Greenhouses ripening bananas are one thing you don’t expect to see dotted about the freezing Icelandic plains where the glaciers sweep down to the volcanic plateau. The greenhouses, which shelter the hardy Icelandic ponies from the bitter east wind, are powered by geothermal heat, which bubbles away under the lava.
This is, after all, a volcanic island and, as a result, energy is practically free. The Icelanders figure it is cheaper to grow their own tropical fruit than import it. Evidence of this geological bounty is everywhere. All around the country, geysers blast steam from under the angry ground, heating homes and generating free electricity.
These extraordinary sights can be seen vividly from the air on a clear day. This morning’s plane from Reykjavik to London is full of bankers and their lawyers who are trying of get their money back.
They have no chance, because Iceland is bust. Like Ireland, some Icelanders went on a borrowing binge, buying assets everywhere. The assets have collapsed in value, the cash is gone and there is no money left to pay the debts.
That such a thing can happen in the country the UN judged as having the highest standard of living in the world last year presents a huge dilemma for modern economics. The conundrum is this: good countries can go bad. Let’s explore this idea a bit more and then come back home to see whether we can learn anything from the Icelanders.
Two years ago, Iceland was judged by Transparency International to be the least corrupt country in the world. The place is totally bilingual, and life expectancy is the best in Europe. The prime minister is the world’s only openly gay leader, and it has the oldest parliament on the planet. The country has no enemies. It doesn’t even have an army.
So how did a country with the highest level of educational achievement in Europe, free energy and a brilliant health service come to be regarded as a financial pariah? How come financial markets can judge a place like Iceland as delinquent and yet regard a place like Dubai – where women don’t have the vote and an immigrant underclass slaves away with no rights – as a safe haven? How do we explain this quandary?
Traditional economics suggests that countries that are corrupt, badly managed, illiterate and intolerant are the ones that collapse. In the morality tale that normally accompanies economics, we are told that countries that spend huge amounts on arms and not hospitals and schools are likely to fail.
In this black-and-white world, it is easy to label failed countries with weak currencies as crony capitalists, cowboys, kleptocracies and the like. These tags satisfy our desire to see the world through a safe moral prism, where clear-thinking economics alone is sufficient to lance the boil of bad governance.
In the past few years, much of the ideology that accompanied the idea of free markets, free capital movements and globalisation had as its political handmaiden the assumption that the less regulation there was, the better for society in general. Indeed, for ideologues the objective of free markets would be to deliver a peaceful, high-income society that looked and felt like Iceland. In the event, free capital movements and light regulation, far from securing a society like Iceland, practically destroyed it.
This dilemma presents the great ideological fault line of the next generation. We in Ireland cannot opt out of this discussion because this is what our next election (which will come, let us hope, sooner rather than later) will be about. Make no mistake about it: the Great Crash of 2009 will have serious political ramifications and, for Europeans at least, they will centre on the ‘Icelandic conundrum’.
The crux of the issue may be that financial markets do not move in a smooth, organised fashion. In fact, they behave in precisely the opposite manner, gushing and gurgling irrationally, rendering everything endemically unstable.
I’m thinking about this as the bankers beside me are trying to figure out away to ensnare the Icelandic population and make them pay for the greed of a few individuals who broke the country.
Some 20,000 feet below lie the Westman Islands, a great volcanic archipelago named after the Westmen – the Irish -who were taken here as slaves by the Vikings in the 10th century. This story explains why 30 per cent of Icelanders have Irish, not Norse genes. What’s more, considerably more Icelandic women than men have Irish genes, because the Vikings did what it said on the tin: they raped and pillaged, taking slave concubines home with them.
Strange as it seems, Icelandic would have been the language of Dublin 1,000 years ago. This is what Dublin would have sounded like. There are still echoes of it today. Just think of our street names. Anyone familiar with Stoney batter in Dublin, which was a Viking ghetto in medieval times, will recognise the name Oxmantown Road. The Oxmen were the Ostmen – the men from the East – who lived in Ostmenstown – the Viking ghetto. Ostmenstown later morphed into Oxmantown.
The Irish and the Icelanders are genetically and historically linked. But more crucially we are now linked prospectively, because we are both faced with the Icelandic conundrum. If free movement of capital can almost destroy a perfectly formed society that has achieved the highest standard of living in the world, then should capital be heavily regulated?
Maybe there is another connection to the Westman Islands that might allow us to see the dilemma more clearly. The islands are volcanic places. An Atlantic Vesuvius gurgles away beneath them. It erupted in 1973, leading to the mass evacuation of these descendants of Irish slaves, chaos, fear and ultimately resettlement.
An interesting way to look at financial markets is that they behave like volcanoes. The markets, like the earth’s inner molten core, are a cauldron bubbling away under the surface, full of pressures, strains and tensions.
