Haiti of the North

Since we're being told on all sides that France, Germany and - a hard one to swallow this - Japan are motoring out of recession I thought I'd take a peek at the Icelandic situation once again. You remember Iceland, don't you? That country that Daniel Hannan wanted Britain to be more like.

There are another round of demos getting underway according to the Weather Report and the latest one featured a speech by
Einar Már Guðmundsson, an Icelandic writer(that's him in the picture).

"Self-made bondage is the strongest form of bondage. Thus wrote Sigfús Daðason, and thus is our situation today. The constitution was mortgaged without the nation being asked, and now we are to acknowledge the collateral and confess to the crime. We are confessing to a crime we did not commit. Let me quote Eva Joly: “This small country of 320,000 inhabitants is now reeling under the weight of billions of Euros of debt, which has absolutely nothing to do with the vast majority of its population and which Iceland cannot afford to pay.”

Yes, we are being enslaved. The Icesave agreement is stage one, the conditions of the International Monetary Fund stage two, and so it will continue until sometime in the future, when we receive an apology for the mistake that is being made … but by then it will be too late. They say we will become the Cuba of the North if we do not ratify this agreement. But shouldn’t we add: We will become the Haiti of the North if we do ratify it. They fulfilled all the IMF’s demands – and are now plagued by a famine. ... That is the reason we are here today – and we oppose this. All of us. We are being made to confess to a crime we did not commit. We are to shoulder the burdens of the global financial system, to become their underdogs.

In truth, this problem is not the nation’s problem, but that of the owners of the privatized banks who vacuumed up cash using the Icesave accounts. Our problem is that the government of this country and its politicians want to remove this problem from the bank’s owners and hand it to us and – not least – to our descendants. We cannot let this happen. We oppose this – all of us.

To you inside the parliament building I say: Stop your bullshit. Stop talking about “friendly nations”, “deposit insurance”, “global community”. The “global community” is a community of wealthy nations, “deposit insurance” is the socialization of losses, and “friendly nations” is wishful thinking and does not extend to authorities, or capital. The Swedes are not our enemies, yet the Swedish financial system financed the banking system of the Baltic States when it was placed on the market – and robbed. The Swedish financial sector looks at the similar collapse of our banks and understands Gordon Brown’s arguments as well as he, himself, does – no, do not confuse this with friendship. Gordon Brown is one of the main theorists behind the financial system in London City, and its regulations, or rather its absence of regulations, became the guiding principle behind the Icelandic financial system. In light of this, none of your legal opinions matter, nor do the names of people in the negotiating committees. A financial war is raging throughout the world in which a decrepit system tries to rev its engines, and in that workshop it is our authorities who are madly shoveling the coals. One of the world’s wisest economists states: “The International Monetary Fund is a sort of debt collector for global creditors and collects revenues … for them. Amazingly, nations the world over are losing their financial and economic freedom, without resistance.”"

Thanks to the Weather Report for the translation - you'll find the full speech there.

New Euphemism Sighted in Frozen North

It translates from the Icelandic as 'rationalisation'. Specifically, rationalisation of the education system.

Representatives of the Association of Local Authorities in Iceland (SÍS) recently met with Minister of Education Katrín Jakobsdóttir to examine the possibility of temporarily reducing the number of elementary school days as a rationalization method.....the idea is related to the so-called five-percent method, which has been discussed among local authorities recently. Municipal employees can then take ten additional days off per year in exchange for five percent lower salaries.

(via). I particularly like the use of the sly 'temporarily' in the first sentence. This is McKinsey grade euphemism. Dilbert got there before them of course...

Recent History of Iceland in One Graph

From Anne Pettifor's blog- which also 'names names' of key neo-liberal economists who kept issuing reports that everything was for the best in the best of all possible worlds. Definately worth a read.

Via Richard Murphy

Fishy Property Rights

Michael Hudson provides a delightful insight into Icelandic property rights.

