Street compared to Las Vegas, because, in Las Vegas, actually, people know that the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you’re playing the game.

Does that tongue-lashing make you feel better?  . . . Me either. Part of me would love to see Goldman Sachs actually face the real threat of being held legally accountable for their actions–but that would have required their actions actually being illegal.

Blaming the US congress and US voters?

I’m not particularly impressed by our members of congress at this time. Perhaps US voters should consider vilifying (and then voting out) our politicians, rather than allowing ourselves to be distracted by their silly Senate hearings about actions the implicitly appear to condone when they refuse to make them illegal.   Indeed, by sitting back and failing to act, we are also condoning such behavior. 

And what about those Greeks?

The French media are very preoccupied with the financial corruption of the Greek government, and the rampant tax evasion that occurs there. Often sited here in France as a symbol of corruption and irresponsibility, le travail au noir, or under the table work is a common source of contention.

After all, if you found yourself forced to shoulder the debts of a fellow Euro nation, wouldn’t you want to know that the citizens of that nation were at least paying their own fair share of taxes? It all starts to seem rather incredible watching people who allegedly don’t pay into their own social programs rioting in the streets when those social programs prove underfunded.

Greek Fiscal Fraud–is it justified?

Recently, I saw a most compelling article at Le Figaro, in which Catherine Schlepp, a former resident of Greece sets out to explain the rampant under-the-table work environment in Greece.  By the time I’d finished reading it, it had  me wondering whether I wouldn’t be guilty of tax evasion myself if I lived in Greece.  As Schlepp puts it:

If the Greeks cheat and refuse to pay their taxes, if fiscal fraud has become a national sport, it’s also because the role of the government is less visible than it is in France.”

She then further details failures in all areas of Greece’s public sector from education, to the hospital system and the justice system and depicts a country with relatively low social assistance for the unemployed.  Given such a track record, it’s no wonder the Greek government struggles to impose new taxes or simply collect those already in place.  The question the Greeks seem to be asking: “What have you done for me lately?”

Schlepp argues, rather convincingly, that for the Greeks tax evasion has become a “condition of survival.” Indeed, when you factor in the arrival of the Euro, the already struggling Greeks have seen their cost of living skyrocket, keeping pace with the costs in other European countries while their salaries have failed to budge.

How relevant is the Greek example to other nations today?

What has happened (over many decades) in Greece is what happens in any nation on any continent whose government becomes too corrupt and inept to help its own citizens–or to allow them to support themselves financially without cheating. To say that economically the US is better off than Greece might well be true.  Politically, however, the US government seems to be heading closer every day towards the kind of monumental political folly that got the Greeks where they are today.  I would argue that it’s a matter of degree, and perhaps time.

And here in Europe, the question of travail au noir as people attempt to make ends meet and lose faith in their governments does not seem isolated to Greece. Here in France, I hear people talking on a daily basis about the extra hours they work on a ‘cash’ basis or that contractor for home repairs paid au noir.
Lest anyone argue (fairly) that the above is mere anecdotal evidence, I present you with the fact that under-the-table wage earners doubled in France between 2003-2008. And 65% of those caught working tax-free were French nationals–not immigrants.  See full article here (in French).  I’m sure we will discover similar problems in countries (Portugal) as well in the days to come.

Is it just me or is the guilt spread around?

I’m starting to wonder if anyone is going to escape blame here–with the possible exception of the Canadians . On one hand, it’s easy to smell a rat in the Goldman Sachs escapades, although they may have been technically legal.  And these same Wall Street companies seem to only be able to do their deals when political leaders turn their heads to their ways and average citizens become greedy (as in the US) or willing break the law (as in Greece).

What are your thoughts on the legality and morality of the Goldman Sachs scandals on these two continents?  Do regular people have as much responsibility as corporations to behave ethically?  Are the Greeks behaving unethically when they refuse to fork over their legal share of taxes to their (corrupt) government?