“Those who are considered chieftains in this country are foolishly susceptible to prayer, drink and bribery, but still the simple and poor common people believe them and are duped.”
Sound familiar? No, this is not a comment on the current economic collapse. These words were written by the Danish king’s emissary in the 15th Century who was sent here to survey the king’s new possession in the North Atlantic.
To any observer of the Icelandic banking crisis, one of the most surprising aspects must be that no one, whether in the financial community or then government, has assumed any responsibility.
“Deny, deny, deny,” was the advice President Clinton supposedly gave to Monica Lewinsky when they were caught in the act. It was following his own advice that turned a minor scandal into a major one. Not only had the President cheated on his wife, but he had also lied to the public about it. Now, bankrupting your country while in office is not the same thing a screwing your secretary. Just ask former President Bush, who will fare much worse in the history books than the philandering Clinton.
Both are on the Guardian’s list of 25 people responsible for the economic crisis. So is Iceland’s former PM Geir Haarde. Like his colleagues, denying the obvious is Haarde’s take on history. For most Icelanders, it was shocking to see the former Emperor, like a sketch out of Spaugstofan, with no clothes on in BBC’s HardTalk. When asked repeatedly, he would not offer an apology to the people of Iceland who now must suffer so much, neither as former PM nor as a human being. A simply sorry last autumn might have allowed him to keep his job. But Haarde chose denial.
Sorry seems to be the hardest word
Did he and his party really think that they would get away with bankrupting the country and not shouldering any blame? So it would seem. But then again, they always have.
Iceland’s economic collapse last autumn was spectacular, but in many ways it was just a little bit of history repeating. When Iceland was founded in 930, it was a democratic society (by the standards of the time), with ships of its own, relatively peaceful and with an economy that could easily sustain its people.
After the introduction of Christianity, power came to be consolidated in fewer and fewer hands as Chieftains built churches and amassed wealth through them. By the 13th Century, Iceland was a violent and impoverished country. The chieftains, mainly consisting of five families, constantly fought over control of the nation’s resources. Meanwhile, the shipstocks had not been maintained and Iceland could not supply itself. Eventually, they had to appeal to another authority. The Norwegian king, the regional IMF of the day, had to be brought in to bring order to the country, and Iceland lost its independence.
The end of Independence, pt. 1
Peace was restored at the price of independence. It seemed that prosperity might follow also.
After the start of the Norwegian period, fish became, for the first time, the most important export. Markets opened up in the Baltic once that area had become Christian. Catholics were not allowed to eat meat on Fridays and hence fish became a popular substitute. The Norwegian port of Bergen, through which much of the Icelandic trade flowed, became incorporated into the Hanseatic trading system.
This, however, did not lead to an increase in living standards among the Icelandic public. Quite the contrary happened as the climate became harsher and crops could no longer be grown. At the same time, a few families became very wealthy from the fish trade. The rich became richer and the poor poorer.
No fish, no freedom
When the bubonic plague devastated Norway in the mid-14th century, shipping to and from Iceland virtually ceased. Both Norway and Iceland came under the control of the king of Denmark. In 1490, new laws were set stipulating that those who did not own livestock must become tenants for someone who did. Hence, the poorer labourers were from then on forced to work for the wealthier landowners. Most Icelanders became virtual serfs and were not allowed to make a living out of the one thing Iceland had in abundance, namely fish. Fishing was only practiced during time off from farmhand duties, and the catch belonged to the landowner.
This system prevailed to a large extent in Iceland into the 19th century. Free trade was one of the main goals of Jón Sigurðsson and those struggling for Icelandic independence. New laws were set that prevented traders from owning more than one store in each town, thus preventing monopolies. Living conditions improved considerably as the 19th century wore on, fishing became ever more important, and boats became both bigger and more numerous.
The Octopus spreads it tentacles
In 1914, a shipping company, Eimskip, was formed. Its founders were well aware that Iceland had lost its independence centuries earlier because it did not have control of its shipping and were determined not to let history repeat itself. The company became known as the “dream child of the nation,” and everyone, rich and poor, bought stocks so that it might prosper. At the time, its owners totalled 13.000 in all, at a time when the population had not yet reached 100.000. But ownership was not distributed evenly. This fact was well hidden, as ownership of major corporations was kept secret.
When the ownership of Eimskip was finally made public, it turned out that 40% of the stock was owned by 15 individuals who controlled the board. The board had been buying up stock sold by shareholders without putting these on the market, something that in most other countries is considered insider trading and is illegal. The board had also been buying stock in other companies, notably about a third of Icelandair shares, and some people sat on the board in both companies. In the 80’s, Eimskip had also gobbled up its biggest competitor, Hafskip.
The Octopus and the Squid
Some people wondered whether Eimskip’s considerable proceeds should not be spent on lowering prices on traffic rather than overtaking other companies. This would lead to more purchasing power among the general public and benefit the population and economy as a whole. But those who owned the nation’s dream child had other interests. Iceland was no longer a part of Denmark, but it had a new set of lords.
The 15 families controlled virtually all traffic to and from the country. These were later nicknamed “The Octopus,” as its many arms all seemed to be feeding the same mouth.
Its other two main pillars were the Shell oil company and the Sjóvá-Almennar insurance company.
Its main rival was another conglomerate, Sambandið, often called the “Small Octopus” or “the Squid.” The Octopus was tied to the Independence Party, and the Squid to the Progressive Party, the two parties who have divided Iceland between them for most of the 20th Century.
Virtually all fishing distilleries belonged to one or the other, and an understanding was reached regarding spheres of influence. By the late 80’s the Squid was falling apart, leaving the field to the bigger player.
Meet the new boss...
In 1991, the Independence Party, along with the Social Democrats, formed a government headed by Prime Minister Davíð Oddsson. Oddson’s grand plan was to open up the economy, privatise most government run companies and encourage competition. No doubt most of the companies were intended to go to the old guard of the Octopus, most of who were loyal party members. But somewhere down the line, Oddsson lost control of the privatisation. A new, hungry class of oligarchs emerged, who were swifter and more fierce than the old elite had been. They also had liquid cash, some from ventures in Russia, others from control of the lucrative supermarket chains in Iceland. The old elite had less capital, and had relied on co-ownership in most of the major companies. The Octopus was eaten up by these new sharks.
Tragedy and farce
By the first decade of the 21st Century, a group of between five and 25 men owned virtually all the country’s wealth. The gold rolling into their coffers came from the Icelandic people, who had to pay the highest prices in the world for necessities such as groceries, as well the highest interest rates in the world. The combined wealth of the Iceland was such that those who controlled it managed to become major players on the international stage.
But as their assets continued to grow, no one really understood where the money was coming from. It seems the answer, in the end, was simple. It didn’t exist. They had taken out loan after loan, mortgaged everything they bought time and time again, and in every case the Icelandic government was responsible for these loans. Now that the bubble has burst, it seems the Icelandic people will yet again have to foot the bill. Our independence passed from the banks to the IMF.
And Justice for All
Icelanders are hardworking people in a harsh land. Through sheer grit, they managed to turn it into one of the most prosperous countries in the world. But time and again, they have been robbed blind while a select few got most of the proceeds from their work. Currently, our money is to be found in the Cayman Islands while, through yet more hard work, we must rebuild the country yet again.
Iceland managed to prosper in spite of, not because of, the Independence Party that kept prices high and competition limited. Imagine what a paradise hard-working people could create if they were allowed to keep the fruit of their labours themselves rather than surrender it to the wealthy few. Let us hope this time they will. Let us hope they will be duped no more.