"...after the war, British trawlers competed with Icelandic fishing boats for the rich cod and other fish. After a series of showdowns extending into the 1970s, Iceland became the leader in establishing the 200-mile limit to define international sea rights....... Iceland issued licenses representing a specified proportion of the annual permitted catch, whose magnitude was set each year based on the estimated fish population. In contrast to classical economic practice, these licenses were not auctioned off each year by the government so as to recover fair value for the nation’s natural resource in the sea. Rather.... they became permanent, and naturally have risen in market price over time. The initial holders – the leading political insiders a century ago – have bequeathed them to their heirs, to be rented out to the actual fishermen or simply kept them in the family. Iceland’s Treasury receives no benefit from harvest the seas. Licenses simply have become a rent-extraction fee, a payment to the former insiders and their successors."(My emphasis)

& it's terribly, terribly crude of me I know, but I can't help thinking, as I read about banking being back on the up, that something very similar has happened in the UK, only with money, not cod.

Skating on Green Ice

Last time I looked, the average Icelander was 30,000 euros in debt and the IMF was predicting the national economy was due to shrink by 10% this year. The numbers may have shifted a little since then, but I doubt the general picture has. The default assumption amongst this tiny nation of 300,000 people is that they need someone to rescue them, or at least share the burden of this unimaginable level of debt. Few seem prepared to actively embrace default, as Michael Hudson advises. The room for manoeuvre for any Icelandic government at this point may be very limited indeed.

Which is why it’s only two cheers from me at the news that a Social Democrat/Left Green coalition has won the Icelandic elections? The basic tension in this coalition is around whether or not they should open talks with the EU about prospective membership - the Social Democrats are in favour, the Left Greens against, although their strength of purpose is crumbling and their formal position is that they want to see a referendum before any such talks are entered into. The guy gagged and tied onto the back of the bus in the cartoon is Steingrímur J. Sigfússon, chairman of the Left-Greens and finance minister.

I've only seen a fraction of the debate in Iceland as I'm a monoglot. But it does seem to me to be an argument devoid of any doubts about whether the EU - and, more to the point, the European Central Bank, masters of the Euro - would accept them under any better conditions than on offer from the IMF.

Larry Elliot points out this morning that,

"...the losses made by the banks have not gone away; the debts have simply been shifted from the private sector to the public sector. A potential meltdown in the global financial system last October was averted, but only at the risk of ­creating a sovereign debt crisis.

It would only take two or three of the emerging economies of Eastern Europe or Latin America to default on their debts to see doubts surface about the viability of the bigger developed economies, including Britain. The idea that the next big shock will come in the emerging markets is plausible, because these countries have been heavily dependent on foreign capital, and those flows have reversed as banks have repatriated what's left of their capital."

Basically, Iceland is already at the point where bank default merges into something that is, in all but name, sovereign default. Given it's so small, there is a case for rescuing it. But the ECB have got to be worried about precedent - if they rescue Iceland on overtly favourable terms, how can they not do the same to the Baltic countries, Hungary or even Ukraine if they go belly up?

Blogged with the Flock Browser

"When a debt can't be paid, it won't be"

Michael Hudson says an oligarchy is emerging all over the world - they are the bulk of the creditors who are insisting on repayment of unrepayable debt. Debt-peonage and neo-feudalism are waiting in the wings for the debtors if they accept the dominance of the creditors. Iceland is under financial attack. They shouldn't accept the IMF diktats. See the video six paragraphs down here (don't worry, it's in English even if the blog is in Icelandic) or read his long article here.

'Can't Pay, Won't Pay' reemerges as a slogan of the left?

Put like that it sounds crazy - but look at the words on that £10 note in your pocket. 'I promise to pay' says the Chief Cashier. Money is embodied trust. No-one believes that Iceland can really repay- it's only a question of whether they sell themselves into debt-peonage before everyone acknowledges that truth. There's no real trust behind the IMF proposals- just naked power. Hudson is saying call their bluff. Re-establish real trust by saying what you will and won't give up as a country and only deal on that basis. Force a debt jubilee.

The Collapse of a Country

Hold the front page - Economists in 'writing in clear English shock'. (perhaps because they're not English, they're Icelandic). The quotes below are from the report 'Collapse of A Country' (pdf) from here.

From A:

"In effect, the country decided to stake its economic future on international banking,
without having the necessary safeguards in place, eventually developing a banking
system much beyond the ability of the state to come to its help with liquidity or
solvency support."

To B:

"The collapse of Iceland’s economy is a testimony of the combined effects of
deregulation, privatization and lax financial supervision in a world of cheap credit. A
speedy recovery depends on the authorities taking the right steps to steer the economy
towards a path of sustainable development."

