From Iceland — A CIVIL (COD) WAR?


Published June 16, 2011

Many people find the subject impossibly boring, but it is always simmering under the surface of Icelandic society. Many do not understand it, but others are totally obsessed by it. We are talking about fish—or more specifically, the system under which Icelanders manage their fisheries. Now things are coming to a head with the government’s proposals to transform the system.
“Life is saltfish”, is an old Icelandic saying. And it is true that Icelanders have been very dependent on fish. There was an economic boom connected to the great herring fishing in the early 20th century, commonly referred to as “the herring adventure”. This finally collapsed in 1967 due to overfishing, and the result was a severe economic crisis with ensuing unemployment and emigration.
And possibly the greatest moment of our small republic was when we had the better of the British in a series of “cod wars”, lasting from 1948 to 1976. There, we managed to drive a huge British fleet of trawlers from the waters around Iceland and establish a 200 nautical mile economic zone around Iceland.
One of the main tasks of Icelandic politics has been to diversify the monotonous industries of the country. In the sixties, aluminium was seen as the alternative, and it still is to some. Tourism is of course a growing industry, but the most interesting experiment was when Iceland was to become an international financial centre. This succeeded for a while. In 2007, it was noted that when fishing quotas were cut severely it had no impact at all on the Icelandic stock market. People truly thought that Iceland had entered a new phase—that we were no longer a nation of fishermen. A year later the banks came tumbling town; now these dreams of financial glory just leave a bad aftertaste.
So we are basically back to fishing and society has had to adapt to that. For example the Icelandic króna’s exchange rate is now impossibly low for the general population of Iceland. But for the fisheries this is very beneficial. The fish fetches a high price in foreign currencies. This makes it possible to service all the foreign debt amassed in Iceland during the boom years. A change is not foreseeable in the nearest future. So money is rolling into the fishing industry, while many other parts of society are suffering.
So why change the system now? The left wing government, which came into power after the crash, promised to make very ambitious changes to  Icelandic society. It was going to right old wrongs. One of these is the quota system on which the fisheries are based. In the beginning it was set up to manage dwindling stocks. In the early 1980s Icelanders, after an extensive modernisation of the fleet, was fishing up to 400 thousand tonnes of cod every year. In the last years it has sometime been as little as 130 thousand tonnes. In some ways higher prices make up for this, fish is now an expensive commodity—it is not sold anymore, frozen into a block, to be consumed in American prisons.
The quotas were allocated to fishing vessels, so their keepers became the ship owners, not the fishermen themselves or the towns where the fisheries operated. After a piece of legislation, that no one seemed to notice at the time, the fishing quota became transferable which started a lively business—vessel owners, large and small, started selling their quotas. Soon they started falling into fewer hands, now a few dozen people “own” most of Iceland’s fishing quotas. This pitted neighbour against neighbour, the solidarity of the fishing towns was broken—suddenly the man next door had become fabulously wealthy from selling his quota, which up to then had been a common good for the society. The quota might then have been transferred to another town—leaving the townspeople without work and income, their houses gradually becoming worthless.
So this was not only a question of preserving the fishing stocks, there was also an economic neoliberal—agenda, even though few realised this at the time. It was claimed that by this quasi-privatisation, the fisheries would become more efficient. But soon the beneficiaries of this system started using the quotas—i.e. the fish in the sea—as collateral, taking out huge loans that didn’t necessarily go back into the industry. Much of the sudden quota wealth was used for private consumption, for building of shopping malls in Reykjavík, or simply moved out of the country.
It is generally considered that this was a prelude to the big economic bubble that finally destroyed Iceland’s economy. The price for a kilo of unfished cod was constantly being inflated so that the ship owners could take out ever higher loans. As a result, the fishing industry is mired in debt, the total sum is about 500 billion ISK—in reality creditors are the de facto owners of much of the industry.
But there has always been a catch. Firstly, the laws on fishing state that the stocks are the property of the nation. Secondly, using quotas as collateral for borrowing is forbidden. But this has simply been ignored—and now we have a huge system that is terribly hard to unwind.

There are many sources of discontentment within the system. One is that the fishing towns have suffered. Another is that many ship owners actually do not fish the quotas themselves, but rent them out at high prices to fishermen who do not have quotas. Up to 42 percent of the quota is rented out in this way. So in this aspect the system is almost feudal. Very little of the money sees its way into the coffers of the government. There is a resource tax, but it has always been nominal. In a recent article it was compared to renting a flat in Reykjavik for 100 Euros per month. Some attempts have been made to patch up the system, for example by augmenting the fisheries of small boats close to the coast. But this in turn has been changed into quotas—with ever growing complexity.
So now there might be time for a showdown. The government made lofty promises when it took over, but now its proposals seem very confusing—they come as a disappointment to many. This is a compromise between the Social Democrats, who have been of the opinion that the quotas should be gradually taken over by the state and then rented out, and the Left Greens, who favour a system that is more regionalistic.  Generally in polls, more than 70 percent of the nation is against the present system. Most people seem to favour more radical changes than the government proposes.
But there is strong opposition. The Federation of Icelandic Fishing Vessel Owners is maybe the most powerful lobby group in the country. They have access to parliamentarians, trade unionists and local politicians who tremble before them. They are also very strong in the media. Two of the largest newspapers are on their side. The leadership of the right wing Independence Party, traditionally the largest party in Iceland, is against all change, even if many party members might be vehemently against the quota system. And the banks, which have a stake in much of the fisheries through loans, are using their clout behind the scenes, claiming that any changes would be disastrous for the economy. There is talk of expropriation, nationalisation and Mugabe-like policies.
Some claim that we have the best fisheries system in the world. Most of the ship owners would of course say so, but also some politicians and academics. It is sometimes compared to the failure of EU fishing policies. Still the Norwegians and the Faroese have a different system with quite good results. There is a widespread sense that great injustice was perpetrated when the quotas were given out—and with the ensuing speculation. Thus, almost overnight, a new overclass was created. The fisheries have amassed a lot of debt and the stocks haven’t really grown. There is also a UN Human Rights Commission ruling from 2008 stating that the quota allocation system is discriminatory and thus unlawful.
This  matter has been like a festering sore on the body politic for more than two decades. Sometimes it seems it might disappear, but it has a way of popping up again—most often before elections. Napoleon Bonaparte once said that men will fight more determinedly for their interests than for their ideals. We might be in for a bitter fight over the quotas—not a cod war this time but a civil cod war—but while most of the population wants to overturn the system, power definitely favours the capitalists. In fact, most likely they will prevail. 
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