Reykjavík Grapevine - 10.10.2014, Blaðsíða 6

Reykjavík Grapevine - 10.10.2014, Blaðsíða 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
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