The Humbling of Iceland

In 2009, Iceland became the poster child of the global economic downturn. The precipitous collapse of Iceland’s banks and the ensuing popular overthrow of the Independence Party-led government were seen as possible precursors of the fall of Western civilization.
Fortunately, the situation in Iceland (and elsewhere) has stabilized—at least for now—and already we are forgetting what exactly led to the kreppa in the first place. Was it the result of fraudulent investment schemes created by foreign flim-flam artists like Bernie Madoff? George Bush’s fiscal irresponsibility? Hank Paulson’s decision not to rescue Lehman Brothers? The market’s irrational exuberance?
Certainly not the policies of Iceland’s Central Bank by Davíð Oddsson, the harebrained business practices of the New Viking raiders, the complete failure of Icelandic regulators, the government’s incompetence, or the absence of sound lending guidelines at the banks. And certainly not the system of nepotism, cronyism, and political patronage that came to define the business atmosphere in Iceland.
As a result of this collective amnesia, we are already seeing the rats emerge from their holes to point the finger at those who have been stuck with the task of cleaning up their mess. Oddsson is back in the public eye as the editor-in-chief of Morgunblaðið. The Independence Party is again polling as the country’s most popular political party. Kaupþing refuses to permit outsiders to take over the business empire of Jón Ásgeir Jóhannesson. The banks are still run by much the same people who caused this mess in the first place.
The cockiness that characterised Icelanders during the good times has been replaced by anger, more directed at the post-party cleaning crews than the political and financial “elite” whose reckless actions have seriously compromised Iceland’s sovereignty.
The world has changed, however. The cockiness that characterised Icelanders during the good times is gone. Iceland’s sovereignty has been compromised as a result of the reckless actions of this “elite.” I am not referring to the movement to have Iceland join the European Union. I am referring to the fact that the positions of authority and nearly all of Iceland’s treasures have been—or soon will be—handed over to foreigners.
The International Monetary Fund (IMF) has been placed in charge of restructuring of Iceland’s economy. The investigation of the financial crimes that led to the kreppa is led by Eva Joly, a Norwegian-French politician. The genetic research firm deCODE—which was probably the best known Icelandic company abroad—was sold in bankruptcy liquidation proceedings to a consortium of American investment funds. The right to exploit geothermal energy in Reykjanes was sold for a pittance to a Canadian company.
Despite all of this, however, there are hopeful signs. The kreppa has given rise to a truly independent media—from the website Eyjan to bloggers such as Daði Rafnsson‘s Economic Disaster Area, and Lára Hanna Einarsdóttir—to challenge the privileged class monopoly on the news. A new political party obtained seats in the Alþingi. A national assembly (Þjóðfundur) was held to try to reach a consensus on how to rebuild our broken society. The Icelandic people have refused to allow the British and Dutch governments to force them to pay for the sins and omissions of the bankers and their own regulators. The outflow of workers had stopped, for the most part, and the unemployment rate is slowly descending. The first prosecutions appear imminent.
Now that the crazy days of the 00’s appear to be behind us, we have an unprecedented opportunity to redefine ourselves. We’ve been humbled in 2009, but it’s still not clear whether we learned our lesson.