Like volcanic activity, we can monitor this, but can never predict where or when it will explode, dragging banks, currencies and ultimately countries with it. Nor can we predict the ferocity of the explosions, the tsunamis triggered by them or the devastation or scale of the clean-up operation.
The crucial difference is that we can control the markets in away that we can’t control the earth’s lithosphere. Maybe, if we want to avoid the Icelandic conundrum, where very good countries go bad, all we have to do is control the irrationality of the markets by heavy regulation.
One thing which is clear, as I lookup the aisle to first class on this plane, is that the future of Ireland and Iceland should not be left to the snake-oil salesmen in Prada, who are nothing more than the well dressed foot soldiers of a tattered ideology.
David: What interesting conversations did you have with Icelandic economists? The Sunday Times has a down-beat review of Ireland’s economic plight that has influenced public opinion in UK as I was told about it by a friend in Scotland. http://business.timesonline.co.uk/tol/business/economics/article5980940.ece It includes the following comment: “Simon Johnson, the former chief economist of the IMF, points out that debt market investors now rank Ireland as the most troubled economy in Europe. He is urging the world’s leaders, who meet at the G20 summit in London this week, to come up with “a plan of action for Ireland. We need it and… Read more »
Hi David, Yes, the wider implications of the Icelandic ‘meltdown’ are food for thought. > If free movement of capital can almost destroy a perfectly formed society that has achieved the highest standard of living in the world, then should capital be heavily regulated? Well lets go back to basics. If markets are completely unregulated, we end up with a gun-toting society, just like the wild west and in fact worse. If we have no laws it reduces to pure barbarism, that is the nature of the beast, the human. That’s capitalism in its extreme 100% form. Soceities for many… Read more »
David,
Spotted this interesting Article on the web. There is oppurtunity in Iceland right now
http://www.siliconvalleywatcher.com/mt/archives/2009/03/could_troubled.php
Hi wills, wills> My post is getting at the fact that the worldwide credit crunch origins lie within the credit production system all global economies use,.. the loan transaction / banking practice of manufactoring debt method,. and i am asserting that this system is the gateway to the great ponzi credit bubble swindle,… and for some bizarre reason most people seem think ah sure this is all we have and sure we have to make and do and if you clear out management we will be fine, or, if we clear debts into skip all will be fine, and i… Read more »
http://www.contrahour.com/contrahour/2009/03/martin-armstrong-is-it-time-to-turn-out-the-lights.html
You know, what people need to ask themselves is exactly what kind of a democracy they live in when one day you think you’re rich and liberal and all the nice things that came with being Icelandic over a year ago. The majority of people there – ordinary people – thought they were living their life reasonably sensibly. Now, someone has reached into their pockets, took what they thought was theirs and said – tanks…(like that insurance fraud ad). Icelandlic sovereignty really is now just a name. (and by the way, same goes for the rest of indebted nations around… Read more »
Excellent essay, as in thinking in print, playing with ideas, analogies, connections between perceptions, beliefs, concepts, structures of thought, systems, the natural and the human. This essay can be read several times, considered at leisure and appreciated repeatedly for the thought it provokes. Now, consider that money is a utility, like water, like electricity, like public transport, like waste disposal, like education. But then I can hear you already suffering under the effects of privatisation of these public services. Problem one. We have suffered the Reagan/Thatcher/neo-con domination that public is bad, private is good. Flip this, public is good and… Read more »
Financial institiutions as well as the Government pay 6 figure salaries to Economists and Accountants in return for accurate forecasts and sound advice.Seeeing as these so called professionals have screwed up-how come they get to keep their well padded jobs?.It isn’t just chairmen and CEOS’ who shoud bite the bullet.Is any politician in Ireland in favour of ditching the Euro?.FG and Labour are just as inept as FF.
banger – that was well worth reading . It seems that martin armstrong is proposing is to allow the euro to free float for each country and allow the international market decide the price of each country’s euro printed .This can only mean that the Irish Euro as denominated with the letter ‘T’ – is in tatters no matter what happens .
Malcolm Mc Clure – I enjoy your post .I am reverting to what we wrote yesterday and your comments above today.My point is to build up a new law that we can call our own and that we all can have confidence in and have trust in .If that can be successful good business will follow and Logic is restored once more .Most points on the site refer to failure of current regulations etc and I agree .I believe history repeats itself and has something to offer to feed us on the long journey back to good times again.My proposals… Read more »
David, what is your source for this statement?
“What’s more, considerably more Icelandic women than men have Irish genes, because the Vikings did what it said on the tin: they raped and pillaged, taking slave concubines home with them.”
Surely, even if Irish women but not men were brought back to Iceland a thousand years ago, those women had male and female offspring in equal numbers? So how can Irish concubines explain the genetic disparity that you write about?
I am sure you would not invent a statistic to suit your narrative, so I would like to understand its basis.
