Iceland Jailed Bankers and Rejected Austerity - and It's Been a Success
Instead of imposing devastating austerity measures and bailing out its banks, Iceland let its banks go bust and focused on social welfare policies. It has now repaid 85 percent of U.K. claims, and the Icelandic finance minister announced recently that all will be settled by the end of the year.
Iceland Jailed Bankers and Rejected Austerity - and It's Been a Success
By Roisin Davis / truthdig.com

When the global economic crisis hit in 2008, Iceland suffered terribly—perhaps more than any other country. The savings of 50,000 people were wiped out, plunging Icelanders into debt and placing 25 percent of its homeowners in mortgage default.

Now, less than a decade later, the nation’s economy is booming. And this year it will become the first culturally European country that faced collapse to beat its pre-crisis peak of economic output.

That’s because it took a different approach. Instead of imposing devastating austerity measures and bailing out its banks, Iceland let its banks go bust and focused on social welfare policies. In March, the International Monetary Fund announced that the country had achieved economic recovery “without compromising its welfare model” of universal health care and education.

Iceland allowed those responsible for the crisis—its bankers—to be prosecuted as criminals. Again, a sharp contrast to the United States and elsewhere in Europe, where CEOs escaped punishment.

“Why should we have a part of our society that is not being policed or without responsibility?” asked special prosecutor Olafur Hauksson in the wake of the collapse. “It is dangerous that someone is too big to investigate—it gives a sense there is a safe haven.”

By refusing to allow its currency, the krona, to suffer ultra-low inflation to protect the assets of the rich—as in the rest of the West—Iceland let the krona tumble. The resulting inflation and higher prices have helped its export industries, unlike what happened in many European Union countries, which are contending with ongoing deflation.

On Monday, Iceland’s Finance Minister Bjarni Benediktsson announced the introduction of a 39 percent tax on creditors seeking to reclaim assets from the country’s failed banks. As The Guardian explains, this is “an attempt to prevent foreign investors rushing en masse to withdraw billions currently frozen in Iceland’s financial system.”

This tax has been introduced as the country winds down capital controls imposed in response to the crisis. Again flouting free market orthodoxy, this move restricts Icelanders’ ability to move their money out of the country in order to protect the krona. Initially intended to expire after six months, the controls have been in place for more than six years.

As a result, it’s estimated that about 1,200 billion Icelandic krona have been frozen—the equivalent of $9 billion. If capital controls were removed, Iceland could face a spate of bankruptcies and problems with liquidity. “There is not sufficient foreign currency to release 1,200bn [krona] in foreign currency,” The Guardian quoted Benedikt Gíslason, an adviser to the government, as saying. “The Icelandic economy would not survive.”

All of these actions have, unsurprisingly, drawn the ire of other countries—in ideological and measurable ways. By refusing to honor bank guarantees given by British and Dutch investors in Icesave—a subsidiary of one of Iceland’s main banks, Landsbanki—Iceland created enemies of its European neighbors. But it has now repaid 85 percent of U.K. claims, and the Icelandic finance minister announced recently that all will be settled by the end of the year.

When asked why Iceland was enjoying such a strong recovery while everyone else is still mired in debt, President Olafur Ragnar Grimmson said in 2013:

“Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. People in enlightened democracies are not going to accept that in the long run.”

There you have it. Instead of conceding to the crooks who made the mess, Iceland listened to its people. And the data speaks for itself.

 

Roisin Davis is an Assistant Editor at Truthdig. Originally from Northern Ireland, Roisin is a journalist with a background in social research and community work. After graduating from Queen’s University Belfast, she gained an MA in Economic History from the University of Barcelona. She currently lives in Los Angeles.

