Reykjavík Grapevine - 10.10.2014, Síða 6

6
The Reykjavík Grapevine
Issue 1 — 20116
The Reykjavík Grapevine
Issue 6 — 2014
“Oil exploration might begin next sum-
mer,” the headlines read, and many
Icelanders, who had already started to
believe the country was on its way to
becoming a North Atlantic Switzerland
could now fantasize about living in an
Arctic Saudi Arabia.
Although there was no oil explora-
tion that following summer, Iceland-
ers did not give up hope. The dream of
finding oil only became more pressing
as the Icelandic financial miracle came
crashing down in 2008. Over the fol-
lowing years many Icelanders there-
fore just transferred their dreams of
prosperity from one get-rich scheme
after another.
A string of get-rich
schemes
The financial miracle and the oil ad-
venture are only examples of what is
perhaps one of the most striking char-
acteristics of recent Icelandic economic
history: the dream of hitting the jack-
pot, or of some fabulous scheme that
will solve all our problems in one fell
swoop.
Thus, Icelandic authorities and
businessmen have poured money into
failed investments, risking everything
on pie-in-the-sky plans while frequent-
ly neglecting less exciting options. In
the 1980s, for instance, it was salmon
and fur farming, and when that didn’t
pan out people transferred their hopes
to various energy-intensive industries,
including aluminum smelters or oil
refineries. Then, after the turn of the
century, it was financial services, and
finally oil exploration.
This Powerball approach to econom-
ic policy goes a long way to explain the
Icelandic business cycle, which has been
characterized by extreme investment
booms (and busts) that have accompa-
nied the chase after the ‘next big thing’.
It is easy to explain this tendency by
referring to the Icelandic national char-
acter: As a nation of fishermen, Iceland-
ers are simply always waiting for the big
catch. Or one could go further back in
history, and blame the Vikings and their
quest for plunder in a wealthy unpro-
tected English monastery. However, it
makes more sense to look to politics, as
it is the political class that has done most
to create and maintain these expecta-
tions.
One way to get elected in Iceland, not
unlike in other countries, is to claim to
be a “rainmaker”: Vote for me, and I will
bring about an economic windfall for
the district. When in office these poli-
ticians have used their power to make
their promises come true, facilitating in-
vestments and pouring subsidized capi-
tal and government funds into whatever
plan they had sold to voters.
Reykjavík vs.
the rest
These promises have
another important
feature, namely, that
they tend to be pro-
moted by rural politi-
cians, that is, repre-
sentatives of districts
outside the densely
populated southwest
corner of the coun-
try. As such, the vari-
ous get-rich schemes
have been offered as
a way to balance the
scales between Reyk-
javík and the rest of the country. When
silencing critics, balanced growth and
regional development have also served
as powerful trump cards.
Salmon or fur farming were sup-
posed to breathe life into the rural
economy while energy-intensive indus-
tries have been promoted as the surest
way to anchor regional development.
In this long tradition,
the long awaited oil
adventure was sup-
posed to boost the
economy of North-
east Iceland, revers-
ing its slow depopu-
lation. This was the
failed goal of the last
”sure” things: The
aluminum smelter
in Reyðarfjörður
and the associated
Kárahnjúkar hydro-
electric plant.
The rural dis-
tricts and smaller
urban centers have
been waiting for their jackpot ever
since Reykjavík received its most im-
portant boost: The arrival of the Eng-
lish and later the Americans in WWII.
The troops doubled the population of
the city, creating a building boom and
an insatiable demand for labour that
greatly sped up the migration of people
from the countryside. This in turn led
to very lopsided economic develop-
ment, which remains an issue to this
day.
The oil adventure is over
But now it seems their most recent
hope of striking it rich by finding oil
has been dashed, as a recent report by
Citigroup has predicted that future
oil price developments will not justify
expensive deep-sea drilling in remote
and inaccessible arctic waters like the
middle of the North Atlantic. At least,
the Icelandic oil adventure seems fur-
ther off now as oil exploration has been
halted off the coast of Greenland and
Shell shelved its plans for massive in-
vestment in drilling and exploration
north of Alaska.
You can rest assured though, Ice-
landic politicians have already found
the next big thing: Iceland will become
a global transit hub for freight traffic
once the Arctic ice sheet melts. Perhaps
that will pan out fabulously.
In the spring of 2007, when the Icelandic financial bub-
ble was reaching its peak, the Ministry of Industry held
a press conference to announce it intended to undertake
an environmental impact assessment of oil exploration off
the coast of Northeast Iceland, near the Jan-Mayen ridge.
The press was quick to see what this meant: Untold riches!
Words by Magnús Sveinn Helgason
Photo by Hörður Sveinsson
On October 9, 2008, The Economist pub-
lished an article called “Kreppanomics,”
detailing Iceland’s then-recent financial
meltdown. “One word on every tongue
in Iceland these days is kreppa. Normal-
ly it means to be ‘in a pinch’ or ‘to get into
a scrape’, but when it is applied to the
economy, it becomes ‘financial crisis,’”
the article began. “In time kreppa may
become the word that conjures up the
disastrous meltdown that is now taking
place in the country's economy.”
Indeed, The Economist was right.
This post-crash buzzword went on to
appear in almost every single article and
blog post about Iceland’s financial cri-
sis and its lingering effects. Under the
premise that the frequency of kreppa-re-
lated stories is a reflection of the state of
the economy, Arion bank’s department
of research and analysis teamed up with
Fjölmiðlavaktin (“The media watch”) to
track this (hackneyed) word in the local
print and broadcast media.
In a nod to The Economist’s R-Word
Index (“R” being for recession), Arion
bank calls this economic indicator of
theirs ‘K-orðs vísitalan’ or “The K-Word
Index.” And although it says nothing
about the context in which the word
kreppa is being used, the bank believes
that the decrease in the frequency of the
word indicates that the economy is on its
way to recovery.
Almost exactly six years after The
Economist ran its rather prescient arti-
cle, the accompanying graph would have
us believe that things are looking up (but
of course it’s also quite possible that the
media is sleeping and/or simply really,
really tired of the K-word).
K-word Index Number
Number of news articles that
contain the word kreppa
800
700
600
500
400
300
200
100
0
2006 2007 2008 2009 2010 2011 2012
No,
No,
No…
Not The K-Word!
By Anna Andersen
The Endless
Bubble Of
Overblown
Expectations
Huh?
Photographer Hörður Sveinsson
shot this image for the cover of
our March 2009 issue. The feature
story ("Grapevine Exposes Sordid
'Music Trip' To Scandinavia's Sod-
om") revolves around two then-hot
young bands, Hjaltalín and Retro
Stefson, and hot young composer
Ólafur Arnalds, and their journey
to play the annual By:Larm music
showcase in Oslo. Note that quite
a few of the people in the image
were underage at the time it was
shot (Retro Stefson's Logi is only
17!) and that the drugs and alcohol
depicted are totally fake and not
real in any way.
Clockwise from bottom left: Óla-
fur Arnalds, Þorbjörg Roach, Axel
Haraldsson, Viktor Orri Árnason,
Högni Egilsson, Guðmundur Ós-
kar, Steinþór Helgi Arnsteinsson,
Þórður Jörundsson, Hjörtur In-
gvi Jóhannsson, Gylfi Sigurðsson,
Sigríður Thorlacius, Haraldur Ari
Stefánsson, Jón Ingvi Seljeseth,
Logi Pedro Stefánsson.
Kreppa | Revisited