A personal account of a national tragedy
I come from the land of Eyjafjallajökull. Let me say that again. Eyjafjallajökull, which means Island Mountain Glacier, is the volcano, or rather the location of the volcano, that disrupted air traffic for a few days in 2010. Flight passengers were stranded all over, cursing Mother Nature and Iceland. In the vicinity of the volcano, the ash cloud was so dense that days turned into nights and people stayed inside or fled the area. For a few days we were reminded of how vulnerable our modern lifestyle is and how dependent we have become on technology; we felt almost as claustrophobic on this island as we had felt, for another reason, two years earlier. Even the remotest places affect the rest of the world, and even the remotest places are affected by what happens elsewhere.
Since I was born, there have been 21 eruptions in Iceland. None of these eruptions have caused casualties or seriously disrupted life on the island; most have been of the kind that worldly Icelanders nowadays refer to as Tourist Eruptions, which tourists can watch from a safe distance. However, 230 years ago an enormous eruption that lasted for three years not only led to the death of every fifth Icelander, but also had serious repercussions for other countries, causing crop failure and famine as far away as Japan and Alaska. Some even say that it instigated the French Revolution. Up to 70 per cent of livestock in Iceland died due to poisonous gases and volcanic ash that settled on the fields. There were fewer than fifty thousand people left on the island, and the average life expectancy was only 29 years. So now we are how many? Three million? No, only a tenth of that. There are 320,000 people living on that windswept island which is a bit bigger than Tasmania.
So we are few and yet we speak our own language, Icelandic, which is derived from Old Norse, the language of the Vikings. Don’t worry, I’m not going to tell you the whole history of Iceland, just the things that may shed light on recent developments. Let’s start with a little bit about our ancestors. According to the Icelandic Sagas, which were written on cowhides in the thirteenth century and deal with the feuds of the founding fathers, the settlers preferred to leave Norway rather than submit to the authority of the Norwegian king. This was in the ninth and tenth century when Norway was being united into one state. Supposedly, the chieftains and wealthy landowners had to choose whether to submit to the new authorities, and pay taxes to them, or pull up roots and seek their fortunes in other lands. The Icelandic settlers decided to pull up roots. Since then, more than thirty generations have grown up believing that the founding fathers preferred to risk their lives rather than lose their freedom.
In Iceland, the settlers formed a community of independent landowners who were determined not to obey anyone. Despite their determination, or perhaps because of it, they lost their independence 300 years later and became a part of Norway. For almost 600 years, Iceland was colonised, first by Norway and later by Denmark. Since 1944 we have, supposedly, been an independent nation. However, a few years after we gained independence, the new government decided to join NATO and gave the US Navy access to Icelandic soil. To many Icelanders, who had fought for and looked forward to independence, this equalled treason, and led to the first riots in the new republic in 1949. The treaty brought about a loss of sovereignty, the protesters felt. A naval air station was built on a little heath close to Reykjavik and up to 5,700 soldiers were stationed there during the Cold War; it was formally closed in 2006.
The presence of the American Navy was politically and socially problematic for the Icelandic nation. Many novels depict how this sensitive issue split Icelandic families, especially when Icelandic women ended up in the arms of the charming, gum-chewing American soldiers. Many also resented the cultural influence of the base: generations in the south were brought up listening to American radio and later American television, which led the government to insist that these broadcasts be limited to the base to prevent cultural contamination, as it was sometimes called. However, there was no escaping this cultural influence as is probably evident to visitors in Iceland today. But we still consider ourselves a European nation and Iceland is presently in the process of applying for membership of the EU, which has also been controversial.
The Icelandic economy benefitted enormously from the presence of the American Navy. Although Iceland had not been greatly affected by the Second World War, the American government gave Iceland more aid proportionally through the Marshall Plan than any other nation in Europe – undeservedly, some historians claim. This, in addition to the business opportunities that the base provided, enabled the nation to take a giant leap from the poverty of the past into modernity.
Today, Iceland usually ranks near the top in terms of quality of life, overall life expectancy is now nearly 82 years and infant death is more or less unknown.
The economy is more diverse than it used to be, but fishing is still the mainstay. Although we have managed, to a degree at least, to regulate the industry in an effort to make it sustainable, it is not the most stable line of business you can find. There are years when the catch fails for one reason or another; this led to several recessions in the twentieth century, the most serious one being when the herring stocks virtually disappeared, almost overnight. As a result, a number of Icelanders emigrated to Australia and many of them are still there. The constant fluctuations of our currency, the krona, naturally affect this export industry, but luckily it does best when the krona is weak, as it has been for the past four years.
