"Inside Job", the highly-touted documentary about the global financial crisis, opened last week in theaters, and director Charles Ferguson told the New York Times that he could have done a separate film just on Iceland, where the former Prime Minister was indicted in recent weeks for "gross neglect" of the economy. Ferguson was amazed by the havoc caused by an elite so small, "you could practically fit them into a restaurant."
This week, Iceland is the focus of the second in an occasional series examining a trend in which networks of public-private players, purporting to serve the public interest, instead capture official information to serve their own interests. Robert Wade of the London School of Economics and Silla Sigurgeirsdottir of the University of Iceland show how the trend played out disastrously in Iceland. - Janine Wedel & Linda Keenan
What explains Iceland's financial debacle? The bankers' wild behaviour is a textbook case of accounting control fraud. In the end, however, the responsibility lies with the government led by former PM Geir Haarde and Haarde's longtime ally/mentor David Oddsson, who led the Central Bank after serving as PM from 1991-2004. The parallels with US and UK politicians and central bankers are obvious: Iceland's leaders remained in denial while their policies pumped up the bubbles, year after year. And their modus operandi shows that these leaders are part of a new breed of power broker who fuse state and private power to achieve their own ends.
These players debuted with the end of the Cold War and amid the growth of privatization and of new information technologies, part of a new system of power and influence identified in Janine Wedel's Shadow Elite. Iceland appears to be a stark example of the shadow elite in action, with operators multiplying their influence by coordinating their efforts as part of an exclusive and self-propelling team that Wedel calls a "flex net."
Iceland's flex net operated on the edge of and partly in opposition to a traditional elite, a bloc of some 14 families known popularly as the Octopus, which dominated Icelandic capitalism from the start. In the early 70's, some university students took over a journal called The Locomotive to promote free-market ideas--and, not least, to open up career opportunities for themselves, rather than wait for Octopus patronage. The two future PM's, Oddsson and Haarde, were members.
They were devoted to neoliberal policies, and privatized publicly-owned enterprises, to the benefit of their Locomotive cronies. In 1991 Oddsson began his reign--not too strong a word--as PM, explicitly invoking Reagan and Thatcher as models and drawing on the same ideas of "New Public Management," which sanctioned large-scale outsourcing of government work to private actors. Then he set in motion the dramatic growth of Iceland's financial sector, before installing himself as Central Bank Governor in 2005. Finance Minister Haarde took over as PM shortly after.
While manuevering themselves and their allies into key roles relevant to achieving their agenda, the leaders also locked up should-be public information in their own network --these tactics are both key flex net features. A glaring case of this can be seen when, as the collapse gathered speed, Oddsson, as Central Bank Governor, moved to peg the krona at close to the pre-crisis rate, a crazy move by all economic counts, but it might have allowed cronies in-the-know to spirit their krona into safer currencies in the few hours that the rate lasted. He consulted only his protégé, Haarde. Even the Central Bank's chief economist was kept in the dark.
With near-exclusive access to information, power brokers can also brand it for the media and public to suit their own purposes, with only a few able to counter them. The Oddsson and later Haarde government proved masterful at this. They relied primarily on the banks' research departments for economic analysis. Iceland's National Economic Institute had built a reputation for independent thinking and, at times, published unwelcome reports, warning that the economy's management was going haywire. Oddsson abolished it in 2002. Statistics Iceland, the public data agency, was notably cowed into suppressing unfavourable information. And the University of Iceland bowed to pressures to make its Economic and Social Research centres self-funding--that is, to rely on finding buyers for commissioned research--with the convenient result that they no longer published big-picture reports with a critical edge.
In 2006, the Icelandic Chamber of Commerce commissioned an expensive report from
Columbia Business School economist Frederic Mishkin, which affirmed the banks' stability with few qualifications. The following year the Chamber of Commerce commissioned another one from London Business School's Richard Portes, which reached much the same conclusion. (After Iceland's collapse, Mishkin's report, called "Financial Stability in Iceland" was re-listed on his CV as "Financial Instability In Iceland". Mishkin told Inside Job director Charles Ferguson that it was a typo.)
