Iceland -- the Nordic Zimbabwe
The catastrophic economic collapse of Iceland has in international news stories been described as simply another, inevitable casualty of the credit crunch. A Wall Street Journal story last week noted that Iceland was one of the international financial bubble's most enthusiastic players," but failed to mention how Iceland's largely homemade crisis was created by a small group of powerful political and financial figures who literally have looted the nation's treasury.
According to the Fund for Peace, a state that is failing has several characteristics, such as group-based inequality, brain drain, sharp economic decline, corruption and criminal behavior, to name a few attributes. The magnitude of corruption and wrongdoings at the highest levels of Icelandic political and financial system that have come to light following the country's economic collapse begs this question: Is Iceland a failing state?
In October 2008, Iceland's three major investment banks -- Glitnir, Kaupthing, and Landsbanki, which the Conservative party had privatized eight years earlier in favor of their cronies -- collapsed and were taken over by the Icelandic government. They had, through various questionable artifices, incurred a combined debt equal to 7-10 times Iceland's gross domestic product (GDP). Hundreds of thousands of investors outside of Iceland lost all of their savings, inducing the British government to invoke anti-terrorism laws in an attempt to contain the damage.
Since this collapse, the Icelandic stock exchange has plummeted, the Icelandic crown has lost one-half of its value, and the unemployment rate rose 60% from October to November. The sudden halt of major construction projects -- including what was to be an iconic opera house -- has caused foreign workers to flee the country in droves. Automobile sales have nearly stopped, and massive residential foreclosures loom. One-third of Icelanders have indicated that they are considering leaving the island.
Despite obvious mistakes and wrongdoings by governmental regulators and bank executives, no observable changes have ensued. The current regulators--including the head of the Icelandic Central Bank, Davíð Oddsson (Prime Minister from 1991-2004) -- are the very same people who encouraged and approved these fantasies. The majority of the top executives in the newly-nationalized banks are the same directors who created the overleveraged castles in the air. Instead of criminal charges, they get to keep their jobs and handsome paychecks, and remain in position to further manipulate the country's finances. Average Icelanders, on the other hand, get to scratch out a living and the responsibility (along with their children and grandchildren) for paying the billions of debt Iceland is now saddled with.
The gang's perp-in-chief, Jón Ásgeir Jóhannesson, who also happens to "own" most of the private media in the country, is free to gallivant in his private jet between luxury homes in several countries. At this writing, he and his fellow crooks, who invented false enterprises and inflated their "worth" by selling pieces of paper back and forth to each other, continue to engage in all kinds of business transactions in Iceland and wait like carrion for opportunities to "buy" for pittance businesses that have closed or gone bankrupt since the collapse (the same fate awaits many others in the new year), not to mention real estate when thousands of Icelandic families lose their homes in this inferno of greed.
The crimes and corruption that has flourished under Iceland's conservative rule make Bernie Madoff's schemes look like Mother Goose tales. Each day brings forth ever more incredulous stories. Icelanders who are struggling to hold onto their homes and pay the bills were outraged at to learn a few days before Christmas that certain well connected individuals -- bank execs, their families and friends (including members of the Icelandic government) -- hoping to cash in on the boom, borrowed hundreds of millions to buy bank stock, but as the collapse became imminent, the loans were conveniently "forgiven" in secret meetings, with a single penstroke! The average Icelander of course gets no such absolution.
The democratic process is paralyzed. The legislature, Alþingi, is little more than a rubber stamp for the administration and has basically shut itself down. Despite massive popular protests, Prime Minister Geir Haarde's ruling junta refuses to call for new elections before making what will certainly be extremely painful decisions.
Failed states are unable or unwilling to "protect their citizens from violence and perhaps even destruction," and "regard themselves as beyond the reach of domestic or international law." They may have democratic forms but suffer from a serious "democratic deficit" that deprives their democratic institutions of real substance.
The tyrant Robert Mugabe declared a few days ago that "Zimbabwe is mine. "I will never, never, never, never surrender." Iceland's Prime Minister Geir Haarde, the Central Bank Governor Davíð Oddsson, and the members of their little gang are telling Icelanders and the world that -- like Mugabe -- neither will they.
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There are parallels and differences as well. Iceland belongs basically to Icelanders only. Maybe now with the foreign debt, you'll have more tourists and foreigners claiming property.
