Reykjavík Grapevine - 24.06.2005, Side 26

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A large number of defaults would have already
occurred, had it not been for an unusual aspect of the
local economy: to make up for their spending, locals are
working that much more. In fact, despite the enormous
personal debt, loan officers told us that defaults are at a
record low.
University of Iceland economics lecturer Guðmundur
Ólafsson points out that despite the strong wages, there
are aspects of the local economy that are third world.
Foremost on the list of third world realities in Iceland
was the workweek, which he suggested to be 50 hours a
week, something he claims that Northern Europe and
the USA did away with around 1900. He also points out
that while Icelanders have strong literacy, there is poor
local education in industrial matters.
The thriving economy in Iceland, then, is based
on a dangerous political structure that has caused a
significant bankruptcy in the very recent history, and
on a local population that spends without what might
be considered a reasonable fear of debt. Add to this
news that the privatization of the banks was handled
with extreme impropriety—interestingly, Björgólfur
Guðmundsson is again involved, though this time he
seems to have been rewarded for his political views
as opposed to being jailed. (Read the interview with
journalist Sigríður Dögg, pages 6 and 8, for more
information.)
Guðjón Arnar Kristjánsson, the chair of the Liberal
Party, usually known as an ally to the conservative
Progressive and Independence Parties, informed the
Grapevine that “many aspects of the [privatization]
procedure have been dubious… Huge profits of some
recently privatized companies, especially financial
institutions, show that the companies were sold at
suboptimal prices. Furthermore, the banks are causing
an overheating of the economy and keeping the interest
rates far too high.” He went on to warn of business
ethics, claiming: “the law of business today is profit at any
price. Business ethics have declined…”
As bad as a fashion show featuring the Beckhams is, as
much fear as Russian beer and soft drinks strike in the
hearts of English newspapers, as attractive an analogy
for business behaviour as modern Vikings are, those in
the know about the Icelandic economy seem to point
not at blond hair or Russians, but at the ground. The
fundamentals of what make a strong economy: banks that
are trusted by international investors, high employment
levels, a well-educated and confident workforce, a
government free from corruption, seem to be in danger. If
you want an easy analogy, realize that the country is built
entirely on a fault line, sprung from volcanoes.
In a worst case scenario discussion with Mr. Ólafsson
from the University of Iceland, he pointed out that “a
slight setback in the economy could trigger a domino
effect. If people lose their jobs, they can’t pay off their
loans, the prices of their properties drop and people could
be paying off interest of 15 million ISK for properties
that [when corrected from inflation] will be valued at
13 million.” This exact situation has already occurred in
Norway and Sweden. In fact, in a news report that did
not get nearly as much attention as the Beckhams or the
Russians, Norwegian economics professor Thore Johnsen
warned the Norwegian business industry that “The banks
[of Iceland] could fall down like a house of cards.”
Screaming Viking,
Ignoring the Volcano
Continued from page 25
G
úndi