From Iceland — The Last Great American Depression

The Last Great American Depression

Published October 12, 2008

The Last Great American Depression
Photo by
Hörður Kristbjörnsson

The Last Great American Depression

The Great Laissez-faire Dream is over. To many, it always seemed like more of a nightmare. In any case, we must now wake up and face the facts. It beggars belief how entire nations can blindly be led towards folly by leaders who in retrospect were so obviously wrong, and how all those who knew better were brushed aside. And how this can happen again and again, in different forms.

Thankfully, this will be the last we will hear of the market as the cure of all ills in our lifetime. Or at least until we start telling our grandchildren to beware of those who try to convince them that greed is good. Will they listen then? I doubt it. It will always be in the interests of the rich to make people believe that they should be allowed to do as they want. And those with the money will in the end control our minds. Unless something is done to stop them.

My generation will be the one hardest hit by our current predicament. The people in their late 20’s and 30’s, the ones who have taken out loans to buy homes at exorbitant prices that are now practically worthless. We are the ones who will never forget, in the same way that everyone who was around in the 30’s learnt to have a healthy suspicion of the market. It took 50 years from the Great Depression until free market policies became dominant again. By that time, everyone who could still remember the hard times was either dead or had lost influence. The same mistakes were made all over again.

The Return of History
So much for Libertarian Capitalism. What next?
During the 20th Century, two ideologies emerged to seriously challenge capitalism. During the Great Depression, it seemed one or the other of these might win out. It took a World War to defeat Nazism. This left communism and capitalism to duke it out for the next half century until there remained, as in Highlander, only one. We who grew up in the 80’s and 90’s were indoctrinated in an era in which many were talking about the end of ideology. It wasn’t the end, but rather that one ideology, that of the Free Market, had replaced many. And even if those who doubted the prevailing system weren’t thrown into a Gulag, they certainly had little stock in the marketplace of ideas. Here in Iceland, we had the free market policies of the conservatives in Morgunblaðið competing with the free market policies of the newly rich in Fréttablaðið. For a while, libertarian capitalism was the only game in town. It took only 20 years to blow it. History is back with a vengeance.

The new Jews
So, will that mean that other ideologies will make a comeback? Probably. Just as have had to deal with bad ideas from the libertarian spectrum for the past decades, we will now have to listen to bad ideas of a different kind. People are still reeling from the shock of having everything they believed in come to an end. But after shock comes anger. Just as the wealth was unevenly distributed, so will poverty be. And when people see that some who deserve it least will be the hardest hit, anger will start to simmer.

During the Great Depression, a scapegoat had to be found, and as so often before, people started blaming the Jews. This time around, they might turn on the immigrants. Even with full employment, there is always some resentment towards those of different backgrounds. As mass unemployment spreads, the locals will be vying for the cleaning and service jobs that they wouldn’t touch with a stick during better days. Anyone seen as an outsider is bound to suffer most during hard times, and the same will no doubt be true now.

The fascist model?
Nazism never really took root in Iceland during the 30’s. It may simply be because there was no significant Jewish community to use as scapegoats. Immigration to Iceland only really started in the 90’s. We may well see some political parties on the far right emerge to take advantage of directionless anger. Hopefully, the anger will be better directed at those more deserving of it.

In any case, immigrant communities haven’t really set root here, and many people will simply leave. Still, it is a bad omen that the first weekend after the collapse saw 13 violent attacks reported to the police in a single night. This may well be a record.

The main difference between Fascism now and in the 30’s is that at the time, it was a new and unproven idea. We have now seen what it leads to, and hopefully, this will ensure that we don’t have to go down that road again. Nevertheless, the idea of a controlled economy allied with nationalist arrogance is bound to make some sort of return. In Russia, it already has.

The Left-Reds
It is not just parties of the far right who will benefit at the polls. Parties of the left will tone down their feminism and environmentalism and start taking a greater interest in the economy. The Left-Greens are the one major party in Iceland that can be said to be blameless of our current predicament. But if they fail to offer solutions, those with more radical ideas will become louder. Instead of the Left-Greens, we may end up with the Far-left-Reds. The era of identity politics is over. We’re back to class struggle now.

But history never repeats itself completely. In the 30’s, when things seemed to be going well in the Soviet Union as seen from the outside, communism was a better proposition than it is now. And yet communists failed to take power in any country during the Great Depression. It will be hard to be harder to be a communist now, after we know what happened in the Soviet Union. So many people will want a new ideology for a new Depression.

The Second Coming?
But the most vibrant ideology these days goes back a long way. Even during happier times, people were starting to turn to religion when the market failed to provide them with purpose. Not only the parties of the left, but also others who have warned against the dangers of excessive greed, will benefit. As people begin to lose their material wealth, they will turn for comfort to the one party that has always been willing to provide it. Now, as the rich are becoming poor, the first last, there is much in the Bible that will seem apt. History should have taught us that giving political power to the clerics has never been a good idea. But history is no guarantee that mistakes will not be repeated. If worst comes to worst, religion will become the greatest threat to democracy, the Nazism of the 2010’s.  

The Great Depression of the 2070’s
None of this is to say that we are witnessing the end of capitalism. But we are seeing the end of its most extreme form, Laissez-faire. Neither capitalism nor communism functioned very well when taken to their extremes. The social democracies of the Nordic countries became the richest countries in the world, as well as those that took the best care of its citizens. Sadly, Iceland decided to go in a different direction. It must now pay the price. In any case, this will probably be last depression caused by Wall Street. The Great Depression of the 2070’s will start in Shangai.

Winter has come. We won’t see spring again for a long time.  

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