Monday, August 1, 2011

Iceland's On-Going Revolution

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.


  1. [...] [by Deena Stryker, originally published in OtherJones] [...]

  2. Your math is wrong.

    A €3,500,000 loan could be paid off with a one time payment of €10.94 by each of the 320,000 citizens.

    If a person made €130 payments each month for 15 years @ 5.5%, the principal of that loan would be roughly €16,000. Multiply that by 320,000 people and you are talking roughly €5.1 billion.

  3. Yes, yes, by now I know, so many have called me out on this. I only hope the gist of the message would receive as much attention!

  4. Please correct your article.
    See all the corrections made by @rvkgrapevine

  5. Thanks for letting me know about the Iceland article. As said previously, my piece was an adaptation of an Italian
    radio feature which had provided a written text. The math mistakes are mine, due to being numerically challenged,
    especially when going from math in one language to another. But I'm glad I was able to bring to the attention
    of Americans a sense of what is happening in another country, even if with inaccuracies, and even if the situation
    evolves. That is the thrust of what I do: try to open a window onto the rest of the world, which American media insists on
    keeping tightly shut.

  6. Thanks for the interesting article about what Iceland did in response to this external financial attack by the 1%ers. Its heartening to hear that true democracy can work, and will find the best course of action for the greatest number of people, if the people are not lied to as they are here in the US. The corporate propaganda here is getting pretty thick these days, so that only means that its not working as well.

    Still our democracy here (in the US) has failed because it was undermined at every turn by the 1%ers. This will be the undoing of the empire in the end. The course taken to fix the financial and other problems her in the US is and will be a misguided one as long as propaganda organizations like FOX News can systematically lie, and stir up misplaced hatred. The US is likely to become the Argentina of the North.

  7. Hi,
    I didn't see your comment until today. I appreciate that you highlighted the connection with the Occupy Movement.

  8. We just had this article circulate through our local sustainability newsletter, and had to track down the rvkgrapevine article to get the corrected facts...and, as it happens, the corrected conclusion. It's lamentable that the changes that have actually come about in the situation have been eclipsed by the tone of the initial article, which turned out to be inflated due to some of the errors. It's especially of concern that you seem reluctant to correct the initial article - it merely gives fodder to those who insist that progressives are dedicated to slanting the news.

    I strongly urge you to issue a correction for this reason alone - simply saying that the errors originated elsewhere, without issuing a redaction of your own article, is irresponsible, as you are the one who has passed the errors along. I know it would be hard to track down every place the article has been reprinted, but just hitting some of the major sites would be extremely helpful. People are still linking to, for example. Issuing a correction (as Naomi Klein did by correcting her Twitter feed after linking to your article) would also assist your own credibility - you probably don't want your name synonymous with that of Steven Glass ( ).

  9. Previous comment came off much more heavy-handed than intended, for which I apologize. I just meant to say you may not realize that your article uncorrected may be doing more harm than good, especially to your own reputation and that of progressive reporting. Unfortunately the response to the mention of the inaccuracies, above, does come off a bit as "There are errors, oh well, at least I reported it," and I don't think that's necessarily what you meant, but that is how it reads.

  10. Dear Tom Tom,

    It's difficult for me to answer your comment, because it is not specific, but thanks anyway for browing my site!