The whole thing is only about 20 pages long and well worth a read.

H/T IWR

Iceland and the Self-Help Shelf

Iceland has sacked the Head of its Central Bank. Poor darling, he's very, very upset. What's interesting, tho' is that the Weather Report is critiquing his reaction with quotes from not Marx or Keynes or Friedman but, um, Further Along the Road Less Travelled by M. Scott Peck. It's as if the readership of Men are From Mars and Women are from Venus had suddenly developed an acute sense of economic and political judgment.

Which, in British terms, is roughly the same as the readership of the Sunday Mail supplements suddenly turning against turbo-driven finance capitalism.

I don't think the Weather Report is a Marxist. But, blimey, I think she understand the Gramsican concept of hegemony.

Not-Reykjavik: Nice Cathedral, Unfortunate Twin Town

I've been chuntering on about Iceland on this blog since early October, when I quoted from the then current Wikipedia article on the Icelandic economy. The same article, you perhaps won't be surprised to hear, has been subject to some revision and now ends with the words, " The IMF predicts the GDP of Iceland will contract by 10% for year 2009". Looking at the 'discussion page' - the bit where the people who lovingly update Wiki argue out their differences - I am struck by this plaintive note:

"Merger of Nordic Tiger

I propose that Nordic Tiger be merged to this article. There's not much need for a separate article on a short-lived nickname. Fg2 (talk) 07:21, 11 October 2008 (UTC)

But I tend to agree only so much can be generalised from the experience of such a small nation - talk of a possible Reykjavik on Thames is undoubtedly over-blown. Iceland, we are reminded on all sides, is only the size of Coventry in population terms.

So I now plan to keep an eye on reports of the effects of the credit crunch on Coventry, a city I lived in thirty years ago. As of today, Wiki tells me,

"Coventry's main industries include: cars, electronic equipment, machine tools, agricultural machinery, man-made fibres, aerospace components and telecommunications equipment. In recent years, the city has moved away from manufacturing industries towards business services, finance, research, design and development, creative industries as well as logistics and leisure."

According to the local paper all is quiet - the Coventry Evening Telgraph - admittedly, never exactly a keen barometer of political or economic change - seems to be leading on stories around a arsonist who set fire to himself, a hike in the cost of meals on wheels and "hearing-impaired patients in Coventry and Warwickshire wasted £75,000 of hospital cash by not turning up for appointments last year." Yup, it's that gripping.

But Wiki also reminds me the town is twinned with Volgograd. But it wasn't always called that of course, it used to have another, more famous name

Let's hope Coventry isn't facing a new economic Stalingrad.

P.S. AVPS carries a report saying the Icelandic Green Left Party stands at 32.6% in the polls, a staggering jump in popularity. He'll no doubt recall that he has a comrade in Coventry famous for almost sharing an office with Tony Blair. But I'm not betting on Mr.Nellist jumping quite so far in the popularity stakes.

Credit Crunch Effects: First Government Falls

Iceland. Who'll be next?

Frozen Orange Blowback ?

No, not that kind of Orange......

The Icelandic Weather Report carries a really helpful eye witness account of events in Iceland over the last week. In summary: mass popular protest has caused a deeply unpopular government to concede fresh elections in the aftermath of economic Armageddon.

This turmoil - and similar events elsewhere on Europe's periphery - has begun to worry the continent's political and financial elite. (Via the leftist sage of Suffolk).

But what caught my eye in the latest Weather Report was her reference to a degree of popular revulsion at rioting as a tactic - and an explicit iconographic reference to events in the Ukraine.

"Hundreds of Icelanders join the “orange movement” to show they support peaceful protests and reject violence. Protests continue outside the parliament buildings despite cold temps and gale-force winds. People bring roses and tulips to give to the police; someone brings hot chocolate and distributes equally to protesters and police officers..."

How amusing if the turbo-driven world of globalised finance capital were to be challenged in the ideological clothes of a movement which presented itself as sweeping away the corrupt and undemocratic remains of the old Soviet era. Especially since 'even the dogs in the street' (as a real god-fearing Ulster Orange man might say) know that Ukraine's original Orange Revolution was part funded and organised by a range of Western government and non-government agencies including George Soros' Open Society Institute. & who personifies globalised finance better that Soros, the 'man who broke the Bank of England' back in 1992?

