Iceland’s Quiet Revolution
What’s that? You haven’t heard much about Iceland’s Quiet Revolution in the mainstream media? You’re not alone. Here’s the scoop on how Iceland responded to the 2008 financial crisis to effect real change.
Following the U.S. Model
Iceland’s economy had been growing according to the unsustainable U.S. model – lowered taxes, newly privatized banks merging commercial and investment banking, and growing larger and more interconnected, and increasing income and wealth inequality.
U.S. Style Banking Practices Cause Collapse
All looked fine, as Iceland’s income levels were fifth highest in the world, until, in 2008, the global financial crisis, precipitated by U.S. banking practices, brought down Iceland’s banks. In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went under 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.
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. The foreign financial community pressured Iceland to impose drastic measures. 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. The IMF offered a loan to stabilize the krona, with the condition that Iceland honor the obligations to pay back foreign creditors.
Tenacious Citizens Revolt Against Austerity
After the government agreed to the austerity measures, protests demanded the government’s resignation. Protests and riots eventually forced the government to resign. Elections were brought forward to April 2009 and a left-wing coalition condemned the neoliberal (ie. conservative) economic system.
Still, the coalition gave in to its demands to pay off a total of three and a half million Euros – saddling each Icelandic citizen with 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by bankers.
The notion that citizens had to pay for the mistakes of the financial oligarchs and an entire nation had to be taxed to pay off private debts was unacceptable to the citizenry. In the March 2010 referendum, 93% voted against repayment of the debt. Buckling to pressure from the people, 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.
As a result, rather than than bail out the banks, the Icelandic government let them collapse. Twice the country has voted not to repay foreign creditors money lost during the bank default, but to put citizens ahead of bankers. Unlike the U.S., where people are apparently far less economically literate, Iceland’s citizens understood that recovery hinged on the welfare of the working class, not paying down government debts at their expense.
Thinking Outside the Box
Iceland thought outside the box, and set forth a clear and different set of priorities: to preserve social welfare. As a result, while European nations undertaking austerity measures struggle, Iceland is on the road to a quick recovery, with unemployment is falling and the economy is expected to grow.
There are tradeoffs: the Icelandic krona collapsed, bringing in tourists but resulting in rising consumer goods prices while wages fell. Icelanders who were encouraged during the boom years to take out loans in foreign currencies have seen their loans double or triple in value.
The lessons of Iceland are well worth studying. Like the U.S., the country has its own currency – something that has helped the U.S. Federal Reserve employ monetary policy that isn’t available to other European countries under the Euro. On the other hand, the U.S. is a much larger and more complex economy.
Whatever the differences, there are some important lessons well worth noting:
- Democracy In Action: Unlike the U.S. where the grass roots movement of Occupy Wall Street was crushed by a militaristic Department of Homeland Security, the democratic rights of Iceland’s citizens were honored.
- Education: In the U.S., the public is largely misled by pervasive propaganda from the right wing media and a corporate media that largely sweeps underlying economic issues under the rug. By contrast, the people of Iceland understood the economically crippling implications of austerity measures applied against the debt.
- Moral Priorities: The quiet revolution of the Icelandic people put citizens ahead of the banking industry. This stands in stark contrast to the U.S. where corporate priorities have usurped individual interests. The priorities of the corporate CEOs who comprise the “Fix the Debt Committee” – to balance the budget on the backs of the ordinary citizens have become the accepted mainstream meme.
- Courage and Tenacity: In Iceland, the international community increased the pressure, with Great Britain and Holland threatening dire reprisals that would isolate the country. As citizens turned out to vote, foreign bankers threatened to block IMF aid, and the British government threatened to freeze Icelander savings and checking accounts. The IMF immediately froze its loan. The nation was undeterred.
- Accountability: With the support of the citizens, 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.
- Action and Transparency: Icelanders didn’t grow complacent but decided to draft a new constitution to free the country from the power of international finance. They elected 25 citizens from among 522 not belonging to any political party but recommended by at least 30 citizens. The document was written -not behind closed doors – but on the internet. Citizens could send their comments and suggestions, and watch the document as it took shape. The constitution that emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.
Why Has This Been Kept From The American Public?
Refusing to bow to the interests of a wealthy minority, the nation asserted its sovereignty, applied democratic ideals and practiced pragmatic participatory action.
By contrast, here in the U.S., Occupy Wall Street is crushed, while the Tea Party and corporate personhood are set in motion by the wealthy interests. Representatives refuse to take any action against the corporate interests that caused the collapse and bow to corporate-led demands for budget austerity designed to balance a budget deficit created by the wealthy on the backs of the rest of us.
It is more than just shameful that the nation that brought these unsustainable business practices to the world, precipitating a global economic crisis, hasn’t demanded accountability or reform. What’s most alarming is the inescapable conclusion that these practices will be allowed to continue, enabled by a political system in thrall to the interests that promote them. What results might we expect from the political gridlock led by House Republicans that seeks to tie the hands of a president attempting to hold the line against the inexorable march of the banksters?
There is every reason for these interests to keep the news of a true movement for economic democracy from us.