The foundation for the thriving fishing industry lies in the so-called Cod Wars, which eventually gave Icelanders total control of their fishing grounds within a 200-mile radius. For a few years Icelanders exploited their new resource to the fullest, but, as it turned out, with little foresight. In the early 80s, scientists discovered that the fish stocks had shrunk by half in three years due to overfishing. Something had to be done or the fishing industry would collapse with dire consequences for the Icelandic nation. The solution was to allocate fish quotas to vessel owners, on the basis of their prior fishing. This system turned out to have drastic consequences for most of the small fishing towns, because many of the quota owners sold off their quotas to bigger companies, got a high price for them and spent the money on long vacations in Spain. This pulled the rug out from under the villages; boats were sold from the smaller towns and many fish factories were closed. Furthermore, the system created a class of wealthy Icelanders and, many felt, for all the wrong reasons. These people were making money by selling off access to resources that weren’t even theirs: the fish in the sea. As it turned out, this system set the stage for the rise of a financial sector that would eventually reshape Iceland.
At the turn of the century, a right-wing government that adhered to the ideas of neoliberalism had come to power. It started deregulating the financial sector, much like what was done in the US. In 2001, the government announced that it planned to privatise its national banks. The three national banks were then sold one after the other in the next year or so; unfortunately they were sold to businessmen who had little or no experience in banking. At first, this lack of experience didn’t seem to effect the banks for they grew amazingly fast in the hands of the new owners. In 2008, the Icelandic banking system had a ‘balance sheet that was ten times the size of the country’s gross domestic product’.
For about five years, Icelanders experienced an unprecedented financial boom, as if they had unexpectedly landed in a genuine paradise. Even the weather was nice: we had our best summers in decades, which is not to be derided when you live near the Arctic Circle. The news was filled with the most incredible dealings of our newfound millionaires. They seemed so energetic and resourceful. All of a sudden we had an Icelander on the Forbes list of the world’s richest people. Our president travelled the world hailing the ingenuity of the Icelandic businessmen who were supposed to be more clever and daring than most due to their Viking ancestry:
‘The track record that Icelandic business leaders have established is . . . an interesting standpoint from which to examine the validity of traditional business teaching,’ President Grimsson boasted in 2005. He finished his speech with words he formulated with a little help from Hollywood movies: ‘You ain’t seen nothing yet.’
He was certainly right, but for all the wrong reasons.
Immigrants flocked to the country during the boom years as if Iceland were the Promised Land itself. There was endless work to be had: construction all over the country, and many jobs that were now beneath the wealthy and snobbish Icelanders. There was a wild party going on, and Icelanders were enjoying themselves at home and abroad. The streets were filled with brand new cars, sleek black jeeps and Audis and BMWs; purchasing power had risen sharply since 2002 and peaked in 2007. This was partly due to a strong krona, which allowed the general public to buy a lot of foreign goods and travel widely abroad. We also enjoyed news of the conquests of Icelandic businessmen, who were referred to with a term from our history, they were the business Vikings and they raided foreign lands just as their ancestors had raided monasteries long ago. They were buying property in countries that we had previously looked up to or been ruled by. You should have seen the smirk on Icelandic faces when they started buying property in the old empire, Denmark. We were getting back at the Danes for having maltreated and exploited us through the centuries. Their most famous hotel in Copenhagen was now in Icelandic hands and so was the most famous store. Finally this tiny nation, which was accustomed to being among the last in international tournaments, was among the winners. We were showing the world how to do business. This was the Icelandic business wonder and we were going to be not only the wealthiest but also the coolest nation on earth. You ain’t seen nothing yet, the man said.
