Iceland’s Revolution Response
This is a long Overdue Response to “The Reykjavík Grapevine” and all those who have taken exception to my August blog: “Iceland’s On-going Revolution”.
This article is written at the instigation of Bella Caledonia, which received 27,000 hits on my original article (‘Why Iceland Should be in the News But Is Not’). As it made its way around the world, many commented on the factual mistakes that I translated from an Italian radio text. Bella understood that the gist of the article was more important than the factual details, and encouraged me to respond to my critics, once and for all.Let me say that in order to keep up with my blog at www.otherjones, which has been neglected at a time when so much is going on, I will not respond to comments on these comments.
The Grapevine’s ‘Deconstruction’ was written by Anna Anderson:
Last night, ‘Shock Doctrine’ author Naomi Klein tweeted: “#Iceland is proving that it is possible to resist the Shock Doctrine, and refuse to pay for the bankers’ crisis” with a link to an article called, “Iceland’s On-going Revolution,” by Deena Stryker.
“This article is full of factual errors, so we tweeted back: “@NaomiAKlein We are fans of yours, but we are sad to say that your tweet and the article it cites are both dead wrong. #Iceland”
“She replied: “@rvkgrapevine tell me and i’ll correct”.
“So here it is, a deconstruction of that error-ridden article, ‘Iceland’s On-going Revolution,’ which is unfortunately making rounds in the Twitter-sphere.
“In the first paragraph, the article states: ‘Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.’
“There are two errors there. One is obvious. Namely, Iceland is not a member of the European Union. The other one is perhaps less obvious, but it is nonetheless an important point. That is, Iceland did not go bankrupt. This factual error was heavily criticised in 2008 when Iceland’s banks collapsed and news spread that Iceland, the country, had gone bankrupt. This is as wrong today as it was then.”
Okay, so an Italian journalist thought that Iceland was a member of the EU and I did not question that. (It is currently applying for membership.) Instead of being thanked by Icelanders for getting this story out there, I am accused of a major ‘error’ that many more qualified than I have made. For example, inside the dust cover of “Why iceland?” by Asgeir Jonsson, Head of Research and Chief Economist of thee Kaupthing Bank, one finds: ‘…Asgeir Jonsson is perfectly suited to examine Iceland’s collapse in painstaking detail.’
On page 152-153, Asgeir writes: ….’creditors would take control of the banks, which nearly meant taking control of the whole country……bank failures would mean the unraveling of the payment and clearing system, which would bring the entire economy to a halt….Collapsing banks would not only send the country reeling back into the financial Stone Age, it would initiate a government debt crisis.’
Yet AA writes: “Then there’s this: ‘The three main Icelandic banks, Landbanki, Kapthing and Glitnir, went belly up and were nationalized, while the Kroner lost 85% of its value with respect to the Euro. At the end of the year Iceland declared bankruptcy.’
Well, on October 9th, the New York times filed a story under the headline: “Iceland is all but officially bankrupt.”
And according to Wikipedia: “Commenting on the need for emergency measures, Prime Minister Geir Haarde said on 6 October, ‘There [was] a very real danger … that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could have been national bankruptcy.’ He also stated that the actions taken by the government had ensured that the Icelandic state would not actually go bankrupt.”
Indeed: “In late September 2008, it was announced that the Glitnir bank would be nationalized. The following week, control of Landsbanki and Glitnir was handed over to receivers appointed by the Financial Supervisory Authority (FME). Soon after that, the same organization placed Iceland’s largest bank, Kaupthing, into receivership as well.”
As these quotes indicate, for all intents and purposes Iceland did go bankrupt, if one considers that a nation’s economy rests on its banks and that these were either nationalized or put into receivership.
Then there’s this statement, the one that has caused the greatest turmoil among knowledgeable readers: “In 2003 Iceland’s debt was equal to 200 times its GNP, but in 2007, it was 900 percent. The 2008 world financial crisis was the coup de grace.”
Anna Anderson states: “These numbers are wildly inaccurate (and not to be too pedantic here, but sticking to a multiplier or percent would be helpful when making such a comparison).”
I agree that it would be more helpful to stick to a multiplier or percent, but I have noticed that financial information is almost never presented that way, to prevent readers from evaluating the facts being presented. There was no way I could substitute different numbers for those used in the original Italian article.