With independent information centres neutralized, the big financial players were better able to capture the key Ministries and Central Bank; indeed, in such a small pool, one could say that they all they captured each other. The line they fed themselves and the public was that, because the three main banks - Landsbanki, Kaupthing and Glitnir - paid much better than any government body, they must therefore attract the best talent. (Of course, this "talent" joined the Central Bank or the Financial Services Authority with the aim of learning enough to then land a private bank job and double their salary.) Therefore, it was only sensible for the government and the public to rely on information supplied by the best talent - the banks themselves.
The Chamber of Commerce, for its part, functioned almost literally as the bankers' executive committee: it has been estimated that at least 90 per cent of its recommendations were translated into legislation. Almost everything the bankers wanted became government policy, and grateful bankers provided grateful politicians with generous rewards. The government's decision to provide unlimited deposit guarantees after the crash - rather than the statutory amount -- illustrates its beholdenness to the financial elite.
In Shadow Elite, Wedel points out that the new breed of power broker is skilled at evading accountability - often by using ambiguity to create built-in deniability. As the Iceland crisis unfolded, senior ministers, answering mainly to each other, established an ad hoc crisis coordination group. But it had no clear mandate or formal reporting procedures and did little more than throw ideas around. Iceland's Special Investigative Commission later revealed that the group did not report to ministers in any way that could be verified, allowing the latter to evade legal responsibility and later to deny that they knew how serious the problem was becoming.
This new kind of power broker is also skilled at turning failure into opportunity. Case in point: David Oddsson. Far from being held accountable, Oddsson was rewarded in September 2009 with the position of Editor-in-Chief at the leading Icelandic daily. From there, he orchestrates coverage of the crisis, yet again helping to brand events for the public. This is roughly the equivalent, as one commentator has pointed out, of appointing Nixon editor of the Washington Post during Watergate. External investors who have bought into some Icelandic firms at knock-down prices are urging the Icelandic government to 'move on' and not keep raking over the past. Another crucial outside actor - the IMF- is headed in Reykjavik by a former roommate of Haarde's (Brandeis in the 1970s), and still close friend. And strangely, despite an expansive team of 30 people, and after 20 months of work, the special prosecutors' office has brought only one case to court so far. It involves a very minor figure.
Even Parliament's recommendation last week to indict Geir Haarde is a letdown for those demanding real accountability: the parliament voted to charge Haarde, but not three others facing similar charges. The former ministers who prescribed the policies of the bubble economy, i.e. David Oddsson and his then partner in a coalition government, face no charges whatsoever because of a 3 year statute of limitations. Meanwhile the current leadership is unable to avoid one thing: popular outrage - misleadingly directed at it rather than at the previous leaders responsible. The Guardian reported that politicians had to flee 2,000 angry protestors at the recent Parliament opening. Polls show that "trust in parliament" is running at about 10%. One can hope that those responsible for Iceland's implosion will face more consequences than hurled eggs, but Geir Haarde, for one, is undaunted at the prospect of being the first world leader indicted for economic mismanagement. He told Bloomberg News two weeks ago that he will be "completely vindicated", and called the charges "absurd."
This article was adapted from a lengthy analysis of the Iceland crisis by Robert Wade and Silla Sigurgeirsdottir, appearing in the September/October issue of the New Left Review.
Goldman Sachs!
Take your money out of BoA and put it in a savings account with a reputable credit union.
a) with out atm
b) without checking
c) without debit
Then you can see your assets.
*Use cashiers checks and money orders (which are often free at your corner store) We'll see how long the banks allow that to continue.
*Rent a conservative apartment.
*Pay off your credit card and then cut them up
*Buy silver coin (American Silver Eagles have no tax and the sale is not reported).
The New Fiscal Conservative Citizen.
Shop at the Farmer's Market I implore you.
Show them who the real boss is. We have No Demand for your services and we are taking back Our Supply.
As I recall, Oddsson didn't last through the crisis, so all he did was done in the economic maelstrom. And he was a political appointee, not an economist.
It has been how long, and they are writing "it might have allowed.."? Do these people not have data? Without data they are just boiling up conspiracy theory hyperbole and blathering "scary-stuff" propaganda.