Zimbabwe was colonised by Europeans whose descendants, a 5% minority, claimed ownership of 75% of the arable land.
Mugabe allowed militant Africans to seize most of the land claimed by this European ethnic minority. For this, Zimbabwe's economy has been made an example of the international financial elite. This collective punishment has been meted out in the tradition of Genghis Khan.
If Icelanders had a 5% minority of Africans who claimed ownership of most of their land, would they be inclined to take it back and suffer the consequences?
Iceland is also being punished by the international financial elite, but for a different crime - too much social integrity.
In my estimation, there may be some merit to the argument the incumbent government is making, that only they can deal with the mess they've made. But their role needs to be as sacrificial offering to appease the gods of finance. Don't let them off the island.
Put as much of the financial burden back on them in the form of seizures of property, large sums to be bailed out of jail, fines, litigation fees, and challenges to the fraudulent transactions resulting in the claims of the creditors.
Finally, don't let your government over-correct in the direction of economic renunciation and naivety. Unsophisticated economies are always vulnerable to exploitation in the future.
Most of the land across the planet is owned by a minority - they're called farmers. Granted, in Zim most of the farmers were white, but displacing them from the productive farms they had developed over generations was the height of economic stupidity. There were far more equitable ways of levelling the playing field, of building the economy, of creating employment and opportunity for everyone. Mugabe has been progressively destroying Zimbabwe since the 1980's - if there is an international fiancial elite that has it in for Mugabe then they are a relatively recent development - and they are probably Zimbabwe's best hope for an end to the long nightmare.
Agreed, the people who ran the Icelandic banks into such overwhelming debt should be stripped of their personal assets. They are trying to hold Iceland at bay while they scavenge what they can from the wreckage and hide their tracks. Only forensic investigators should be allowed at the crime scene.
This breaks the heart and indicates a massive rending of the fabric of Western civilization.
Iceland is a microcosm of what has happened throughout the capitalist
And we fought 50+ years of a cold war to defeat Communism, on the promise of economic liberty, and THIS is our legacy?
The cold war, then, was pointless. And all the lives squandered for its sake are blood on the hands of Western leaders since Truman. As a civilization, we now get to enjoy the final bitter act. Our own leaders, who have fooled us for most of the 20th century, will now start the 21st century in a grand betrayal.
Redistribute the wealth? Oh, they are doing just that. Into their pockets and out of the nations' they claimed to lead.
The nation state, at least in the Western World, is now an endangered species. The Multinational, Globalized Corporate Conglomerate is the new Political Power. It is where power resides.
Add to the irony of the cold war, that much of our debt is owned by Communist China.
I still have the great naivety of believing that things are going to be okay (þetta reddast!). Maybe it's an outdated opinion, but losing hope never does anybody any good.
What helps me maintain that view is that I have a job, I'm in school and generally doing pretty well. I know I'm not the only one who is. Of course you think about what you're buying, and whether you really need whatever is in your shopping cart, and pick Icelandic products over imported ones, but other than that this collapse hasn't changed much in my life.
Oh, no, there's one other thing the collapse did - it made me slowly begin to despise my government. It's broken beyond repair, and still Geir cannot find the decency to call an election. It makes me wish that the president had some power to take charge. Cause surely a nice fellow like Ólafur R. as a dictator would be better than what we have now.
Anyway, this is a great article, even though reading it made me a little angry all over again. Thanks for writing it :)
Part of the world wide Robber Barron Conservative coup.
Iceland was the one country that I never expected to go this way. Shows what I know.
I hope Iceland can recover soon - you have a strong and hardy tradition of survival in your favor. My hopes are with you.
That said it was hard to read your story and not smile - all those lovely Nordic names mixed up with the skullduggery. It reads like the plot of a comic opera.
Greed here comes wrapped in common and infinitely more boring surnames.
Erlingsdottir - what a beautiful thing just to say!
If Iceland revolts, can the rest of the world be far behind? In the US, we have voted in favor of Hope and Yes We Can. But if it turns out that we can't and that Obama can't take back the nation not just from the brink of ruin but from the banksters who robbed us, that question will be on my mind.
THis makes me very sad. I lived in Iceland for nine months in the late seventies, and I really enjoyed myself there. Inflation was high and things were expensive, but it seemed at the time as though the social and economic systems suited the country. I love Icelandic literature
yes conservatism just like communism is a failure based on delusions
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