AA: “To set this straight, Iceland’s debt (as in The Central Bank) was equal to 57% of the GDP in 2003 and fell to 43% of the GDP in 2007, according to World Bank statistics. In 2009, that percentage reached 104%.”
My efforts to verify if these percentages are ‘correct’, yielded only this from Wikipedia: “The Icelandic government had a relatively healthy balance, with sovereign debt of 28% of GDP and a budget surplus of 6% of GDP (2007). Debt is now 90% of GDP and Iceland has a budget deficit.”
The Wiki article is not dated so we don’t know what “now’ means. Its link to the CIA webpage yielded this result for public debt:
126.3% of GDP (2010 est.)
country comparison to the world:
114.9% of GDP (2009 est.)
Is this polemic really meaningful?
AA: “Now, if by Iceland the author meant Iceland’s banks, then it’s true that the banks’ debt was pretty big—astronomical really—and by 2007, Iceland’s banks did in fact reach 9 times the GDP, though that’s GDP not GNP.”
When discussing anything as extraordinary as the near failure of an entire economy, does the difference between GNP and GDP really matter? According to Wikipedia:
‘Gross National Product (GNP) is often contrasted with Gross Domestic Product (GDP). While GNP measures the output generated by a country’s enterprises (whether physically located domestically or abroad) GDP measures the total output produced within a country’s borders – whether produced by that country’s own firms or not.
When a country’s capital or labour resources are employed outside its borders, or when a foreign firm is operating in its territory, GDP and GNP can produce different measures of total output. In 2009 for instance, the United States estimated its GDP at $14.119 trillion, and its GNP at $14.265 trillion.
AA: “Alas, again the statement, ‘At the end of the year Iceland declared bankruptcy’ is wrong. And the Icelandic krónur lost more like 50% of its value compared to the Euro any way you look at it.’
How should one look at it?
AA:“Moving on to the next paragraph: ‘Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain.’”
AA: “It’s true; we had a referendum to elect a Constitutional Assembly—a group of twenty-five people tasked with writing a new Constitution. But there were 500 plus candidates to choose from, and the results were nullified because proper election procedures weren’t followed. Rather than hold another referendum, those individuals were ‘appointed’ to a Constitutional Committee. They have now submitted a ‘proposal’ for draft of our new Constitution, but we by no means have a new Constitution yet! This is definitely jumping the gun. Our old one still reigns supreme.”
MEA CULPA, MEA MAXIMA CULPA. Iceland’s new constitution has not yet been adopted. That is not altogether surprising: I have read the entire document, and found it to be way ahead of anything contemporary rulers would be likely to approve. What is important, however, is that it was drafted, although perhaps because the drafters were appointed rather than elected, allowances are made for future perhaps undemocratic laws, as in:
Right of assembly
All shall be assured of the right to assemble without special permission, such as in meetings or to protest. This right shall not be abridged except by law and necessity in a democratic society.”
It would be helpful to those of us who are trying to keep Iceland in the wider public eye to receive up-dates in English on what is going on. Why has the Constitution not been adopted? And how do the Icelanders 99% feel about the austerity measures imposed by the IMF? Are reports of good growth neglecting them?
AA: “… ‘Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The FMI and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.’
“Okay, come on now. It’s the IMF, not FMI. Furthermore, Geir Haarde is from the right-wing Independence Party, which had a coalition with the Social Democrats.”
Excuse me, but this is sheer nitpicking, unless Anna Anderson carries four languages in her head and never fails to translate an acronym. And failure to specify the political affiliation of the head of a coalition government (which can be inferred) might be counted against a journalism student, but has no place in a discussion among writers.
AA: “Back to the Constitution: ‘This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.’
“Apparently the author was confused about whether or not we had a new Constitution when she started writing and then did some more research toward the end to realize that yes, it is still a draft with a number of hoops to go through.”
Why ‘Back to the Constitution’? In my article, the entire issue of the new constitution was treated in one paragraph. The pre-ceding paragraph is pure, gratuitous speculation. What can be the reason for this witch hunt?
AA: “The idea that the Constitution was ‘crowd-sourced’, as the international media has been keen on reporting, is at best half true. But accepting suggestions via Facebook and an Internet submission form is hardly the same as the Constitution being ‘written on the internet’. It sounds cool though.”