Blowback time?

Worth a Thousand Words...

I've been blathering on for weeks about the fact Britain has - or perhaps had - a grotesquely over-sized financial sector compared to the rest of the economy. But Bubbly Alice cuts straight to the point and provides the killer graphic.

Oh - and Lenin directs us to this website, which has some quite well shot videos of the riot and occupation at the Icelandic parliament.

From the Periphery to the Centre?

Keep an eye on Iceland. Things seem to be, erm, hotting up.

"The number of protesters in front of the parliament buildings has grown steadily this evening and there are now between 2,000 and 3,000 people there. Windows have been broken in the building and paint has been thrown. A bonfire is burning in front of the building and people have fetched things to add to it from nearby building sites." 10 pm, Jan 20th

Thunderclap Newman Plays Reykjavík?

The Weather Report says there is revolution in the air. But what kind of revolution, I wonder?

Her next but one post is a long interview with Thorvaldur Gylfason, an Icelandic economist who once worked for the IMF and advocates joining the EU. He seems the very model of a non-corrupt & competent technocrat - and apparently he is the popular favourite to become either Minister of Finance or Head of the Central Bank. And he appears to be advocating, or at least positively entertaining, a non parliamentary government - that is a temporary government of non elected experts and trusted public figures.

What this sound like to me is not some popular revulsion at capitalism, nor even at financial capitalism per se. What it sounds like is the beginning of the Italian Mani pulite (clean hands) campaign and the so-called 'fall of the First Republic'. That was supposed to make Italy a 'normal' country.

But what the Italians got was Berlusconi and his party: "Forza Italia, the first party in the world to be mounted as if it were a company.." as Perry Anderson put it in an article which concludes,

"Contemporary efforts to normalise Italy have sought to reshape the country either in the image of the United States, or of the Europe now moving towards it. The pressures behind this process are incomparably greater. But its results may not be quite what its proponents had in mind. For rather than lagging, could not Italy be leading the march towards a common future? After all, in the world of Enron and Elf, Mandelson and Strauss-Kahn, Hinduja and Gates, what could finally be more logical than Berlusconi? Perhaps, like others before them, the travellers to normality have arrived at the terminus without noticing it."

Iceland's Economy: Still Fokked

Lest we forget: Iceland's still in deep doo-doo. The always readable Weather Report tells us,

"The news is pretty depressing - hospitals are closing, potentially 3,500 companies going bankrupt by the end of this year, hundreds of people lined up at the unemployment offices at the beginning of the month, etc"

So the mood is grim - hence the range of T-shirts etc she's selling, featuring the slogan of 2008 in Iceland. No prizes for guessing it basically means 'Goddam Fucking Fuck'. It was a slogan on a notorious sign used in demonstrations in Iceland after the economic implosion . The cultural supplement of the main paper is quoted as saying of the products,

“Behind them is a complex mood. No political demand is at the forefront, no technical implementation of the catastrophe, just a rank indignation: How could I stand by and just let the insanity happen?”

So why not buy one? & hope we won't need an version in English....

P.S. The Weather Report is also carrying news of regular demonstrations - and even some thing that sounds to me to be close to a sullen, unfocused mini-riot...

Iceland: First Glimpses of Innovative Form of Bank Regulation

The routinely entertaining Weather Report has news of 2000 people (i.e. the equivalent of c 400,000 as a percentage of the British population) gathered for a demo on Monday, Iceland's national day, in conditions described as 'devastatingly cold, subzero temps and windy'.

"....near the end of the last speech someone climbed up the statue of [first settler] Ingólfur Arnarson and hung a picture of Davíð Oddsson [ex-Prime Minster, and current chair of the Central Bank - CM] over his head. ...... the last thing I heard before heading down the hill was “shall we go in and get him?”

And they did.

Apparently a couple hundred people stormed into the lobby of the Central Bank, shouting that they wanted Davíð out. They got past the first set of doors but beyond that was the Viking Squad in full regalia ... who kept their cool and calmly warned THE MOB that they’d use tear gas if they didn’t behave So THE MOB just basically sat down and started singing protest songs."

