Meltdown in Iceland: Free-falling from the Top of the World

anywhere you go, it’s the same cry
money worries

— The Maytones

When I arrived in Iceland nearly 7 years ago, I saw two distinct faces of the country. On almost every large hilltop stretching from Reykjavík to the airport were a half dozen cranes, blighting the otherwise gorgeous scenery in a perverse paean to over development which almost no one at the time thought necessary but everyone put up with. It seemed to demonstrate some Icelandic version of “Damn the torpedoes—Full steam ahead!” This might explain, among other things, the revival of whaling (a marginal enterprise at best), granting Bobby Fischer citizenship, and selecting in-your-face comedienne Agusta Erlendsdottir as their representative to Eurovision in 2006. Each of those actions (and others) drew condemnation and quizzical stares from their neighbors. However, Icelanders don’t care much for what outsiders think and don’t like being told what to do—even if it’s in their own best interests. So now we watch as the entire economy collapses and, in typical Icelandic fashion, barely a whisper is heard about how their version of neo-liberal IMF Republicans have driven them into uncharacteristic submission before the financiers of the world. It’s a sad time to be in Iceland, and my guess is things will only get worse.

Usually the only time Americans hear about Iceland is when some intrepid traveler returns to regale us with tales of lunar-like landscapes, stunningly fresh air and endless miles of unspoilt beautiful expanses. Now Iceland, making headlines on the Wall St. Journal, the New York Times, CNN, BBC, and others, returns to our attention as what the British press are calling a “test case” of failed capitalism. Pay attention America. In the past week, all three of Iceland’s biggest banks have essentially collapsed and been taken over by the government. Stock trading has been suspended, and a war of words is happening between Iceland’s banking czars and the Brits over the possibility that Iceland will not secure the money many Brits placed in another Icelandic bank, Icesave. By this time next month, it is betting odds that the Icelandic Kronur will be an historical relic, the IMF will have bailed them out, and the adoption of the Euro is near inevitable. Not to mention all those typical bailout conditions the IMF levels to the Third World like stringent “austerity measures” and other cheerful sounding destructors of formerly independent people around the world.

It is now becoming clear that Iceland (a country so fiercely proud of its identity that the novelist Halldor Laxness, 1955 recipient of the Nobel Prize in literature won for was appropriately titled, Independent People) is no more independent in almost any but the most perfunctory ways. This is because the criminal class who privatized the banking system, creating for the first time since the Middle Ages a class of ultra-rich who could afford to buy soccer clubs in England, and get Elton John to sing at their birthday parties, are now begging Russia to lend them 4 billion Euros (5.8 billion dollars) to help them weather a crisis they caused. On top of that, it is near certain that the IMF will step in like they have done in many countries and extract further concessions sure to be painful to that delicate ego which clings to a proud independent streak.

In other countries, a “throw the bums out!” mentality would be heard and swiftly acted upon. So far, nothing of the sort is playing out here. That might be because since gaining their independence from Denmark in 1944, the Independence Party, which has dominated the political scene since then, cunningly plays right into the myth of Icelanders as an independent people that Laxness so beautifully wrote about almost 60 years ago. But the nostalgic retention of such an image is dangerous. Especially when reality bites. Holding on to this image, by constantly allowing the Independent Party to rule, even in coalition with other parties, only insures that so long as it’s done under the guise of maintaining this myth of independence, Icelanders will close their eyes to the apparent thievery that goes on under their noses. They would do well to try something new. Quickly.

Rev. José M. Tirado is a poet, priest and writer finishing a PhD in psychology while living in Iceland. Read other articles by José.

9 comments on this article so far ...

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  1. Michael Kenny said on October 11th, 2008 at 8:14am #

    What Iceland may well try in EU membership! Iceland is a member of the European Economic Area (EEA) which is an adjunct of the EU in the form of a treaty between the 27 Member States and Norway, Iceland and Liechtenstein. Basically, they have all the disadvantges of EU membership without any of the advantages. That’s why the British have been able to treat them in such a cavalier fashion. They would never have dared do that to another EU Member State.

    In a similar way, Germany went after Liechtenstein a few months ago over tax fraud. And of course, we saw what happened to Serbia over Kosovo.

    Moral of the story: no salvation outside the EU!

