A few years ago, Sandy and I visited a beautiful, small European country that has been in default on its sovereign debt for most of the last hundred years. About a third of the economic activity is in the “gray economy,” where no one pays taxes. Many locals believe that only fools pay taxes.
The sights were stunning. Tourism was the nation’s most significant economic driver; agriculture was second. No guide ever mentioned the third economic driver because it was so insignificant. There were few businesses of scale and family enterprises dominated. Many locals worked for their families or under the table for meager wages. They would rather avoid taxes than take a higher-paying job and pay taxes, even though they could net more after paying taxes.
Little tax collection meant the government did not maintain roads, bridges, public buildings, etc. The mediocre infrastructure imposed real costs: delays, damage to cars, inferior education and healthcare options, archaic systems, and few economic options.
The locals considered themselves clever because they dodged taxes. They didn’t seem to know or care that tax dollars could be used to build the national economy. They seemed unable to imagine the benefits of national cooperation, responsibility to unseen fellow citizens, or trusting people unknown to them.
Culture and Travel
Culture is “the way we do things around here”. Travel can help you better understand the consequences of culture. Cultures differ. Often, those differences have consequences. Reflecting on travel can provide insight into the impact of those choices.
Our tour group was primarily rental property owners – families engaged in face-to-face capitalism. Most of the households who rent from our travel companions paid 5 – 15% below market rent. Most of the rental owners on the trip live well below their means.
There was a poignant contrast between the tax-paying entrepreneurs and people in the European nation, which has not met its national obligations in any of the last four generations. The culture, “how we do things around here,” had consequences.
The US rental owners improved their buildings and entrusted the apartments to residents unrelated to them. The landlords expected that renters would pay. Rent increased because of inflation and upgrades. The rental owners were millionaires. In contrast, few of the Mediterranean business owners were financially independent.
The Example of the Germanies
Germany is geographically close to the nation we visited. For almost fifty years, there were two distinct Germanies. West Germany, with its free economy, was prosperous. East Germany, a communist country, was not. One pastor, who routinely passed between the Germanies, said it was like “Going from living in color to living in shades of grey.”
In 1990, Western Germany welcomed Eastern Germany to reunite the nation. The eastern cousins had inferior income and skills. The eastern infrastructure was severely neglected. The West subsidized the East for decades. Now, generally, Germans pay taxes and seem to receive sensible benefits in return for their higher taxes. The German economy is far more productive per person than their near neighbors.
Americans and Germans are not superior to people from the Mediterranean nation with nearly a century of bankruptcy. Yet beliefs affect actions, and actions have consequences.
When we first travel, we want to learn about somewhere else. With the passing of time, some wise people travel somewhere else to understand their home country better.
~
What reflections about America came after you visited another nation?
-o0o-
Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.”
We’re in Barcelona. You can eat off the streets and simultaneously admire youthful well dressed and well behaved men and women. And there are a voluminous supply of jobs. And the architecture is outstanding.
Interesting to read Ron’s characterization and description of culture. I’ve always thought of the behavior allowed or tolerated by the group or organization in a given setting — for example, among family, with friends, within a nonprofit organization or in the workplace — as defining the culture of that group or organization. A company that allows and tolerates its people yelling or throwing tantrums in the office has a very different culture from a company that doesn’t allow or tolerate that behavior. Maybe we’re saying the same thing in different ways.