The banks turned record profits every year and even I became a shareholder in one of them; through the strange workings of the financial world, an innocent investment in a fund turned into shares. And as a micro-shareholder I had the pleasure of attending the annual meeting of the biggest bank, Kaupthing, in February 2007. The meeting took place at the Reykjavik Theatre, which in hindsight seems to have been an appropriate location. I dressed up in a suit, which I rarely do, and sat down among the international businessmen. Everyone looked very successful. The meeting was conducted in English, the official language of the business vikings; they couldn’t be bothered with our old-fashioned language. And there I sat in my inexpensive suit among the expensive suits and listened to the chairman of the bank speak in broken English about the billions they had made. The word seemed to be in every other sentence. Billions. He had a hard time pronouncing some of the English words and I wondered if he understood them properly. One of those difficult words was adversity, which he used in his refutation of allegations made by The Danish Bank the previous year. The Danish Bank had criticised the Icelandic banks and predicted their collapse. The Icelandic bankers were furious at the Danes; actually they were furious at everyone who dared to criticise the Icelandic business wonder. Apparently, Kaupthing Bank had survived the vicious attack, an accomplishment that the chairman called ‘a stunning success’. Then he had the assembly agree to tremendous bonuses for the bank’s managers. No-one raised a hand against the motion, no-one ever did or they would be labelled negative, and I guess I will regret my cowardly conduct for the rest of my life. How nice it would have been to stand here and tell you that I was the only one in the crowd to vote against those extravagant bonuses. However, I did not vote for them either; I abstained. In an ironic blog that I wrote at the time, I called the meeting a play in five acts with a happy ending.
It turned out to have been only a play and the happy ending was fictitious. Soon after, dark clouds started welling on the horizon. The news from the US was alarming but the Icelandic bankers vehemently denied it would affect us. A liquidity crisis? No way. In the hope of turning fiction into fact, Icelandic politicians travelled the world and claimed we were in the best of all possible worlds. One minister stated that a specialist at Merrill Lynch, who had criticised the Icelandic government for doing nothing to prevent the banks from falling, needed re-education. She was minister of education at the time. The prime minister claimed that there was no reason to act, that we could all go on sleeping and spending; earlier this year he stood trial for having done nothing. Most people do not face charges for things they didn’t do. Some of the big doers themselves are still in business, if on a smaller scale.
Fiction gave in to hard facts in the early weeks of October 2008, shortly after Lehman Brothers filed for bankruptcy. October is often a nice month in Iceland, but that year it turned out to be the cruellest month. In its second week, all of the major banks collapsed.
6 October 2008 is probably the bleakest day in the modern history of this tiny nation. That day, Prime Minister Geir Haarde went on national television to explain the emergency the nation faced. Two of the three major banks had fallen that day and three days later the third and biggest one, the Titanic itself, sank to the bottom. I remember sitting in front of the television with my older son, who was 16 at the time, completely paralysed. The problems that our nation had to deal with seemed overwhelming. The whole world appeared to be barking at us or making fun of us. There didn’t seem to be a friend in sight. There was utter chaos and no-one knew what was happening. I remember sending my son to the nearest cash machine because we didn’t know if we would have access to payment systems in the days to come. ‘God bless Iceland,’ the prime minister said.
The following days were like a walk through purgatory. All day long we were bombarded with bad news, making it difficult to concentrate on daily tasks. The bankruptcies were painful enough, but the loss of the nation’s honour, which is a key term in the Icelandic sagas, was much harder to accept and affected all of us one way or another. Overnight the credibility of a whole nation seemed to have disappeared. And the bottom line: What would the Danes say?
Imagine if the entire banking system of Australia were to fail in one week. That’s more or less what happened in Iceland; most of the smaller banks eventually collapsed too, and even the Central Bank was technically bankrupt. Still, believe it or not, I was able to go to my bank the next morning and it was open for business as usual as if nothing had happened. The same employees greeted me, trying to put on a brave face. It was not their fault, they hadn’t known anything, they had trusted the management. My wife and I managed to sell our small shares in the largest bank a week before it collapsed for a price that was astonishingly high. As it turned out, the bankers had used tricks to keep the prices up.
People felt that our model society had been sabotaged by unscrupulous risk takers and incompetent politicians. We were sitting there on this rugged and windswept island in the middle of the soulless Atlantic Ocean, in an open boat, completely isolated, without friends, it seemed, for our arrogance had lost us many allies. Would the nation have to declare bankruptcy? people asked themselves. Would most of our businesses, which had borrowed extravagantly during the boom, collapse too? Would we have an airline tomorrow? Would the government be able to pay its employees?
The next months were painful, to say the least, which tells us how much of one’s personal wellbeing depends on national identity. A nation’s loss of prestige is, to an extent, the individual’s loss of prestige. Every day the media was filled with the most shocking revelations. Icelanders tried hard to make sense of all this, although some resorted to turning off the news in order to maintain their sanity. There were protests in front of the house of parliament for weeks, and in January 2009 they intensified. What ensued was later to be referred to as The Pots and Pans Revolution, because thousands of citizens brought kitchenware downtown to create a din in front of the parliament building. Protesters were calling for the resignation of ministers and for new elections to be held. No-one, by then, had stepped down or assumed responsibility for the disaster. The protests reached a climax on 20 January 2009, when the protesters tried to set fire to the house of parliament and the police used tear gas for the first time since 1949, when Icelanders had protested against Iceland’s becoming a founding member of NATO. The protests subsided for the most part with the resignation of the old right-wing government. A new left-wing coalition was formed after elections in late April 2009, and it implemented all kinds of rescue measures. It also started a process that included the judicial prosecution of the former Prime Minister and fired the heads of the Central Bank who had failed to act on the warning signs.
