Avarice, incompetence, feuding, lying, revenge-seeking: The financial collapse of Iceland in October 2008, writes Financial Times correspondent Boyes, has all the makings of a Viking saga.
Iceland had been riding high, having deregulated its banking industry in a moment of Thatcherite/Reaganite free marketeering. Though a nation with a population approximately the size of a small Midwestern city, Iceland had almost nothing else but commodities speculation going for it. But that speculation brought vast sums to the newly privatized banks, far more than the country’s gross domestic product. As usually happens, bust followed boom. Some 30 players, “the core of the country’s decision-making elite,” made very bad decisions in a time when the rest of the world was falling into an economic tailspin. The sudden bankruptcy of Iceland, Boyes notes, had a radicalizing effect in an otherwise quiet political scene, with demonstrations that would have been the equivalent, in the United States, of a few million angry people taking to the streets. First the islanders threw eggs at the guilty party. When eggs became too expensive, they switched to shoes, bringing the specter of George W. Bush into the mess. In time, the anger transformed into denial, acceptance and the other stages of reckoning with death, in this case the death of a small but independent economy. Boyes includes plenty of human-interest stories, but the narrative will be most interesting to students of globalism, who will find object lessons in the spectacle of a nation’s being forced into bankruptcy thanks to the greed and malfeasance of a few well-placed, well-connected individuals. As to whether Iceland be brought back from the economic grave, Boyes ventures that it is possible—but with more, rather than less, regulation of the sort that will increasingly be required to save capitalism from itself in other economies well beyond the island.
A valuable adjunct to the small but growing literature surrounding the current economic crisis.