Reykjavík Grapevine - 07.01.2011, Síða 10

10
The Reykjavík Grapevine
Issue 1 — 2011
The First Decade Of The 21st Century In Retrospect | Jón Baldvin Hannibalsson
Jón Baldvin Hannibalsson was leader of the Icelandic Social-Democratic Party
from 1984-96 and Minister of Finance and Minister for Foreign Affairs and
External Trade from 1987-95. He is an honorary citizen of Vilnius, Lithuania.
Will October 6th, 2008 (the
day Iceland’s luckless PM
Mr. Haarde, asked God to
help his poor nation since
he himself could not) live on
in our collective memory as
a “day of infamy”—a sort of
Icelandic Pearl Harbour?
Pearl Harbour is today remembered
by Americans because of Japan’s aerial
bombardment on the US naval station.
And because it led to the Americans'
involvement in the Second World War.
Wars are inevitably both destabilising
and devastating. People not only lose
their property—but their lives.
In our case, Iceland’s economic col-
lapse (“hrunið”) may yet claim a few
lives, but in most cases the losses are
less tangible. Many have lost their jobs,
their property, their savings. Some have
even lost their hope. Then there are
those who have already voted with their
feet—and emigrated.
Some say our greatest loss is our
reputation as an honest and trustwor-
thy people. Because in our case, we did
not suffer an attack from an outside en-
emy. In our case the enemy came from
within. That is what makes it all the
more painful. And it explains, partly
at least, why so many find it almost un-
bearable to face the truth: We have only
ourselves to blame—and no one else.
‘THE THREE WISE MEN’
The best thing that has happened to
us after the crash is the truth-com-
mission-report by ‘the three wise
men’. Nine volumes and almost three
thousand pages, including appended
documents on the web. The truth and
nothing but the truth. They were asked
to tell us the truth about the causes of
the collapse and to find out who was
responsible. And they did just that—
fairly and squarely. They spelled it all
out in painstaking detail.
The collapse was caused by a combi-
nation of fraudulent business schemes
and irresponsible politicians. And by
the way: the majority of Icelandic voters
cannot be acquitted either. Time and
again they voted for parties and politi-
cians who did not deserve the trust put
in them. Again and again. And the nou-
veaux riche buffoons—flaunting their
ill-begotten wealth—were extolled as
the nation’s best sons. How many times
did the President of Iceland, Mr. Gríms-
son—the hyper-active chef-de-protocol
of the plutocrats—ceremoniously ac-
cord them the highest decorations of
state, making it impossible for honest
people to accept such commendations
in the future? The critics’ voices were
simply drowned, and the warning sig-
nals—and there were plenty of them—
were ignored.
No wonder how many are simply
unable to face the truth: Out of 147
individuals in leading positions in gov-
ernment, political parties, the Central
Bank, the civil service and banks and
business corporations etc., questioned
by the truth-commission, not a single
one admitted any responsibility at all,
not to mention expressing a sense of
guilt or regret. “Not my department”
was the standard refrain of those
haughty elitists. This seems to be a na-
tion where the blind lead the deaf.
But ours was not only the lethal
cocktail of dishonest business and
incompetent politics. Iceland was by
design meant to become a shining ex-
ample of the neo-conservative utopia; a
tax haven for the super-rich with mini-
mum government interference in the
free play of market forces. If something
were to go astray, the market forces
could be trusted to correct it by them-
selves—or so they believed. This was
not only the professed ideology of the
Independence Party leadership; it was
the declared policy of the IP-led govern-
ments that steered us, slowly but surely,
into the crash.
Iceland’s fall in 2008 was the di-
rect consequence of this pre-meditated
policy. It was not the failure of capital-
ism as such. Capitalism cannot func-
tion at all without direction, legislation
and constant supervision by the state.
It was the US-style predatory type of
capitalism, let loose without proper
democratic control that failed here as
elsewhere. The biggest lesson to be
learned from this catastrophic experi-
ment is simply this: never again. Never
again should we let the selfish, greedy
and short-sighted have a chance to play
whimsically with our fortune. Now, my
countrymen must find their way back
to the Nordic family of nations, with
their democratic and egalitarian way of
life, or else face social disintegration.
THE NEO-CON UTOPIA
The ‘three wise men’, in their volu-
minous investigative report, amassed
unassailable evidence for how the mis-
taken policies of the Independence
Party-led governments after the 1999
elections gradually brought Iceland
towards the brink of the abyss. It all
began with the practice—contrary to
the law of the land—to allow a selected
group of ship-owners to sell or rent
their fishing quotas (allowable catch),
which had been allotted to them by the
state—for free. Thus the most valuable
natural resource of the nation, actually
a national property under the law, was
in practice privatised. It was handed
out to politically favoured groups of
ship-owners—for free. This was very
much in the same way as Russia’s rich
resources of oil and gas were given to a
favoured few, in return for political sup-
port. This sort of blatant abuse of power
could never have been thinkable in a
decent democratic state like Norway, for
example, with its enormous oil wealth.
The privatisation of the state-owned
banks to politically favoured groups of
businessmen was pushed through in
much the same way by the leaders of
the Independence Party and their part-
ners. In a few years time, those tradi-
tional commercial banks, which had
tended to the needs of the local commu-
nity, had been turned into international
investment banks (some say more like
aggressive hedge-funds), amassing
mountains of foreign-currency denom-
inated debt, through easy credit abroad.