Then, in a radical break with the country's finest berserker traditions, both sides agreed to go home for dinner if the other side did.

The Weather Report is putting the record straight she says - her purpose is basically to debunk reports of 'a riot'. But it still sounds like a fun way to, ahem, 'bring public concerns to the attention of the financial community' to me.

Pop Star Says Something Sensible Shock

The Iceland Weather Report makes the Guardian, and uses splendid prose to describe the range of Icelandic opinion on the proposed IMF loan:

"Some try to placate the masses – and probably themselves – by claiming the loan is merely there as a credit line, a guarantee, and we may not even have to use any of it (hope springs eternal).

Others are wildly indignant about the perceived extortion by the British and Dutch IMF representatives and loudly proclaim they would rather revert back to living in turf houses and spending winters eating pickled whale blubber and chewing on Icelandic moss than take some dastardly IMF handout on those terms.

And then there are those who claim the IMF is the only route to take; that without the loan the Icelandic nation would slowly sink like a stone into the frigid waters of the North Atlantic. That group includes the Icelandic government."

Apparently interest rates in Iceland are now 18%. But no one wants their currency anyway.

The Weather Report also points to a really excellent FT piece from a couple of days ago which quotes Bjork, of all people, on the real meaning of that benighted nations situation:

“Young families are threatened with losing their houses and elderly people their pensions. This is catastrophic. There is also a lot of anger. The six biggest venture capitalists in Iceland are being booed in public places and on TV and radio shows; furious voices insist that they sell all their belongings and give the proceeds to the nation. Gigantic loans, it has been revealed, were taken out abroad by a few individuals and without the full knowledge of the Icelandic people. Now the nation seems to be responsible for having to pay them back.”

Now what I want to know is simply this: is there a Icelandic Left and what's their answer to this*? Because whatever it is I 'll take some of it and apply it liberally to the-much-less-frightening-but-still-scary British situation.

Incidentally, unlike in Britian, no one in Iceland - left or otherwise - seems to think it was about mangers running riot, free of shareholders constraints. Everyone seems to agree it was a power elite issue with the government actively aiding and abetting the financial buffoons (cf.C.Wright Mill or even, whisper it quietly, Marx), not a Burnhamite problem.

Update: there is a Iceland Left: the Left-Green Movement with a claimed c3000 members (1% of pop) and 15% of the vote. However, if they do have a distinctive policy response to their county's financial crisis their website isn't translating it into English for me....

Iceland: Where's the Lesson for Us?

A simple question: what is it, exactly, we're going to do as a nation now the idea that we can surf the 'Great Moderation' (RIP) as a provider of financial services has died the death. This seems to me to be a bigger question that simply who owns the economy: if we take more of it into public, social or mutual ownership what is it we're going to do with it?

But the financial sector is only -only! - 20% of the UK economy. It was a fair bit more in Iceland.
Haukur Már Helgason teaches philosophy at the Iceland Academy of the Arts. He is a founding member of the experimental literary band Nýhil*. He tells it like it is there in the LRB:

"Today, personal security is the only growing sector of the economy. Politicians and stock exchange ‘entrepreneurs’ are surrounded by bodyguards. After several years of private ownership and staggering growth, the country’s three major banks collapsed in the space of a week, unable to pay their debts. ... This is now the position of a neoliberalised country that until April considered itself one of the most affluent on earth.

The average Icelander owes euro 30,000. ... The country is caught in a web of international debt. Because it has its own currency, there isn’t much difference between our situation and so-called ‘truck systems’, whereby a labourer buys goods from the company he works for. His work and his consumption are noted in a single book of debits and credits, and the worker sees little or no ‘real’ money for his work. Young people, who took out big loans to pay for overpriced apartments in an inflated market, now find themselves stuck....the flats are impossible to sell, and since the loans are tied to the retail price index, in times of inflation the debt grows.

The result of all this is a very stressed society in which everyone is always running to stand still because they’ve never done enough to pay the bills at the end of the month; and if they’re late with payments, staggering default interest will sooner or later hit them.

There is such a thing as collective guilt, and I am guilty, by association with this tribe, of having participated in casino-capitalism. ....We had the chance to be decent people,and we blew it."

So what is Britain going to do now? Because relying on the banks sorting themselves out and re-establishing the City of London as the greatest casino on the globe seems like a really, really bad idea to me.

