The Iceland of my youth was not a rich country. When I was growing up, our diet mostly consisted of fish, lamb, potatoes, and the few crops that could be grown near the Arctic Circle. "Exotic" foods like fresh apples and oranges were reserved for Christmas - "The deli-síjus apples have arrived..." announced the ad-reader on the state-owned radio each December. I was 14 when I first tasted iceberg lettuce. I thought I had died and woken up in consumption heaven when, as a 17 year old exchange student, I first experienced an American supermarket.
Because there was so little foreign currency available, we had rather few consumer goods. I have almost no photographs of myself as a baby, because my parents didn't own a camera - in the 60s a luxury item for our working class family of seven. People rarely left the island. Summers away from school were spent working, and I was 12 when I began working in a fish factory, cleaning cod for export (which I found a welcome change from the babysitting I had done every summer since the age of nine).
Due to the country's dependence both on unreliable fish catches and foreign demand for fish products, Iceland's economy remained very unstable well into the 1990s. Iceland became one of the founding members of the European Economic Area (EEA) in 1994, which allowed its economy to diversify. Aluminum refineries were built, even though there is no aluminum on the island, to take advantage of the country's cheap electricity. Economic growth averaged about 4% per year from 1994 until last year.
At the end of 2007, the United Nations' Human Development Index ranked Iceland as the most developed country in the world. Unemployment was essentially non-existent, and foreign workers were brought in to handle the tasks that Icelanders felt were now beneath them, such as fishing. Young people no longer ate fish. Only two of 200 business administration graduates chose to go into the fishing business in 2007.
2008 brought a 90% decline of the Icelandic stock exchange, a 50% decline in the Icelandic krona, and the complete collapse of all of Iceland's banks. Unemployment is expected to be in the double digits shortly. Foreign workers have fled or been forced out of the country, and thousands of residences stand vacant or uncompleted. Automobile sales have essentially stopped.
So what now? When will we hit bottom?
If it was business as usual in the rest of the world, Iceland would probably be able to stabilize itself, with assistance from the International Monetary Fund (IMF), negotiate some sort of debt forgiveness settlement with its largest foreign creditors, and adapt itself to a more realistic budget. We would have to cut back from the glory years, but we would still live a good life.
Unfortunately, of course, the rest of world is not doing so well. Experts, such as Paul Volcker and George Soros, recently stated that they can't see the bottom, that things may be worse than the Great Depression.
The Great Depression passed mostly unnoticed in Iceland because most people were so poor that it was a stretch to fall any further. My parents tell me stories that almost defy belief. The novel Independent People by our cultural icon, Nobel prize-winning author Halldór Laxness, describes early 20th century Iceland amid farmers and fishermen - much like my grandfather, a West fjords seaman - who would rarely leave their valleys and fjords, except for a trip to the nearest village to shop for necessities, a country whose farmers might be so destitute that they "died without ever having transacted a business deal involving more than a few dollars at a time."
In 1882, an Icelandic family in front of their home, getting ready to leave for church services. Photo credit: Ponzi, F., Brennholt Publishing.
It seems almost unimaginable that we could ever sink that low again. Almost. It is hard to see how we will be able to maintain a middle-class standard of living if there is a severe global downturn. We didn't build an infrastructure during the fat years that will permit us to support ourselves during the lean years; everything has been partied away.
Rather than working to repair the flaws in the system, however, we seem to be going out of our way to alienate the countries in the best position to help us. The banks took in hundreds of millions of Euros from investors in Britain and in the Netherlands that they can no longer repay. Norwegian authorities claim that one of the banks embezzled €47 million. Last week, the "Green" Party Minister of Fisheries reaffirmed that Iceland will defy the International Whaling Commission and pleas by the ambassadors of United States, Sweden, the United Kingdom, Germany, the Netherlands, France and Finland and commence massive whaling.
Although a spontaneous uprising of the people forced the government to resign, I see no signs that the new bosses will respond to the nation's demands for change. Why hasn't "the group of thirty" that bankrupted the country been arrested and questioned as formal suspects, their assets frozen? The special prosecutor should have a smorgasbord of charges - theft, fraud, tax evasion, conversion, to name a few (he doesn't have to start with the treason immediately, although it belong on this list). The Icelandic authorities diligently throw people „suspected" of selling drugs or stealing a car in jail and confiscate coke and stolen goods, but these individuals who have stolen hundreds of millions of dollars cannot be touched! Who is protecting them and why?
It's back to business as usual. The Icelandic political parties and the media have fallen back into their same old pattern of finger-pointing and ad hominem attacks, and but for a miracle, I suspect the elections will put the same professional politicians who got us into the mess back in charge - that would be a new bottom for us.
Or perhaps not, to quote a cultural giant of our times, Homer Simpson: "Not a chance! I can sink way lower."
I've never been so afraid for my country, for my family.
My best wishes go out to your country.
So sorry to hear Iceland has had to take loans from the IMF. This will compound the problems.
Best wishes for the people of Iceland.
You have it spot on. I watched during the boom years as folks drove to Kringlan in their new 4wds
and refuse to shop at Bónus on the 2nd floor when they could purchase identical products at Hagkaup on the lower level at at a 40% premium. The ambiance was much nicer in Hagkaup and who would be caught dead putting a couple of those yellow plastic Bónus bags in the back of the Land Cruiser. Now these same folks are complaining about how their auto loans have increased by 70% and how could it be their fault when they chose stronger currencies to bet against! Duuh!
In reality I do feel sorry for the more responsible folks such as those that have had their monthly mortgage payments go through the roof through no fault of their own but that of a government that indexes home loans to inflation! Where have all the learned folk been while this has been going on? Should the economic studies curriculum at Háskóla Íslands be reviewed to find out what sort of financial education is being afforded to the students there? Kaupthing had a Phd. employee who thought every thing was rosy not too long before the bank fell. Are people buying these degrees or are they not learning what they should be learning?
I hope the people there come to their senses in time. Good luck!
the warnings against the excesses began long before the banks collapsed...but, as here in the usa, the voices were hard to hear above the noise of approaching good times...oddson's opportunistic privatization of the banks was a part of the intocation with american-style capitalism...i remember when the first SUVs started showing up in reykjavik , the "jeeps" as they were called, were seen by some as the first signs of a new economic morality that would, finally threaten the country's structure and spirit (sjalfstaefolk)...at least the new government, unlike ours, is trying to throw the banking leadership out (only oddson refuses to give up his key to the executive badherbergi)...and if they keep looking into the dealings behind the collapse they'll surely find evidence enough for prosecution.
Iris,
Irrational exuberance coupled with stupidity is not a crime. You need a laser focus connecting the ill acts with a criminal intent. Barring that, you have no complaint. Iceland was certainly used by the financial well-positioned manipulators and like most blonds, the lesson is not soon forgotten. And so goes the journey through time.
Tell us specifically what the group of thirty did, please.