Why Iceland Should Be in the News But Is Not
Posted on August 25, 2011
<http://bellacaledonia.org.uk/2011/08/25/why-iceland-shold-be-in-the-news-but-is-not/>
By *Deena Stryker*
An Italian radio program’s story about Iceland’s on-going revolution is
a stunning example of how little our media tells us about the rest of
the world. Americans may remember that at the start of the 2008
financial crisis, Iceland literally went bankrupt. The reasons were
mentioned only in passing, and since then, this little-known member of
the European Union fell back into oblivion.
As one European country after another fails or risks failing, imperiling
the Euro, with repercussions for the entire world, the last thing the
powers that be want is for Iceland to become an example. Here’s why:
Five years of a pure neo-liberal regime had made Iceland, (population
320 thousand, no army), one of the richest countries in the world. In
2003 all the country’s banks were privatized, and in an effort to
attract foreign investors, they offered on-line banking whose minimal
costs allowed them to offer relatively high rates of return. The
accounts, called IceSave, attracted many English and Dutch small
investors. But as investments grew, so did the banks’ foreign debt. In
2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was
900 percent. The 2008 world financial crisis was the coup de grace. The
three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly
up 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.
Contrary to what could be expected, the crisis resulted in Icelanders
recovering their sovereign rights, through a process of direct
participatory democracy that eventually led to a new Constitution. But
only after much pain.
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. But
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.
Protests and riots continued, eventually forcing the government to
resign. Elections were brought forward to April 2009, resulting in a
left-wing coalition which condemned the neoliberal economic system, but
immediately gave in to its demands that Iceland pay off a total of three
and a half million Euros. This required each Icelandic citizen to pay
100 Euros a month (or about $130) for fifteen years, at 5.5% interest,
to pay off a debt incurred by private parties vis a vis other private
parties. It was the straw that broke the reindeer’s back.
What happened next was extraordinary. The belief that citizens had to
pay for the mistakes of a financial monopoly, that an entire nation must
be taxed to pay off private debts was shattered, transforming the
relationship between citizens and their political institutions and
eventually driving Iceland’s leaders to the side of their constituents.
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.
Of course the international community only increased the pressure on
Iceland. Great Britain and Holland threatened dire reprisals that would
isolate the country. As Icelanders went to vote, foreign bankers
threatened to block any aid from the IMF. The British government
threatened to freeze Icelander savings and checking accounts. As
Grimsson said: “We were told that if we refused the international
community’s conditions, we would become the Cuba of the North. But if we
had accepted, we would have become the Haiti of the North.” (How many
times have I written that when Cubans see the dire state of their
neighbor, Haiti, they count themselves lucky.)
In the March 2010 referendum, 93% voted against repayment of the debt.
The IMF immediately froze its loan. But the revolution (though not
televised in the United States), would not be intimidated. With the
support of a furious citizenry, 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.
But Icelanders didn’t stop there: they decided to draft a new
constitution that would free the country from the exaggerated power of
international finance and virtual money. (The one in use had been
written when Iceland gained its independence from Denmark, in 1918, the
only difference with the Danish constitution being that the word
‘president’ replaced the word ‘king’.)
To write the new constitution, the people of Iceland elected twenty-five
citizens from among 522 adults not belonging to any political party but
recommended by at least thirty citizens. This document was not the work
of a handful of politicians, but was written on the internet. The
constituent’s meetings are streamed on-line, and citizens can send their
comments and suggestions, witnessing the document as it takes shape. The
constitution that eventually emerges from this participatory democratic
process will be submitted to parliament for approval after the next
elections.
Some readers will remember that Iceland’s ninth century agrarian
collapse was featured in Jared Diamond’s book by the same name. Today,
that country is recovering from its financial collapse in ways just the
opposite of those generally considered unavoidable, as confirmed
yesterday by the new head of the IMF, Christine Lagarde to Fareed
Zakaria. The people of Greece have been told that the privatization of
their public sector is the only solution. And those of Italy, Spain and
Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that
small country stated loud and clear that the people are sovereign.
That’s why it is not in the news anymore.
Originally published in the excellent SACSIS
<http://sacsis.org.za/site/home/> (with thanks)
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