* Does this make him a Nýhilist?

The Divide between the Blogosphere & the Staffroom.

As I write Stock Markets all over the world are engaged in yet another round of freefall. This is being attributed to the fact that everyone knows that the US banking system is still broken (and some people are even calling for it be be rescued by, er, China), and the fact that as the credit crunch works itself through into the real economy firms will go bust and banks will start having to pay out on all the insolvency insurance deals they have sold these firms. The reception of Brown's recovery plan is still positive amongst the commentariat and, it seems, the Market itself - but everyone knows Britain is not an island in any kind of financial sense. Or if it is it is a kind of giant offshore deregulated haven. So the recession is coming, whether or not the Brown plan 'works' in the sense of avoiding major bank defaults.

The Left blogosphere is going bonkers with excitement at all this. & I do mean all sections of the Left. So we have my favourite Kautskyite gloating at the death of neoliberal free market ideology; we have a hugely fractious debate on Socialist Unity over whether the Brown plan is straightforward corporate welfare or a necessary staving off of an Icelandic situation; we even have dependable voices from the New Labour stable (who I don't regard as part of the Left under any possible definition) telling us the world has changed. What they all seem excited about, in their different ways, is that Left politics can once more 'hold its head up' in public debate and isn't simply crushed by the historic shift against us of 1989. The overwhelming feeling is "people will listen to us now, we always said this sort of thing was intrinsic to capitalism, and especially neo-liberalism". Some on the Red Pepper discussion boards are - albeit it very hesitantly – beginning to clear their throats and talk once more about the problems of the transition to socialism.

But what of ordinary people? I say they are, in the main, still experiencing all this as a spectator sport. Certainly that was the mood last night amongst a totally unrepresentative group of teachers, school governors and teaching support staff I ran into at a school reception. (Yeah, I know – I live a really rock'n'roll life, don't I?). People knew what was going on was important- but didn't understand the detail or comprehend the sheer scale of the problem implied by Brown betting a third of the national income on his recovery plan. No one was moving house, no one ran their own construction business and no one was being made redundant - so it was all a problem which felt somehow 'over there somewhere' and deeply mysterious.

So I do wonder how far this Left triumphalism is justified, as yet. I wonder how far the general population is actually, in reality, in an anti-capitalist mood. I regard this as an open question as most people won't feel the effects of mass unemployment and foreclosures for some months. There is anger - but it could be Brown corrals the anger into supporting him, on the grounds he seems so much more decisive than the Americans. Certainly Osborne and Cameron seem rather pathetic when interviewed. So I'd bet on a New Labour bounce in the polls – at least in the short term. I don't necessarily believe people, as yet, are willing to turn to the Left for answers. We still seem like a bunch of overheated losers with totalitarian instincts to the general populution I fear.

But over the coming 2 years there is much hay we can make.

Afterthought: If we're going to go to war with those despicable financial terrorists in Iceland can we please start by seizing Upton Park and holding a fire sale of Craig Bellamy & Co?

Any Bjork in a Storm

"The economy of Iceland is small but well-developed (most developed in the world according to United Nations Human Development Index), with a gross domestic product estimated at US $ 12.172 billion (132nd of 227 countries) in 2005 (and a per capita GDP of $40,277, which is among the world's highest).[1]

In 1990s, Iceland commenced extensive free market reforms and growth has been strong. Iceland has a free market capitalist economy with high levels of free trade. Government consumption is less than in other Nordic countries. Social expenditure is below most of western Europe.

Today, Iceland has some of the world's highest levels of economic freedoms[2] as well as civil freedoms." Wikipedia October 7 2008

Let's all watch for the updates, shall we? So that's what happens to a small country whose economy is totally overtaken by the wizards of high finance. I'm afraid it's back to those cod boats for Magnus Magnussen's folk.

& what now for Britain, as the august Royal Bank of Scotland loses 35+% of its' value in a morning? That's almost as bad as the Darien scheme.

So is it time for a 'structural adjustment', as the view from Oxford's dreaming spires would suggest? Fine - that chimes with much Left-Liberal thinking about the disproportionate influence of the City on our economy. But a structural adjustment to what, precisely? The metal bashing jobs have gone to Asia and aren't coming back..