4.2 ·
4
What's Next
Trending Today
The Myth of Positivity: Why Your Pain Holds a Mighty Purpose
umair haque · 15,768 views today · Of all the great myths of contemporary life, one of the most toxic is positivity. It says: there are negative and positive emotions, and only the positive ones are worth...
Stunning Summary of US Imperialism and Native Resistance... on MSNBC!
4 min · 11,959 views today · On The Last Word with Lawrence O'Donnell on MSNBC, Lawrence explains why a protest by Native Americans in North Dakota reminds us of the history American always tries to forget.
Standing Rock Wisdom: How Sacred, Nonviolent Activism Has the Power to Succeed
Charles Eisenstein · 6,654 views today · I am told by Native American friends active at Standing Rock that the elders are counseling the Water Protectors to undertake each action prayerfully and to stay off the...
Seven Must-Have Skills for the 21st Century
Tommy Lehe · 4,899 views today · We live in a world that moves faster than we do. Trying to keep up can be an overwhelming task that at times feels hopeless, like we are falling further and further behind—but...
Veterans at Standing Rock Ask Forgiveness for War Crimes Against Tribal Nations
Jen Hayden · 4,392 views today · Jon Eagle Sr., Tribal Historic Preservation Officer at Standing Rock Sioux Tribe has reported something wholly unexpected happened at the Standing Rock Reservation today. The...
Why People Cling to Old Beliefs
1 min · 4,038 views today · Cognitive psychologist and neuroscientist at McGill University, Daniel Levitin, explains why people can be so stubborn when it comes to false beliefs. This behavior is...
The Other Way of Knowing
Lilian Na’ia Alessa · 3,477 views today · Western science and Indigenous worldviews are often seen as incompatible, with the Indigenous view usually being far less valued by society at large. But an inside look at...
DREAM: A Spoken Word Meditation For When Life Is Kicking Your Ass
4 min · 3,129 views today · If life is kicking your ass and the general un-coolness of everybody on planet erf is making you want to off yourself, TALK to someone: 800-273-8255 (national suicide...
Forget Air Force One, Pentagon Wastes Billions and Billions Every Month
Nadia Prupis · 3,115 views today · President-elect Donald Trump's focus on single Boeing contract ignores enormous waste of bloated Pentagon budget
Solar is Already Producing More Energy Than Oil, Says Major Scientific Review
Nafeez Ahmed · 2,996 views today · And is twice as powerful than previously thought
13 Crises That We All Must Face
George Monbiot · 2,515 views today · We face (at least) 13 major crises, some of which are immediate. It’s time for some hard thinking about how we confront them.
Dear Activists, Maybe It's Time to Admit That We've Got It All Wrong
Mickey Z. · 2,322 views today · “The first step in the revolution is eye contact.” - Alicen Grey
A Hauntingly Beautiful Short Film About Life and Death
5 min · 2,232 views today · The Life of Death is a touching handdrawn animation about the day Death fell in love with Life.
How a White Supremacist Became a Civil Rights Activist
Araz Hachadourian · 2,141 views today · The story of a KKK leader’s transformation shows us that we need not live forever with the kind of violence we saw in Charleston this month.
Andy Goes In - Working Undercover in a Factory Farm
10 min · 2,066 views today · He's a $10/hr farmhand, and his name isn't Andy. Andy Goes In is a compelling 10-minute documentary short about a Mercy For Animals undercover investigator. The vast majority...
15 Films Inspiring and Illuminating the 'New Story' Revolution
Tim Hjersted · 1,531 views today · Charles Eisenstein is one of the first people I heard talk about the "new story," synthesizing a diverse movement that has been emerging for the last several decades. When I go...
Sean Carroll - The Meaning of Life
7 min · 1,459 views today · The world keeps happening in accordance with its rules; it's up to us to make sense of it and give it value. Sean Carroll Music: Moby - God Moving Over the Face of the Waters
Satish Kumar on "What Is a Sacred Place?"
3 min · 1,372 views today · Satish Kumar brings a Hindu, Buddhist and Jain perspective to the definition of "sacred place." We found his explanation so compelling that we edited a three-minute piece...
Amanda Abbington Introduces iAnimal - 42 Days in the Life of Chickens
4 min · 1,319 views today · Shot undercover in British factory farms and slaughterhouses, this immersive 360° video gives you a birds-eye view of what happens to chicken from farm to plate.
Sky Roosevelt-Morris: The Secret of Indigenous Resiliency
2 min · 1,235 views today · Activist Sky Roosevelt-Morris is of the Shawnee and White Mountain Apache Nations. She is a member of the Leadership Council of the American Indian Movement of Colorado. In...
Load More
Like us on Facebook?
Iceland Jailed Bankers and Rejected Austerity - and It's Been a Success