Four years have passed since the banks collapsed. During that time, the government has, in cooperation with the International Monetary Fund, worked hard on restructuring the Icelandic economy. It has introduced many measures to support both businesses and households that suffered considerably when the falling value of the krona caused foreign debt, which had extravagantly fuelled the economy during the boom years, to nearly double. New banks have been built on the ruins of the old ones and seem to be doing well – too well, some say. Taxes have been increased and funding has been cut to the welfare system, which amazingly enough seems to have made its institutions more efficient for the time being. The universities saw a sharp increase in enrolment the year after the crash, probably because unemployment soared from 1 per cent in 2007 to 9.3 per cent in February 2010. It now stands at 5.2 per cent, which is high by our standards. Many Icelandic companies have gone under, but the government, in cooperation with the new banks, has tried to save the most important ones. The export industries have thrived, while import has decreased, leaving us older cars in the streets and, more importantly, a healthy balance of trade.
The government’s measures seem to have paid off: the prime minister informed us earlier this year that Iceland was among the OECD countries with the highest economic growth. Polls show that Icelanders are feeling more optimistic. Consumer spending is up, people are travelling abroad again and the real estate market is reviving. However, the construction industry is still more or less frozen with the result that a number of craftsmen and architects have emigrated, mostly to Norway. But people have not fled from the island in great numbers, not even the migrant workers.
There has been, of course, a lot of reckoning, but still none of the major suspects have been drawn to court, which angers Icelanders. The government appointed a special prosecutor to investigate the crash and he has interrogated a lot of the bankers, although very few charges have been laid so far. Some of the tycoons still drive around Reykjavik in their black Range Rover jeeps, which are now called Game Over jeeps. The investigation commission, appointed by the parliament shortly after the Crash, found fault with almost every institution responsible for financial matters: the cabinet, the Central Bank, the laws and regulations, with the dealings of the banks and especially their owners who used the banks to fuel loans to other companies that they owned and thus seem to have robbed them from inside. People feel that someone should be punished other than the general public that once again will bear the brunt of failed private enterprises, through lower salaries, inflation, skyrocketing loans, unemployment and decreased purchasing power. But maybe it is only just that the middle class shoulder part of the bill for having ridden the wave of opportunism too.
Is there life after disaster? a presenter from the BBC recently asked. Certainly the aftershocks of the Crash are still felt in the daily lives of Icelanders. It has affected the mental and physical health of many. There are still heated debates about almost everything.
The constant bickering is invigorating and taxing at once. Invigorating because it creates fertile ground for new ideas, new ways of looking at ourselves, possibly a new beginning. Taxing because it has shaken the very foundations of our society and rendered everyone frustrated and suspicious of their neighbours. Anyone who drives by in an expensive car is a potential thief. Even the traditional Icelandic Yule Lads appear to have been contaminated by the apocalyptic ‘fall’ of the Icelandic nation. Meat Hook, Sausage Sweeper, and the other eleven beggars and thieves now look like perfect reflections of Icelandic opportunists, a painful depiction of the insular identity that we thought we had left behind.
In fact, one feels a bit like Young Goodman Brown in Nathaniel Hawthorne’s famous short story. One night he leaves Faith, his young wife, on the doorstep and embarks on a trip into the dark forest where he finds the most pious people of the village participating in ill-advised worship. Was it just a bad dream? We don’t know, the narrator tells us, but Young Goodman Brown becomes ‘a stern, a sad, a darkly meditative, a distrustful, if not a desperate man’ and his ‘dying hour was gloom’.
Perhaps one could say that now more than ever we need the fellowship of the Scriptures, rather than the indifference of individualism; that we need cooperation instead of competition, sharing instead of hoarding, trust instead of suspicion. We may have a way to go before we reach these goals, but at least we have learned a lesson, if a somewhat hard-earned one: We should never have left young Faith on the doorstep and embarked on a hazardous trip into the ash cloud of greed.