Iceland has the solution to the banking crisis, or so I keep reading on Twitter. It’s true that, unlike many other countries, Iceland has actually arrested some bankers. Still, of the four government ministers implicated in the Special Investigation Commission’s “Truth Report”, only one is being tried. In a country where family ties are strong and in which government ministers are frequently passed in the street, it’s impossible to have a catastrophe on the scale of the banking crisis without someone carrying responsibility. Icelanders talk openly about the rich, responsible for the crisis, many of whom have now fled the country completely.
It’s worth highlighting the inconsistencies in the media account. It’s often said that the banks were “allowed to fail”, yet a State Department cable released by Wikileaks clearly calls Icelandic government intervention a “bailout”. One of the three banks involved remains publicly owned, while the other two are now largely owned by anonymous foreign investors.
The way in which successive Icelandic governments have dealt with the crash is illustrative. The Icelandic Krona was saved from complete decimation by means of an IMF-agreed refloatation together with currency restrictions. Still, Iceland didn’t go crawling to the IMF, cap in hand: talks were held with Russia over a currency deal, and it seems unlikely that the issue hasn’t been discussed with China, too. This is hardly without precedent: while Iceland hosted a US base at Keflavik until 2006, Cold War talk of switching sides to Russia was a useful negotiating tactic. It seems to have worked in the case of the crash, with the IMF deal being infinitely less harsh than the “structural adjustments” often imposed on the global south.
Iceland has also dealt with its debts advantageously, at least up to the present. The money owed after the Icesave crash may soon see repayment, as prospects of a good deal on the Iceland food chain are now much better. Even if frozen food doesn’t pay off all the debt, there will be years more to find a solution before the European Court renders a judgement.
While Iceland’s outgoings look stable, the same can’t be said about her assets. While Naomi Klein initially bought in to the heroic story of Iceland resisting the IMF, the current austerity and sale of Iceland’s assets could come straight from her account of the neoliberal shock doctrine. Before the crash, almost all businesses in Iceland were owned by Icelanders. Now the foreign-owned aluminium industry is swiftly growing, and debate over use or sale of land continues. When you follow the money, what emerges isn’t so much the story of the lone plucky Viking but a country which has had much of its own “rich”, it’s own ruling class deposed in favour of the rich from abroad, and which now only awaits the lifting of the currency restrictions to lie open to foreign capital.
It is worth emphasising the scale of resistance to land exploitation in Iceland. In 1970, opposition to a large dam project was so strong that farmers dynamited a smaller dam in warning. Iceland has always had a strong rural conservative element, and this allied to environmental concerns has made Iceland a tough nut to crack. It is only after the crash, and the threat to the standard of healthcare and education, that Iceland has come to accept the current need to court foreign investment which it is now convinced that it needs.
Since the crash, levels of private debt have soared, particularly levels of mortgage debt, due to the effect of the crash and refloatation of the Krona on mortgage indices. While the current left-wing government largely holds repossessions in moratorium, it seems clear that, just like in the rest of Europe, the banks’ private debt has been socialised. Right now there is no alternative to neoliberalism, and there is no escape: though more Icelanders have emigrated than at any time since 1887, a few have even gone directly to serve as soldiers for Norway in Afghanistan.
There is hope in Iceland. The swiftly-occurring ousting of Haarde’s 2008 government put down roots, and while things are now quieter there is much scope for future co-operation between broadly nationalist, home-owning, environmentalist and left-wing groups. Most ongoing protest in Iceland centres around the issue of mortgage debt, yet the lack of trust in government and demonstration of the power of protest shows the potential for a dual-power situation to arise. In the Europe of 2011, such movements are largely concentrated in the European South, yet Iceland shows that there is yet hope for the North, though perhaps in some unexpected places.
Iceland’s geopolitical position is different from that of the UK, just as its economic and sociological position is different. Iceland drifted into being a Norwegian client since well before vassalisation in 1262, and since then it has been a Danish protectorate, owned (briefly) by a Danish pirate operating from Barbary, (briefly) by a Danish adventurer, been occupied by the UK during WWII and afterwards hosting a US base. Iceland knows very well how international conditions can swiftly change. However, like pre-crash Iceland, the UK economy is strongly reliant on its financial sector, the UK parliamentary left and right are both firmly neoliberal, and Cameron & Osborne have been making some particularly poor decisions of late.
Iceland’s leading professor of economics observes that “we need to know how to read the warning signals. We need to know how to count the cranes”. It may be worth taking a look out at the London skyline – and learning what we can from Iceland now.