FD: All you have to do is register online to read this and all the others published in The New Yorker (how does any publication make money these days).
ABSTRACT: LETTER FROM REYJKJAVÍK about the collapse of Iceland’s once-booming economy and the ensuing political turmoil in the country.
Writer describes a December, 2008, protest by a few hundred demonstrators in the center of Reykjavík. It was two months since the onset of the kreppa, or crisis—the financial disaster in which Iceland’s three main banks all collapsed, along with its currency and reputation for pluck. To see Iceland this winter was to be reminded of that queasy split second during which a spectacular injury decides on its accompanying level of pain. But if Iceland’s economic misery was largely still to come, its cultural and political trauma had been immediate. Iceland was having a revolutionary moment, if of a sometimes hesitant and self-mocking sort. The closest thing to a unifying motif for the revolt was the image, in various forms, of Davíd Oddsson, a former long-serving Prime Minister and fallen chairman of the board of governors of the Central Bank, and the man blamed more than any other for Iceland’s embarrassment. Tells how the protesters entered and occupied a corridor in the Central Bank before disbanding. There were no arrests. Describes a speech on October 6, 2008, by Geir Haarde, then Iceland’s Prime Minister, in which he announced a plan for an emergency bill that would allow the government to take control of the country’s banks. The address was a national punctuation mark. With this, Iceland formally brought to an end its giddy years of growth—an era now remembered for Range Rover traffic jams and private parties featuring Elton John. Gives a brief history of Iceland, which gained its independence in 1944. It remained a provincial, highly regulated place of cod and political cronyism for much of the twentieth century. When Iceland changed, it was guided by a libertarian professor of political science named Hannes Hólmsteinn Gissurarson. Mentions Gissurarson’s book “How Can Iceland Become the Richest Country in the World?,” which explored the idea that Iceland could build an offshore financial economy akin to that of the Channel Islands. Describes the privatization of banks and the other free-market changes that encouraged the boom in Iceland’s economy. The rise of the krona, the Icelandic currency, gave Icelanders new economic assurance. They purchased real estate overseas. Meanwhile, the country’s three main banks leveraged themselves internationally. Gives examples of Icelandic businessmen who prospered during the boom. Tells how the worldwide economic crisis of 2008 contributed to the collapse of the country’s banks and its currency. On February 1st, Jóhanna Sigurdardóttir became Prime Minister, heading a new government coalition. Writer interviews Hannes Gissurarson, who says, “We were too successful with the free-market philosophy.”
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