In four years (2003–2006) they had
piled up debt to the tune of ten times
Iceland’s GDP. Behind it, for ultimate
support if need be, were the meagre
foreign currency reserves of the Ice-
landic Central Bank and ultimately Ice-
land’s tax-payer base of 220 thousand
individuals (less than a common small
town anywhere in Europe). This was fi-
nancial madness. In the end Iceland’s
nouveaux riche banksters proved the
truth of William Black's dictum: “The
best way to rob a bank is to own a bank.”
This ideologically conceived and utterly
reckless experiment with the fate of a
nation was doomed from the start.
Why didn't the government act in
time to avert a foreseeable calamity?
The simple answer is: In the thinking
of the Independence Party leaders and
their cohorts, this was not a mistake to
be corrected. On the contrary this was
declared policy to be promoted. As late
of 2007 it was the official policy of the
Independence Party/Alliance’s coali-
tion government to enhance the finan-
cial sector’s position as Iceland’s engine
of growth.
According to the evidence presented
in the investigative report, the IP-lead
governments (1999-2009) turned out
to be amazingly incompetent. Instead
of restraining the banks’ expansion
and lending capacity, they enhanced
it, resulting in a classical real-estate
bubble. Instead of applying the brakes,
to rein in debt-based overspending, the
government stepped on the accelera-
tor, by drastic tax-cuts for the benefit of
the rich. The Central Bank’s monetary
policy was, according to the report, both
misconceived and ineffective. Because
of Iceland’s automatic indexing of long-
term loans (with a fixed rate of inter-
est) to the CPI (consumer price index);
and because of the easy access to cheap
credit abroad, steep rises in the rate of
interest were not only ineffective but
counter-productive.
It attracted speculative capital, seek-
ing quick profits from interest-rate
differentials, with disastrous conse-
quences. It strengthened the króna,
enhanced imports, pushed the trade
deficit into world record figures and
helped pile up unsustainable debt.
Long before the fall, Iceland’s economy
had spiralled out of control and was
heading helplessly for a harsh landing.
The US-originated financial crisis was
just the spark that ignited the f lame. In
the words of the renowned financial ex-
pert, Willem Buiter, Iceland’s fall was
“not a question of if – only when”.
When ultimately Iceland met its
fate, this once egalitarian Nordic na-
tion had, by the impact of grisly ideol-
ogy and shortsighted and irresponsible
politics, been turned into a caricature
of US-style casino capitalism. Thus Ice-
land, which was meant to be a shining
example of the neo-con model’s supe-
riority, became the first victim of its
ultimate global failure. The intellectual
legacy of Reagan-Thatcher and their
disciples has by now been relegated
to the “dustbin of history”. Unfortu-
nately, that is also Iceland’s place in the
world—for the time being.
BROKEN TOOLS
Who is to come to the rescue? How are
we to find our way back to normalcy
(after this mad ride as the “sorcerer’s
apprentice”)? That’s the point. We are
broke (as a nation) and by definition
unable to help ourselves. We need out-
side help. And willingly or not, we have
now been placed under the tutelage of
the IMF—the first “developed” nation
since the UK in 1976 to be given that
treatment.
The IMF is the watchdog of Ameri-
can capitalism. It is there to ensure that
the interests of international capital
are duly taken into account when na-
tion states threaten to default. Since we
are broke and already over our head in
debt, we don’t have the option of pump-
ing public money into the economy to
stimulate economic activity. Therefore
we have no choice but to accept the bit-
ter pill of the imposed austerity pro-
gram. We must cut our budgetary ex-
penditure on welfare and raise taxes to
save enough money to pay our debt. We
must claw our way back out of the debt
prison. Can we do it? That is the ques-
tion.
To tell the truth, the prospects don’t
look too bright. He who is unable to ad-
mit his mistakes is by the same token
unable to correct them. He is therefore
doomed to repeat them. That seems to
be the most likely outcome for the time
being. When it comes to political solu-
tions—learning from our mistakes—
the only tools (the political parties)
we have for the job, are broken. Three
of the parties (The IP, the awkwardly
named Alliance—for what?) and the
so called Progressives, are all to a vary-
ing degree discredited by their past
and compromised by their inability to
admit their failure of leadership. Who
can trust them? And if they cannot be
trusted—who can replace them? Do
we need another bout of the “pots and
pans” revolution?
The Left-Greens, although clear
of any responsibility for the crash and
called upon to clean up the mess left
there by the others, are caught unpre-
pared for the task of charting any fu-
ture course for the nation. Their mis-
conceived antipathy for the European
Union and general economic illitera-
cy—despite the heroic stamina of their
chairman, turned Finance Minister—
makes the party an awkward and unre-
liable coalition partner. So, the question
remains unanswered: Who can ride in
for the rescue and stake out the road to
salvation?
Although ‘the three wise men’, in
their investigative report, gave con-
To Be Or Not To Be
A Republic At A Crossroads
</2010 POLITICS>
“He who does not acknowledge his mistakes and blames everybody else for his
own faults is not going to learn from those mistakes. He is doomed to repeat
them. Sorry.”
“The fall of 2008 has
mercilessly disclosed the
underlying weaknesses
of the young Icelandic
republic. Not only is
it still today unable to
defend itself against
potential outside
aggressors. But what
about enemies from
within?”
Words
Jón Baldvin Hannibalsson
Photography
Julia Staples