Another example of exaggerated hyperbole is their comparison between Oddsson, a political appointee bank governor (no economics expertise needed for the position, apparently) becoming a newspaper editor after a currency collapse and Richard Nixon, a president of a nation who was implicated in a real-crime burglary, if he had become editor of a newspaper after he had approved the burglary.
In Iceland, and London, "school of economics" apparently equates to "school of propaganda". Suddenly I understand both countries' economic problems.
I don't think Iceland's citizens would agree with your displaced anger.
The same thing happened in America. What was really happening on Wall Street had become private - known only to a few insiders. Why? Because Shrub Jr. and SEC head Cox didn't believe in regulation. Without effective government regulation, Wall Street was able to create "black" transactions and control the public perception.
It continues to this day. Note the number of misinformed and intentionally ignorant right wingers who parrot the fiction that Fannie, Freddie and CRA were to blame for the financial meltdown, when in fact it was 90% the fault of Wall Street Profiteers, many of whom are still in positions of power and none of whom have been prosecuted. This clearly discredited misinformation is spread by the right wing politicians who are still in the pocket of Wall Street and Tea Baggers who simply are not smart enough to understand how America was swindled.
From that kind of a start the only direction is to witch-hunt. Real Investigation requires documentation of events and times and then coordination of different chains of events and times, in chronological order, so what really happened and when can be determined, and if real actions and real results really did result from each apparent indication or appearance, and if each contributed, and how, to what final result. In the Icelandic report, as in the McCarthy Commission reports in this country in the early 1950's, all the real time, real event, real result component is left out. In the McCarthy era example, people who attended a meeting, but didn't join anything, and people who "participated" by serving soup in "alleged communist affiliates or fronts" operated soup-kitchens became communists. I don't know what the Icelanders are "rebuking" people for having "done" today.
Obama has ended up as fodder for blame related to the inherited Bush/Rove economic mess, so I can hardly see him as someone who "corralled" much at all.
Take your money out of BoA and put it in a savings account with a reputable credit union.
a) with out atm
b) without checking
c) without debit
Then you can see your assets.
*Use cashiers checks and money orders (which are often free at your corner store) We'll see how long the banks allow that to continue.
*Rent a conservative apartment.
*Pay off your credit card and then cut them up
*Buy silver coin (American Silver Eagles have no tax and the sale is not reported).
The New Fiscal Conservative Citizen.
Shop at the Farmer's Market I implore you.
Show them who the real boss is. We have No Demand for your services and we are taking back Our Supply.
"The [Iceland] Chamber of Commerce, for its part, functioned almost literally as the bankers' executive committee: it has been estimated that at least 90 per cent of its recommendations were translated into legislation. Almost everything the bankers wanted became government policy, and grateful bankers provided grateful politicians with generous rewards."
How come this sounds familiar to me, with regard to the US Chamber of Commerce, and its interaction with the Republican Party in US policy making? The Iceland Chamber issued several reports which said things were fine and dandy with regard to the banks...the US Chamber has repeatedly claimed that offshoring US jobs is fine and dandy for the US economy.
He also own "Novator Partners LLP is an English private corporation, specializing in telecommunications, pharmaceuticals and financial services. In addition, Novator operates a Private Equity Fund and a Credit Opportunities Fund."
The owner or owners of Novator are hiding behind a web of companies which includes companies in places such as Cyprus, Cayman Islands, Delaware, Gibraltar, Tortola (British Virgin Islands), and Luxembourg.
Investigations published in Denmark suggest that the underlying companies are linked to Russian companies"
Other acquisitions included:
"In 2007 Novator bought out other shareholders in Actavis, an Icelandic pharmaceutical company.
Actavis acquired the New Jersey-based generic drug company Amide Pharmaceutical for US$500 million in 2005.
Actavis acquired Indian research company Lotus Laboratories"
Actavis is the largest generic drug maker in the US.With the new healthcare big pharma deal they are looking forward to big profits I bet.
Decades.
Reagan was the beginning of the end.
Russian Circle - the contribution of Summers as advisor thru his proteges and consulting firm at Harvard and in Russia for the recommendations - during Boris Yelsin period in office - for privatization and control of russian industry - is also a parrallel story - plunder on a larger scale
same players - same methods