Lessons Learned from Iceland’s Decade of Failure

While history—meaning: ‘the past’—does not change, history—meaning: ‘the narration of past events’—does in fact change. This is because we view history through the lens of the present. As events unfold, the meaning and significance of the past changes. And because our view of the past changes we constantly need to change our history textbooks.

So, it is pretty hard to predict how any event, let alone a whole decade, will be remembered. Because we do not know what the future holds, or what academic fads will reign among future historians, it is exceedingly difficult to say with any certainty how future historians will judge this first decade of the 21st century. Still, even if we lack the necessary hindsight of history, we can make some pretty good educated guesses.

A decade of progress

The first decade of the 21st century in Iceland will most certainly be remembered as a decade of progress and achievement by those future historians who will emphasize social and cultural history. Important milestones were met in the history of human rights and equality, most recently with the 2010 law, which gives gay couples the right to marry. Another milestone was reached in 2009 when Jóhanna Sigurðardóttir became the first woman to serve as Prime Minister of Iceland and the first openly gay person to serve as a PM anywhere. An important step in world history.

Also, Iceland became a truly multicultural society as large numbers of foreigners, primarily Eastern Europeans, migrated to Iceland in search of work. And despite the occasional flaring up of xenophobia, Icelandic society welcomed these immigrants. By the end of the decade, Reykjavík authorities had even acknowledged that people from other cultures had the right to construct their own houses of worship, finally granting the nation’s small Muslim community the right to build their own mosque.

The decade was also important in Icelandic cultural history. The arts flourished and Icelandic musicians enjoyed considerable success both in Europe and America.

All in all, Iceland in 2010 is far more cosmopolitan than it was in 2000.

A decade of failure

However important these developments are, I would argue that none of them is as important as the colossal, utter and inexcusable failure of the Icelandic economic miracle, which certainly is the defining event of the decade. The neoliberal experiment of creating prosperity by slashing taxes and regulations in order to turn Iceland into some sort of business friendly tax haven and global financial centre finally ended with the complete collapse of 2008.

The reason the public went along with this experiment in the first place was that Icelanders had been led to believe they lived in a country characterised by fair play, equality and—above all—honesty. Iceland was ranked as the least corrupt society in the world and Icelanders believed they were governed by honest politicians and that their businessmen were equally hardworking and honest.

The collapse and its aftermath showed Icelanders that this had been a mirage. The bankers, hailed as financial wunderkinder were actually looters. The politicians incompetent morons. Like the hapless Minister of Economic Affairs, caught like a deer in the headlights, without a clue as to what to do when they were faced with tough choices. Others, bursting with arrogance and delusion, like former Minister for Foreign Affairs Ingibjörg Sólrún Gísladóttir, declaring that those who dared protest the inaction and incompetence of politicians were “not the nation.” Davíð Oddsson refusing to step down from the chair of the Central Bank. The managers of Kaupthing contemptuously declaring that they had absolutely nothing to apologise for.

A decade of squandered trust

Trust is obviously important for all societies. But too much trust, as well as undeserved trust, is dangerous, and I would argue that one of the greatest weaknesses of Icelandic society at the beginning of the decade was excess trust: excess trust in politicians, business leaders and the market ideology. One of the main reasons for the protests that began in the fall of 2008 is the public’s realisation that the elites, both political and economic, had betrayed the trust that they had enjoyed.

In fact, this appears to be part of a global pattern: everywhere, trust in politicians and business leaders has collapsed. Everywhere the reason is the same. The economic failure and financial collapse, caused by reckless financiers and complacent politicians, are not the primary reason—the real reason is that people feel they were betrayed by their “elites.”

During the bubble, people tolerated growing income inequality because they were promised that the wealth would trickle down. It turned out the public was not allowed to share in the wealth, only the debts, because when the crash came, the public was forced to shoulder the cost of bailing out the speculators. To make matters worse, the left wing government, which promised to protect the homes and families, has been unable to come up with a comprehensive plan to help the public, and no concrete steps have been taken to increase social justice.

Lessons learned

This is not all bad, of course. People have learned the hard way that it is impossible to build permanent prosperity for an entire society on speculation, market manipulation and corporate raiding.

Icelanders have also learned important modesty. But at a steep price. Historically, Icelanders have been plagued by a certain mix of insecurity and self-importance. During the boom years the insecurity was replaced by arrogance, creating a poisonous certainty and delusions of grandeur that fuelled the Icelandic financial bubble. As the bubble burst, people realised that Iceland was not the centre of the universe. To paraphrase the Borat-esque mangled Icelandic of the first lady: Iceland is certainly not “the most big country in the world” (stórasta land í heimi).

Finally, Icelanders have also learned that protest can be effective. It is not so long ago, that it was a commonly held belief that Icelanders were somehow genetically incapable of political protest. Groups like Saving Iceland were vilified and political activists were considered suspect. The financial collapse rekindled a spirit of political engagement that had all but died out during the bubble.

One can hope that this newfound political engagement and activism will lead to more democratic politics and more responsive politicians.

Magnús Sveinn Helgason writes for The Rejkjavik Grapevine where this article first appeared. Read other articles by Magnús.

4 comments on this article so far ...

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  1. MichaelKenny said on February 5th, 2011 at 8:23am #

    Good thoughts. Breaking the American stranglehold on Europe is not an easy task and will not be done in a day. There will be a lot of suffering and the principal task must be to see that the burden is shared fairly. And, indeed, to stop American bullies of both left and right trying to dictate to us how to exercise our sovereignty. Small countries are particularly vulnerable to large bullies, which probably explains why the Wall St speculators have been trying to pick off small countries like Iceland, Latvia, Greece or Ireland. In unity, there is strength, which is probably why Iceland has applied to join the EU. That won’t happen in a day either but at least, the next time Wall St attacks, Iceland will be inside the fortress.

  2. 3bancan said on February 5th, 2011 at 9:26am #

    MichaelKenny said on February 5th, 2011 at 8:23am #

    “Breaking the American stranglehold on Europe is not an easy task and will not be done in a day”

    I’m wondering if this is the same MichaelKenny who always preaches here how independent Europe is from the (…) US and the (…) Israel and who praises the BBC for its ‘high’ quality…

  3. MichaelKenny said on February 5th, 2011 at 10:29am #

    Yes, it is indeed the same MichaelKenny. As the EU gets stronger, Europe is increasingly independent, which was my point about Iceland’s application to join, but there is still some way to go. The ham-fisted attacks on the euro have driven people together, but our leaders are still subject to blackmail, particularly economic blackmail. In fact, I think that the process will not be complete until the US definitively collapses. That isn’t too many years away, but in the interim, it’s just a question of battening down the hatches!
    I’m happy to see that I still scare the professional bloggers enough that they are still shadowing me! Posting comments which attack me rather than commenting on the article! Now, that’s flattering! I loved the bit about praising the BBC. That’s another standard propaganda trick: put me on the defensive by asserting something that I never said, but in regard to a subject on which I have indeed said something. Who, other than me, remembers what I said or didn’t say?

  4. beverly said on February 5th, 2011 at 4:01pm #

    Given the problems of the EU, Iceland might be better off not joining. It has done a good job of righting its own ship after the financial debacle. Why muddy the waters by joining the EU and having financial obligations to support that entity? The EU may be getting stronger but it is still controlled by countries such as Germany which too often kowtows to the ill-advised US agenda, an agenda that gets countries in more chaos, not less.