How, pray tell, would AA imagine a document being ‘written on the internet’ other than via suggestions on Facebook? I’m not sure a program exists that would allow 320 thousand people to edit a single document!
AA: “While nearly every paragraph in this article is riddled with factual errors, the concluding message is also misleading: ‘Today, that country is recovering from its financial collapse in ways just the opposite of those generally considered unavoidable, as confirmed yesterday by the new head of the IMF, Christine Lagarde to Fareed Zakaria. The people of Greece have been told that the privatization of their public sector is the only solution. And those of Italy, Spain and Portugal are facing the same threat.
They should look to Iceland. Refusing to bow to foreign interests, that small country stated loud and clear that the people are sovereign.’
AA: “First of all, it’s naive to think that Iceland was able to stand up to the IMF. In his article, ‘New York Times Reporting Misses the Mark on Iceland, Prints Neoliberal Line’ on www.truth-out.org, Sam Knight makes some good points: “Why Iceland is pursuing its welfare-for-the-elite policies is anyone’s guess, but with the IMF providing emergency currency support, it has had influence in diverting Icelandic resources back toward the financial sector.”
He adds: “If Iceland had refused to share the IMF’s worldview, it could have been denied funds necessary to implement capital controls and stop the Krona’s tailspin. Failure to adhere to the IMF’s demands could have also caused Iceland’s sovereign credit rating to drop significantly, which could have isolated Iceland from international capital markets (despite the fact that credit ratings agencies, in the wake of 2008, are in need of urgent reform).”
AA: “Whether or not influenced by the IMF, one might note that two of the three banks that Iceland ‘let fail’ because it couldn’t bail them out (they were nine times the country’s GDP), have been re-privatised and there is currently a debate about privatizing the third.”
Well, apparently the author of the Italian radio piece was led astray by his enthusiasm for what had happened. What can I say?
AA: “Not to mention, there’s the case of HS Orka, in which 98 percent of a publicly owned geothermal energy company was sold to Canadian company Magma Energy (now called ‘Alterra Power’), giving it access to geothermal energy in the Reyk-janesbær peninsula for 65 years with a renewal option for another 65. This erupted in controversy with Björk leading the crusade against Magma Energy. Alas, it was without success.
The case might as well feature in Naomi Klein’s book, ‘The Shock Doctrine’.
Furthermore, while Iceland may seem like a symbol of sticking it to the financial institutions that brought about the financial collapse, the people really haven’t escaped the burden. To quote respected political commentator Egill Helgason in an article that will print in The Grapevine on Friday: “According to an OECD report Iceland has put more money into its failed financial institutions than any other country except Ireland. So in this way Iceland is not a model—the people in Spain need not wave Icelandic flags.”
AA: “To the contrary of the message put forth ‘Iceland’s On-going Revolution,’ and the notion that Iceland was able to resist the shock doctrine, he says: ‘The political debate in Iceland has gotten horribly stale and repetitive. In some places Iceland is held up as being a model of how to survive an economic crisis and rebuild society. For most Icelanders this seems totally wrong. Some politicians, including our President, like to flaunt this view when they go abroad, but this is definitely not the feeling in Iceland.’
So, @NaomiAKlein have we crushed the hopes of millions? As a publication we strive to practice good journalism, though we have to say that a part of us is reluctant to correct these kinds of articles, as it is nice to see citizens of other nations, like Spain and Portugal, being inspired by our story. Hope has to come from somewhere.”
So, @Anna Anderson, to wrap up a long and perhaps superfluous polemic (I continue to believe the ‘gist’ is what counts), I’m happy that ‘Grapevine’ has published a valuable up-date on the situation, which I shall definitely make public, hoping it reaches as many people as my original article. But the best part of this piece, to my mind, is the last sentence: ‘Hope has to come from somewhere’. Surely, AA knows that since Iceland’s 2008 debacle (if I may be permitted to use that word…) the Icelandic spirit has spread worldwide. (I will refrain from counting the number of countries that are seeing mass protests, for fear of getting the count wrong and igniting another round of recriminations.) One thing is certain, the 99%ers, whether in Russia, the U.S. or Europe, owe Iceland big-time, and I suspect that its people welcome the fact that they are no longer alone.