Iceland review - 2016, Page 63

view. If you refuse to engage in what you
think is an unpalatable discussion, you
end up with a huge hydroelectric power
plant like Kárahnjúkavirkjun where the
land is valued at zero. In that case, it
would have been better to try to put a
value on the land and make sure that the
price of electricity captures the value of
the resource it uses. We sacrifice pristine
wilderness for jobs and economic growth.
That may be acceptable, and is usually
more acceptable if your country is poor.
You may be of the view that it’s more
important to create jobs than to protect
nature. But at least you should make an
informed decision—know how much the
jobs really cost—and you should make
sure that you get a fair price for your
resources.
We must be careful to note that
charging for access to a resource does
not grant the right to use any-and-all
resources if the price is high enough.
Large parts of Iceland will be off limits
to industry because we are protecting
natural diversity, or rarity. We have also
signed international treaties, such as the
Ramsar Convention on Wetlands, which
limit what we can do. But the principle
should be established: if we agree that a
natural resource be put to economic use,
the user should pay a fair price for it.
THE CONSTITUTION
The Icelandic Constitution was written
in 1944 and it does not define ownership
of natural resources. Several attempts
have been made at changing the consti-
tution, driven mainly by the contentious
issue of ownership of fishing stocks,
but these attempts have been rebuffed.
The most recent attempt was to con-
vene a Constitutional Council in 2011.
Although the council agreed unanimous-
ly on its recommendations, the constitu-
tion has yet to be changed to reflect this.
One of the changes suggested by the
council was that the constitution define
Iceland’s natural resources that are not
private property as being the joint and
perpetual property of the nation. It sug-
gested that the constitution should stipu-
late that: “No one can acquire the natural
resources, or rights connected thereto, as
property or for permanent use and they
may not be sold or pledged … The public
authorities may, on the basis of law, issue
permits for the use of natural resources
or other limited public goods, against
full payment and for a modest period
of time in each instance. Such permits
shall be issued on an equal-opportunity
basis and it shall never lead to a right of
ownership or irrevocable control of the
natural resources.” It’s not necessary to
change the constitution to start charging
for resources, but it would make it clear-
as-day how we should proceed.
THE RESOURCE CURSE
Natural resources can be a curse. Many
countries rich in natural resources have
suffered from the resource curse, some-
times called Dutch disease, named after
the negative impact on the Dutch man-
ufacturing industry after the discovery of
the Groningen natural gas field in 1959.
Dutch disease is shorthand for what hap-
pens when a country discovers a valuable
natural resource which starts an export
boom. The foreign earnings flowing into
the economy push the price of domestic
currency up, making other sectors of the
economy uncompetitive. Gradually, the
natural resource dominates the economy,
and then the country becomes dependent
on the international market price of a
single commodity. This is certainly not
the case in Iceland, but you can hear
echoes of it nonetheless. Earnings from
tourism—selling access to unspoiled
nature—have pushed up the value of the
króna, and will in all likelihood push it
up further still, making life difficult for
other exporters.
There are ways to counter the resource
curse. Norway is probably the country
that has best handled the problem. Nearly
80 percent of the economic rent—the
extra amount earned by a resource by
virtue of its present use—from oil goes
to the Norwegian state, which set up a
fund to manage the wealth. The fund is
not allowed to invest in Norway, thereby
achieving two objectives: it diversifies
the nation’s assets—Norway is the largest
single owner of equities in the world—
and it prevents the domestic currency
from rising too much, avoiding the dan-
ger of oil crowding out other sectors of
the economy. In Iceland, we are dealing
with a different problem and on a very
different scale, but there are lessons here
for us.
The great news is that as countries
become richer they put a higher value
on their natural resources. Just as in the
seventies we found it difficult in Iceland
to imagine how we could reduce our
dependence on fisheries, so in a few
years’ time, we’ll find it equally incom-
prehensible that the value we used to put
on our natural resources was as a simple
means to create jobs. u
Halldór Lárusson is an entrepreneur.
He has degrees in economics, philosophy
and history of science.
ICELAND REVIEW 61