Reykjavík Grapevine - 06.03.2009, Qupperneq 10

10 | REYKJAVÍK GRAPEVINE | ISSUE 3—2009
“Those who are considered chieftains in this
country are foolishly susceptible to prayer, drink
and bribery, but still the simple and poor common
people believe them and are duped.”
Sound familiar? No, this is not a comment on the
current economic collapse. These words were
written by the Danish king’s emissary in the 15th
Century who was sent here to survey the king’s
new possession in the North Atlantic.
To any observer of the Icelandic banking
crisis, one of the most surprising aspects must be
that no one, whether in the financial community
or then government, has assumed any responsi-
bility.
“Deny, deny, deny,” was the advice Presi-
dent Clinton supposedly gave to Monica Lewinsky
when they were caught in the act. It was following
his own advice that turned a minor scandal into a
major one. Not only had the President cheated on
his wife, but he had also lied to the public about it.
Now, bankrupting your country while in office is
not the same thing a screwing your secretary. Just
ask former President Bush, who will fare much
worse in the history books than the philandering
Clinton.
Both are on the Guardian’s list of 25 people
responsible for the economic crisis. So is Iceland’s
former PM Geir Haarde. Like his colleagues, de-
nying the obvious is Haarde’s take on history. For
most Icelanders, it was shocking to see the former
Emperor, like a sketch out of Spaugstofan, with no
clothes on in BBC’s HardTalk. When asked repeat-
edly, he would not offer an apology to the people
of Iceland who now must suffer so much, neither
as former PM nor as a human being. A simple
sorry last autumn might have allowed him to keep
his job. But Haarde chose denial.
SORRY SEEMS TO bE THE
HARDEST wORD
Did he and his party really think that they would
get away with bankrupting the country and not
shouldering any blame? So it would seem. But
then again, they always have.
Iceland’s economic collapse last autumn
was spectacular, but in many ways it was just a
little bit of history repeating. When Iceland was
founded in 930, it was a democratic society (by
the standards of the time), with ships of its own,
relatively peaceful and with an economy that
could easily sustain its people.
After the introduction of Christianity, power
came to be consolidated in fewer and fewer
hands as Chieftains built churches and amassed
wealth through them. By the 13th Century, Ice-
land was a violent and impoverished country.
The chieftains, mainly consisting of five families,
constantly fought over control of the nation’s re-
sources. Meanwhile, the shipstocks had not been
maintained and Iceland could not supply itself.
Eventually, they had to appeal to another author-
ity. The Norwegian king, the regional IMF of the
day, had to be brought in to bring order to the
country, and Iceland lost its independence.
THE END Of INDEPENDENCE, PT. 1
Peace was restored at the price of independence.
It seemed that prosperity might follow also.
After the start of the Norwegian period, fish
became, for the first time, the most important ex-
port. Markets opened up in the Baltic once that
area had become Christian. Catholics were not
allowed to eat meat on Fridays and hence fish
became a popular substitute. The Norwegian port
of Bergen, through which much of the Icelandic
trade flowed, became incorporated into the Han-
seatic trading system.
This, however, did not lead to an increase
in living standards among the Icelandic pub-
lic. Quite the contrary happened as the climate
became harsher and crops could no longer be
grown. At the same time, a few families became
very wealthy from the fish trade. The rich became
richer and the poor poorer.
NO fISH, NO fREEDOM
When the bubonic plague devastated Norway in
the mid-14th Century, shipping to and from Ice-
land virtually ceased. Both Norway and Iceland
came under the control of the king of Denmark. In
1490, new laws were set stipulating that those who
did not own livestock must become tenants for
someone who did. Hence, the poorer labourers
were from then on forced to work for the wealth-
ier landowners. Most Icelanders became virtual
serfs and were not allowed to make a living out of
the one thing Iceland had in abundance, namely
fish. Fishing was only practiced during time off
from farmhand duties, and the catch belonged to
the landowner.
This system prevailed to a large extent in
Iceland into the 19th Century. Free trade was one
of the main goals of Jón Sigurðsson and those
struggling for Icelandic independence. New laws
were set that prevented traders from owning more
than one store in each town, thus preventing mo-
nopolies. Living conditions improved consider-
ably as the 19th century wore on, fishing became
ever more important, and boats became both big-
ger and more numerous.
