Reykjavík Grapevine - 20.05.2011, Page 18

18
The Reykjavík Grapevine
Issue 6 — 2011
The newspaper DV recently made con-
siderable hay out of the fact that from
2005–2008 Iceland was the second larg-
est market in the world for the Danish
luxury home electronics brand Bang
& Olufsen. This is according to one of
the owners of the now bankrupt Bang
& Olufsen store in Reykjavík. Only rich
Russians bought more of these over-
priced Danish designer electronics, and
we’re not talking about ‘per capita’ mea-
sures. No, in absolute terms Iceland was
the second largest market in the entire
world for Bang & Olufsen. The news site
Eyjan.is declared in a headline that “ev-
ery second household in Iceland” owns
a B&O gadget.
KEEPING UP WITH THE GRISWOLDS
Considering the cultural atmosphere of
pre-crash Iceland this should not come
as a surprise. The firm’s home elec-
tronics have long been associated with
the ostentatious display of newfound
wealth. A case in point: the insufferable
yuppies who live next door to the Gris-
wold family in Chevy Chase’s ‘Christmas
Vacation’ owned a Bang & Olufsen ste-
reo, killed by Clark Griswold in a memo-
rable scene. In the yuppiefied world of
Iceland anno 2007, where it seemed ev-
ery second person drove a Range Rover,
corporate and finance types ruled su-
preme and every two bit businessman
was a budding corporate Viking, plan-
ning mergers and acquisitions abroad,
it made perfect sense that every second
home be stocked with Bang & Olufsen.
During the height of the bubble Ice-
land became a major market for many
other luxury items. For example, dur-
ing the first ten months of 2007 more
Range Rovers were sold in Iceland than
in Sweden and Denmark combined, and
in January 2008 sales estimates antici-
pated that the Icelandic market would
absorb as many top of the line Toyota
Land Cruiser 200s as the entire British
market. All kinds of other extravagant
luxury items, from Beluga Caviar and
Japanese Kobe beef to designer furni-
ture and overpriced stereo equipment,
sold like hotcakes.
This explosion of expensive luxury
consumption was one of the results of
rising income inequality. According to
research by Stefán Ólafsson and Arnal-
dur Sölvi Kristjánsson at the University
of Iceland, income inequality grew faster
in Iceland during the period 1993–2007
than in any other OECD country. The av-
erage income of people in the wealthiest
1% went from being roughly five times
the average income in 1993 to being 27
times higher in 2007. By 2007, 39,4% of
all income was made by the richest 10%.
Half of this went to the wealthiest 1%,
who commanded 19,8% of all personal
income.
“MY BELUGA NEEDS MORE GOLD
FLAKES”
But it wasn’t only the top percentile
looking for ways to blow its newfound
wealth that consumed like there was
no tomorrow. Average people were also
increasing their consumption. From
2002 to 2008, personal consumption
grew in real terms by some 29%, while
incomes grew by only half as much, or
15%. Much of this increased consump-
tion was therefore paid for by increas-
ing debt. From 2002 to 2008, household
debt grew by 77%. Iceland went through
a general consumer boom.
The great mass of people renewed
their cars, home appliances, exchanged
tube TVs for flat-screens and took more
trips abroad. While all of this spending
was clearly excessive (as evidenced by
growing debt) it was, however, not on
par with the extravagance of the finan-
cial oligarchs who served risotto gar-
nished with gold flakes.
It is both unfair and incorrect to con-
flate the two. The Icelandic consumer
boom has at least two sets of actors: the
top 1–10% and the rest of the popula-
tion, the average middle class Jane who
took out a home mortgage to pay for an
upgrade to her kitchen, a trip to Tener-
ife and a travel trailer for the family. This
is opposed to the top 1%, the new class
of financiers who took out loans to pay
for various financial shenanigans, and
then bought private jets, Kobe beef and
Beluga caviar for the proceeds. Then, of
course, there was a large segment of the
Icelandic population that simply had no
opportunity to participate in the great
boom. Those who work at low wage
jobs, single mothers and pensioners
were largely left behind.
It is therefore unfair to say that “ev-
eryone” participated in the same con-
sumer boom: There is a difference in
kind between the wasteful extravagance
of one group and the excessive spend-
ing of the other. The two are nonetheless
closely related, and it is this relationship
that might explain what fuelled the Ice-
landic consumption boom.
SOCIAL AND CULTURAL INSECU-
RITY
Consumption is a social practice. People
use it to signal what groups they belong
to, or want to belong to, and how they
want to be viewed by others. This fre-
quently assumes the form of competi-
tive conspicuous consumption, first de-
scribed by the 19th century economist
Thorsten Veblen. Veblen argued that
the haute bourgeoisie of the times used
conspicuous consumption to engage in
a competition of social status.
