Lack of honesty helped trigger the economic woes in the US and Europe. Greater honesty will help reverse them.
Researchers who study honesty in societies have just found a gold mine of virtue in Japan.
In the seven months since an earthquake and tsunami destroyed entire Japanese communities, some $78 million in cash has been found in the piles of debris. Most was returned to the rightful owners. In one case, as reported by the Los Angeles Times, a woman found a purse with $26,000 in yen notes and turned it in.
Japan’s culture of honesty is well known and helps account for that country’s past economic success. In Tokyo, experiments are often conducted by leaving wallets filled with cash around the city and then counting how many wallets are returned, along with the money. The numbers are astonishingly high.
Such lessons in honesty are important as America and Europe try to recover from their economic woes. In large part, those woes were caused by giant lapses in honesty.
In America’s case, the recent housing bubble was driven in part by people who lied about their finances to obtain home mortgages or who knew they had little chance of paying them back. Equally bad, these “liar’s loans” were then knowingly sold to investors by agents who knew such mortgages were “toxic.” Even now, many banks are reluctant to admit the real value of their mortgage assets – a big uncertainty that hangs over financial markets.
In Europe, the great fib occurred in Greece. It cooked its books on its fiscal deficit.
When it joined the euro community over a decade ago, Greece promised to follow the rule of not letting its deficit exceed 3 percent of its gross domestic product. But it lied to foreign investors, such as French banks. Its deficit was three times that amount.