THE OCTOPUS SPREADS ITS TENTACLES
In 1914, a shipping company, Eimskip, was
formed. Its founders were well aware that Iceland
had lost its independence centuries earlier be-
cause it did not have control of its shipping and
were determined not to let history repeat itself.
The company became known as the “dream
child of the nation,” and everyone, rich and poor,
bought stocks so that it might prosper. At the time,
its owners totalled 13.000 in all, at a time when
the population had not yet reached 100.000. But
ownership was not distributed evenly. This fact
was well hidden, as ownership of major corpora-
tions was kept secret.
When the ownership of Eimskip was finally
made public, it turned out that 40% of the stock
was owned by 15 individuals who controlled the
board. The board had been buying up stock sold
by shareholders without putting these on the mar-
ket, something that in most other countries is con-
sidered insider trading and is illegal. The board
had also been buying stock in other companies,
notably about a third of Icelandair shares, and
some people sat on the board in both companies.
In the 80’s, Eimskip had also gobbled up its big-
gest competitor, Hafskip.
THE OCTOPUS AND THE SqUID
Some people wondered whether Eimskip’s con-
siderable proceeds should not be spent on lower-
ing prices on traffic rather than taking over other
companies. This would lead to more purchasing
power among the general public and benefit the
population and economy as a whole. But those
who owned the nation’s dream child had other in-
terests. Iceland was no longer a part of Denmark,
but it had a new set of lords.
The 15 families controlled virtually all traf-
fic to and from the country. These were later
nicknamed “The Octopus,” as its many arms all
seemed to be feeding the same mouth.
Its other two main pillars were the Shell
oil company and the Sjóvá-Almennar insurance
company.
Its main rival was another conglomerate,
Sambandið, often called the “Small Octopus” or
“the Squid.” The Octopus was tied to the Inde-
pendence Party, and the Squid to the Progressive
Party, the two parties who have divided Iceland
between them for most of the 20th Century.
Virtually all fishing distilleries belonged
to one or the other, and an understanding was
reached regarding spheres of influence. By the
late 80’s the Squid was falling apart, leaving the
field to the bigger player.
MEET THE NEw bOSS...
In 1991, the Independence Party, along with the
Social Democrats, formed a government headed
by Prime Minister Davíð Oddsson. Oddson’s grand
plan was to open up the economy, privatise most
government run companies and encourage com-
petition. No doubt most of the companies were
intended to go to the old guard of the Octopus,
most of who were loyal party members. But some-
where down the line, Oddsson lost control of the
privatisation. A new, hungry class of oligarchs
emerged, who were swifter and more fierce than
the old elite had been. They also had liquid cash,
some from ventures in Russia, others from control
of the lucrative supermarket chains in Iceland.
The old elite had less capital, and had relied on
co-ownership in most of the major companies.
The Octopus was eaten up by these new sharks.
TRAGEDY AND fARCE
By the first decade of the 21st Century, a group of
between five and 25 men owned virtually all the
country’s wealth. The gold rolling into their cof-
fers came from the Icelandic people, who had to
pay the highest prices in the world for necessities
such as groceries, as well the highest interest rates
in the world. The combined wealth of Iceland was
such that those who controlled it managed to be-
come major players on the international stage.
But as their assets continued to grow, no
one really understood where the money was
coming from. It seems the answer, in the end, was
simple. It didn’t exist. They had taken out loan af-
ter loan, mortgaged everything they bought time
and time again, and in every case the Icelandic
government was responsible for these loans. Now
that the bubble has burst, it seems the Icelandic
people will yet again have to foot the bill. Our in-
dependence passed from the banks to the IMF.
...AND JUSTICE fOR ALL
Icelanders are hardworking people in a harsh
land. Through sheer grit, they managed to turn it
into one of the most prosperous countries in the
world. But time and again, they have been robbed
blind while a select few got most of the proceeds
from their work. Currently, our money is to be
found in the Cayman Islands while, through yet
more hard work, we must rebuild the country yet
again.
Iceland managed to prosper in spite of, not
because of, the Independence Party that kept
prices high and competition limited. Imagine
what a paradise hard-working people could cre-
ate if they were allowed to keep the fruit of their
labours themselves rather than surrender it to the
wealthy few. Let us hope this time they will. Let us
hope they will be duped no more.
Iceland’s 1000 Years:
ARTICLE BY vALuR gunnARSSon
ILLUSTRATION BY BoBBY BReIÐHoLT The Road from and to Serfdom