With the rise of the middle class in the
post war period this kind of conspicuous
consumption became less pronounced,
as American social scientists argued
that consumers were more preoccupied
with maintaining status and “keeping
up with the Joneses”. Keeping tabs on
what kind of car their neighbour drove,
where they went on holiday and whether
they had their kitchen remodelled—not
to outdo them so much as to keep up.
While the earlier type of conspicuous
consumption was never present in Ice-
land this second type characterised Ice-
landic consumer society in the post-war
period.
But as the American economist and
social critic Juliet Schor has argued in
her book ‘The Overspent American’,
this dynamic has changed in the past
few decades as consumers have piled
on debt to finance the ratcheting up of
their consumption standards. The rea-
son, Schor argues, is that the reference
groups people look to have changed.
In the post-war period people looked
to neighbours and friends on which to
model their own consumption practices;
people who were by and large within the
same income bracket as they were. In
the more recent past, consumers have
increasingly started to model their con-
sumption practices on people who are
much higher on the income scale. Schor
blames rising income inequality as well
as the media portrayals of the lifestyles
of the rich.
Schor argues that newly wealthy
groups of corporate managers and in-
vestment bankers have had the oppor-
tunity to engage in fabulous displays
of wealth that had not been seen since
Veblen wrote his ‘Theory of the Leisure
Class’ at the turn of the 19th century.
The media pays close attention to these
displays of wealth, even portraying them
as a goal for the middle class. The result,
Schor argues, is a growing cultural and
social anxiety as the middle class des-
perately tries to keep up with increas-
ingly unattainable consumption goals,
piling on debt in the process.
The process Schor describes is well
known from history. Classes experienc-
ing social and economic decline fre-
quently engage in desperate competi-
tive consumption. Historically, though,
these have been aristocratic classes
who plunge into debt to finance their ex-
travagant lifestyles in a vain attempt to
cling to their cultural status in the face of
rising groups of merchants or burghers.
In all cases, however, we encounter an
atmosphere of rapid social and econom-
ic changes and uncertainty, paired with
social and cultural insecurity.
“AFFORDABLE LUXURIES”
It can be argued that similar conditions
emerged in Iceland in the past decade.
Iceland had been a relatively egalitarian
society and wealthy Icelanders rarely
flaunted their wealth, and the media
never paid much attention to their con-
sumption. This changed in the 1990s as
income inequality rose, creating fabu-
lously wealthy people. And the media
reported breathlessly on their spending
habits.
At the same time there was a massive
increase in the space given to various
lifestyle reporting. Home remodelling
and various luxuries got ample space
in newspapers and magazines while
TV shows contributed to a heightened
awareness about the consumption of
people who were seen to be successful,
what they had in their garages, their liv-
ing rooms, etc. With this the consump-
tion references of Icelanders shifted.
Even if the average Icelander could
not afford his or her own private jet,
some could buy a Range Rover and
those who could not afford that luxury,
even with generous financing, could at
least trade out their old car for a shiny
new one. And many did. Just so that they
would not feel left behind.
This fear of being seen as someone
who is not “making it” is all the more
pressing in a small society when large
groups of people are making it big time.
Realising that you are not one of the
chosen few who gets to eat the golden
risotto can fill people with a feeling of
emptiness that can only be plugged with
some other luxuries. Marketers exploit-
ed this by advertising and marketing all
kinds of “affordable luxuries”.
WHY, ORDINARY PEOPLE?
The story about the Bang & Olufsen
sales received a lot of attention primar-
ily because it seemed to encapsulate the
extravagance of Icelandic consumption
prior to the crash and proves that nearly
everyone (half of all households accord-
ing to eyjan.is) participated in the crazi-
ness. But it probably obscures as much
as it illustrates. The bulk of the sales,
especially of the high-end equipment,
priced in the millions of króna, could
only have been bought by the nouveau
riche. However, a part, even a very siz-
able part, of the general population,
must also have been among its custom-
ers, stretching their credit card limits to
buy a 500.000 ISK flat screen TV.
The critical question is why “ordinary
people” felt they needed overpriced
home electronics. By blaming it on some
innate spendthriftness or moral failure
of average Icelanders we fail to take into
account the larger changes that were
taking place in the Icelandic economy
and society, and we fail to recognise the
cultural impact of these changes.
THE CONSUMER’S
REPUBLIC
OF ICELAND
Words
Magnús Sveinn Helgason
Photography
Hörður Sveinsson
Shopping | Beyond yr. means
“The great mass of people renewed their cars, home
appliances, exchanged tube TVs for f lat-screens and
took more trips abroad. While all of this spending
was clearly excessive (as evidenced by growing debt)
it was, however, not on par with the extravagance of
the financial oligarchs who served risotto garnished
with gold f lakes”
The accompanying photo was actually on our cover (in a slightly amended form) back
in 2009 (issue 3). The covertag read: PARTYING LIKE IT'S 2007 and it was laid out in
the style of Hello! magazine. Pretty cool, look it up. It's also oddly fitting in this context.