I’ve been meaning to post something for a couple days now, but damn. That pesky, so-called “real life” has been… inconvenient.* One of the Palace’s many tens of loyal readers, 5keptical, recently sent a link to a story called Why Iceland Should Be In The News But Is Not. If you have seen the film Inside Job, you already know that the story of Iceland’s economic boom and collapse played out more or less exactly like that of the U.S., only much more rapidly. (See also: Northern Mariana Islands.) That is, Iceland witnessed firsthand the inevitable consequences of economic conservatism — especially financial deregulation — exploding like a nuclear blast, then rapidly cratering like a thirteen ton hunk of poisonous space junk crashing into the Earth. The upshot of Iceland’s story as portrayed in the film is that the country’s relatively brief experiment in neoliberal capitalism crashed and burned spectacularly. However, the denouement was yet to be written at the time the film was released.
Five years of a pure neo-liberal regime had made Iceland, (population 320 thousand, no army), one of the richest countries in the world. In 2003 all the country’s banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors. But as investments grew, so did the banks’ foreign debt. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.
Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.
Intriguing, no? You should definitely go read the whole thing.
Okay, here’s a little, teeny, tiny bit more. (Does my benevolence know no limits?)
Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community [read: “the United States government and its allies” -Ed.] pressured Iceland to impose drastic measures [read: “austerity.” -Ed.]. The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.
Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to its demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.
Hahaha. Reindeer’s back. How timely! In an absolutely amazing coincidence, I happen to be wearing festive holiday antlers on a headband right now! (Of course I’m not. Jesus. Don’t you people know me at all?) Now, I’m a woman, so of course my ladybrainz have no aptitude for math whatsoever. But I have to point out that that these numbers do not add up: either the math is wrong, or more likely there is a typo, i.e., million should be billion. First of all, a couple million dollars is chump change to a bank in Iceland, or even to a wealthy citizen or two (or ten). Hell, if one could actually buy Iceland’s sovereign debt for a couple million bucks, me and my many tens of loyal readers could probably have come up that. Well, maybe not. But anyway, there’s this:
320,000 of Iceland’s citizens
x $130 per month
x 12 months per year
x 15 years
That’s $7.48 billion for those playing along at home.
But nevermind all this math and the goddamn reindeer. We’re getting to the good part now!
What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.
I’m going to repeat this part, because it’s really fucking important:
What happened next was extraordinary.
(I’ll say, although I wish it were not extraordinary at all.)
The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.
Wait, wait, wait. Iceland’s citizens absolutely refused to pay off bankers’ private debts with their tax dollars? And then — I am scoffing so hard I can hardly type! — their elected representatives were driven to their side? Get outta town.
(Are you listening Mr. Obama? I guess not. Maybe he’s got something stuck in his ear. Like Timothy Geithner’s dick.)
But as I keep telling you, there’s a lot more to this story at the link!
Oh, all right. I’ll post more of it and we’ll all just have to hope I don’t get sued for copyright infringement. (See what selfless, perilous risks I take, purely for the enlightenment of my beloved loyal readers?)
Of course the international community only increased the pressure on Iceland. Great Britain and Holland threatened dire reprisals that would isolate the country. As Icelanders went to vote, foreign bankers threatened to block any aid from the IMF. The British government threatened to freeze Icelander savings and checking accounts. As Grimsson said: “We were told that if we refused the international community’s conditions, we would become the Cuba of the North. But if we had accepted, we would have become the Haiti of the North.” (How many times have I written that when Cubans see the dire state of their neighbor, Haiti, they count themselves lucky.)
That’s right people: even though the U.S. has the largest economy in the world, if we do not accept the pillaging of bazillions of our tax dollars to bail out private banks, then OMFG we’ll be just like Cuba! A bunch of fucking Commies! (Which we already know you are anyway, but just play along here.) And while Cuba totally sucks of course, it sucks a lot less than Haiti, and has way better cigars. Haiti has tent cities, fer chrissakes! And horrible healthcare!
But you need to wise up and realize that these are our only two choices, people: Communist Cubans, or hopelessly impoverished Haitians. (I already know which one I’m picking. HINT: it has really good cigars. Also, awesome pressed sandwiches — yum! Of course, YMMV.)
But I digress — and just when we are getting to the best part:
In [Iceland’s] March 2010 referendum, 93% voted against repayment of the debt. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country.
(See, I started highlighting the key points I wanted to stress there, and it ended up being every single word of every sentence. Sorry about that…)
But Icelanders didn’t stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money.
Today, [Iceland] is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.
That’s why it is not in the news anymore.
For what it’s worth, at least it’s in the news here at the Palace.
*Said “inconvenience” involves a young loved one’s addiction relapse and serious psychiatric problems, imminent long-term inpatient hospitalization, related out-of-state travel, and other stuff.**
**Said “other stuff” involves crushing disappointment, heartbreak and cynicism, intermittently alternating with cautious hope and an awe-inspiring, deeply humbling appreciation for all that is good and beautiful in this world — and if you’re reading this far, that almost certainly includes you.