  2. Rev. José M. Tirado said on October 11th, 2008 at 8:24am #

    The unions here (over 80% of the people are in unions) have, along with the fishing interests, among others (like the Left) opposed EU membership on a number of grounds. But this is one of the things being discussed as we speak and my guess is they will join the EU, although if so, it´s probably take a year or two´s negotiations. Iceland however is not negotiating from a position of stability, let alone, strength so they may be forced to accept terms that will hardly benefit them in a number of areas. Events are changing constantly (like the attempt to borrow money from Russia) so all this might be moot in a week but the odds do favor eventual EU entry and adoption of the Euro.

  3. Bryan Bjerring said on October 11th, 2008 at 10:19am #

    The interlake region of the Canadian province of Manitoba was settled by Icelanders beginning in 1875. Thousands of people of Icelandic decent now live here — and annually celebrate their ethnic origins on Islendingadagurinn (Icelandic Day) on the August long weekend. Two years ago the Prime Minister of Iceland addressed a gathering at that celebration in which he extolled deregulation and the neo-liberal course Iceland had taken and which had brought such prosperity to the country. I concluded that I was listening to George W (Ronald Reagan, Allan Greenspan, Milton Freedman, take your pick) of the North Atlantic. Iceland’s current predicament was a foregone conclusion. I fear that, like the rest of the world which bought the neo-liberal line, far worse days are ahead — except,of course, for the uber-rich robber barons of our generation.

    There is an alternative interpretation of Laxness’ ‘Independent People’ — it was satarizing that ‘proud’ but somewhat overblown self understanding, given the squallid living conditions the novel portrayed. Perhaps Iceland is about to live out “Independent People’ again, current conditions perhaps not squalled but certainly desperate.

  4. bozhidar bob balkas said on October 11th, 2008 at 10:33am #

    wld u please drop the label “reverend”. i am not going to read anything written by a bishop, monsignor, archbishop, cardinal, pope, or any reverend.
    let’s be equal. or equally vbalued. thnx

  5. Rev. José M. Tirado said on October 11th, 2008 at 11:01am #

    You are most welcome to not read–or comment–on anything I write.

  6. Fade Dude said on October 11th, 2008 at 2:25pm #

    As an occassional visitor I asked myself ‘how does this work, what’s holding it up?’ Now we know, it was the Brits giving them unlimited credit cards. Who’s the greater fool?


  7. lichen said on October 11th, 2008 at 2:57pm #

    Iceland should be from the EU, IMF, and freidmanite scumbags of this world; I really hope that their quality of life won’t be destroyed by ‘austerity measures.’

  8. Rick said on October 11th, 2008 at 3:07pm #

    On the subject of Iceland, this is interesting too, also be ready for “United Arab Emirtes”:

    January 6th 2007
    In Iceland, which is one of the richest countries of the world, thousands of families live under the poverty line. Children go hungry to schools, and the people do not have enough clothes to protect themselves from the harsh winters of the country. Students drop out of school because of poverty. In this country a small minority is getting richer, while the majority are becoming poorer. (From a report by BBC News, December 29th, 2006).

    Lack of opportunity, lay-offs and growing unemployment – the un-curable diseases of capitalism – are the main causes of poverty.

    If life is miserable for many in Iceland, a Scandinavian country with the 7th highest GDP per capita in the world and only a population of 250’000, there isn’t any hope to have a decent and prosperous life in the other parts of the world under capitalism!

  9. Rev. José M. Tirado said on October 12th, 2008 at 6:38am #

    I am so pleased that you got the Laxness reference. You are 100% right–there was tremendous pathos in that novel and a huge amount of humor as well that is missed by most who read it. Both views–proud and fiercely independent versus fatuously self-important and unrealistically stubborn–co-exist here and in that book.

    While Iceland is often described as the US of the Scandinavian countries (because of what you saw as a fawning devotion to neolib principles) there remains alot here that I regard as infinitely better than in the States: free health care, safe streets, a warm, if reserved people, clean air and drinkably pure tap water, etc., that make the better parts of Scandinavian socialism apparent.

    However, there are politicians (The Independence Party gets the most of the blame here) who have wanted to sell off the country´s landscape (depending upon cumbersome aluminum plants, for ex.) and other resources in a bid to become more like the US. Another positive thing here, though, is a vigorous opposition (the Green-Left Alliance and the Social Democrats) which have tempered the excesses the Independence Party have advocated. I allude to this in my article.

    As for “thousands in poverty” I think some care is in order here. With 80+% of the population in unions and free health care along with the abovementioned atmosphere of safety and, food given to kids at school (I have 3 in school here) makes what we call in the US poverty a very different thing here. But yes, there are big flaws to the way things are run here and they could be better. I recommend that in the article and am hopeful people will advocate for change on a greater than glacial pace.