Book review: Meltdown Iceland

Published on Saturday 3 October 2009 15:27

Meltdown Iceland By Roger Boyes Bloomsbury, 244pp, £12.99 Review by DAVID ROBINSON

IF YOU go to Reykjavik right now, you may be hard pushed to find any sign of what Icelanders call the Kreppa. A few bare shopfronts, idle cranes and empty luxury harbourfront apartments might hint at the country's financial collapse, but there are no more than you'd find in Edinburgh. A handful of protestors hanging up posters opposite the parliament. Columns and editorials in newspapers still, a year on, burning with rage and resentment. And that's about it – till you get back to Britain and find out that the airport foreign exchange desk that sold you Icelandic krona on the way there now no longer wants to buy them back.

That's what national bankruptcy looks like close up. You'd hardly notice it. The tourists will come again in the spring. Cod will still fill the Icelanders' trawler nets, glacier meltwater will still power the turbines for the aluminium smelters, piped geothermal heating from the friction between the tectonic plates beneath the earth's thin crust will still keep city roads almost ice-free in winter. None of that will change. Bankrupt countries aren't like bankrupt companies. Life goes on.

Yet imagine if the Kreppa had happened here. Imagine a Scotland in which not just one but two generations are forced into emigration in order to pay for the greed and incompetence of about 30 people in the boardrooms of our banks and major companies. Imagine our collective rage if one in six Scots had their savings entirely wiped out. If the bungling of our economic lords and masters since the millennium were to saddle us with a per capita share of the national debt worth nearly 300,000. If a family of four needed to pay 1 million to help our proud, independent nation balance its books.

Because Iceland (population 300,000) is so small, it makes an ideal case study in any attempt to understand the consequences of the global economic meltdown. In a British or American context, the sums involved – the US, for example, has put aside $12.7 trillion in guarantees to its financial sector – are too vast to comprehend. A small island state with half the population of Glasgow is altogether easier to take in: on this scale, you can see not only how the economy was affected but also the Kreppa's roots in individual greed, rivalries, and power plays.

The story of booms that turn into busts is so commonplace that the stages are easy to recognise. In Iceland's case, the denationalisation of the banks in the 1990s gave Icelanders money to play with; asset prices started to rise, the housing market began to take off. As credit flooded into the economy, the New Viking entrepreneurs buying up big stakes in half of Britain's undervalued high street chains (Moss Bros, House of Fraser, Karen Miller, Whistles) seemed the ones to emulate. At that point – somewhere between 2003 and 2006, three years in which the average Icelander became three times richer – mania set in. Iceland's entrepreneurs bought businesses at unrealistic prices, scrabbling to get on board the already departed gravy train.

By this stage, it was 2007. Economists of all hues were flying into Iceland delivering warnings about the unsustainability of growth. They were all ignored by an unquestioning media, laughed at by the oligarchic entrepreneurs. At the central bank, former prime minister David Oddsson, a firm believer in the free market's ability to regulate itself, hadn't put in the kind of safeguards he ought to have. In the euphoria of the booming market, he boasted that the rules that applied to other markets just didn't apply to Iceland. In his country, he told investors, hard-working businessmen – the so-called New Vikings – freed from bureaucracy, were able to make speedy decisions about the future, so there could be no possibility of the kind of crisis that overtook Asian economies in 1997. "Iceland is not Thailand," complacent central bankers assured the doubters.

It took a full year – until 6 October 2008 – before prime minister Geir Haarde came on the television to announce that the Kreppa was about to hit Iceland. The painful inquests on what had gone wrong began.

Boyes, an award-winning foreign correspondent who has been reporting on Icelandic affairs for the past three decades, gives an admirably succinct account of the Kreppa's causes and effects. He shows the complex interweaving and rivalries within and between its nascent oligarchies, invariably with a telling detail to illuminate each stage of the descent into economic chaos.

Take last year's Hogmanay celebrations. Icelanders, he points out, set off more fireworks per person than anywhere else in the world, yet a year ago a special loan had to be negotiated with the Chinese fireworks manufacturer. When the Chinese freighter moved in to Reykjavik harbour, it berthed alongside a boat sent by Nissan to collect three hundred unsold cars.

From such vignettes, he tells a story that – unlike the accounts of Britain's own Kreppa – moves beyond economics to take in history and culture. This is important. Countries are about more than their economies alone. They're about ways of living. And part of the anger – as hot and furious as any volcanic eruption – that runs through ordinary Icelandic society is the realisation that they have sold their birthright – a fair, well-educated, reasonably equal society with a full range of well-funded social services – for a mess of pottage.

So yes, 30 people (many of them living in faraway London) may have vandalised their country's future. But tens of thousands of other Icelanders, by not questioning, by not actively insisting on their ideals, by being apathetic about politics, let them get away with it. They know that now, and know too that they need to regain control of their destiny, to deal with capitalism and shape their society on their own terms. When we look at how, in the 21st century, nation states should accommodate themselves to the blistering forces of globalisation, the world's oldest democracy, small as it is, has lessons for all of us.