Given the fact that they have 30% Irish genes, are the women living on the Westman islands good looking…?
michaelg – it’s a simple answer. 50% of the women in Iceland have Irish genes and 25% of the men have Irish Genes .When a man has a son he transfers his male gene to his son and when a woman has a daughter she transfers her female genes to her daughter – this is how nature works.
IMO – I have been in Westmann many times and in the summer the islands quadrouple in population because of summer festivals and camping etc .It’s time to set up a GAA branch there any takers?
David, “the snake-oil salesmen in Prada, who are nothing more than the well dressed foot soldiers of a tattered ideology” thats quite a statement, bravo. Slightly OT, but possibly of interest in the context of controlling the markets: I was lucky enough to speak with someone (senior) from a UK based multi-national bank the other day. Their investment in technology for automated trading was for me astonishing. Latencies in excess of 500µs are for them a problem. To put that in perspective these computers (well, server farms in fact) are making a trading decision in 1/1000th of the time it… Read more »
“In the past few years, much of the ideology that accompanied the idea of free markets, free capital movements and globalisation had as its political handmaiden the assumption that the less regulation there was, the better for society in general. Indeed, for ideologues the objective of free markets would be to deliver a peaceful, high-income society that looked and felt like Iceland. In the event, free capital movements and light regulation, far from securing a society like Iceland, practically destroyed it. This dilemma presents the great ideological fault line of the next generation. We in Ireland cannot opt out of… Read more »
Its an interesting article David but I would caution against heavy regulation… There is a clamour for more and better regulators. Yes it would be great to have them; it would be also be great to have more and better Christains. The problem is regulators are human…. Moreover they are not all seeing, all powerful people who only do good…They are essentially dull, predictable but hopefully reasonably intelligent people. In practise, their ranks are full of people who dont fully understand their industry; but who can apply rules, and use words like compliance, best practises etc. If a good green/red… Read more »
malcolm mc clure -I agree with what you say .However I disagree that you should imply ignoring brehon laws completely .The spirit of the laws and our culture are entwined from centuries and that cannot change and nobody can make that happen for any reason .Just like genes there is a history written into the ancient behaviour of what we are .The Magna Carta and Brehon are twined at the hip insofar that the power of the people decide not the elected few at the top as in the Lisbon treaty proposals.If we want a great state we should build… Read more »
Max you rock:
http://www.youtube.com/watch?v=NzvMh73WflQ&feature=player_embedded
The future of the laptop:
http://www.travellingdesk.com/
:-)
@David McWilliams; I found the article a good read, thumping good assertions and my thoughts now follow….., “financial markets………, gushing and gurgling irrationally” Nope,.. i suggest any possible suggestions along these lines, and i think you are playing devils advocate here david on this one, are fatuous to the bone of a one pound sirloin steak. These gurglings and gushings are forces under the tight control of brilliantly informed clever clogs banking magnats. I would contend the elemental laws of global finance are securely buttoned under the tool boxes of the gilded ruling classes under lock and key bound up… Read more »
wills, you explained all, there. Thank you.
Will you, please, expand on your final paragraph? I found it a little obtuse.
Break the last paragraph down for me. wills, give me the “ladybird” version – even though it wil, take you some time (sorry).
Please help me to understand?
Thanks.
Neary was just weak and gave continuity to a regime that had already undermined the Irish Economy.Neary was only appointed in 2006,so at that stage the System was already rotten to the core.Liam o Reilly was the first Regulator appointed in 2003 when that office was set up after the Government had commissioned the mcDowell report and went onn to create the offices of Financial Regulator and also Financial Ombudsman.(detached from the Central Bank). 3 seperate entities.Remember after we joined the Euro the Central Bank lost control of Interest Rates and thats when the Vultures really upped their game.The architects… Read more »
Malcolm Mc Clure – I accept the serious difficulties but they should not stop us ‘to make a change in our existing body of laws’.We need to adapt someway in fact anyway otherwise we are forced to submit to another alien law system that is not our own doing .We can make choices that will allow the change to be easier .It’s ‘the spirit of the law’ we want to hold on to .It is a choice we have only NOW. We adapted before .When the Vikings arrived they had wepons that gave them the advantage to win in war… Read more »
Mischo – there is no mention of the Faeries in Westmann .They also travelled from Ireland .There presence is steeped in Icelandic folklore .
Neither is there mention of the troyan work carried out in Reykjavik by The Irish Sisters of Mercy over the years in education and hospital care or the Irish Priests who held parish appointments there .
Another place in Ireland with an Icelandic name is Helvick near Waterford and it means ‘Sunny Bay ‘.
Folks, I’ve just been reminded by Primetime that the biggest Bank robbery in Irish history, the Northern Bank €25 million, is actually LESS that Mickey Fingers’ pension. Interesting, that.
Look at how those boyos were pursued.
Look at how fingers is pursued for just €1 million.
Interesting, that.
So FF has decided to host it’s website in the US and not Ireland,ah well its only costing 12 grand a year to do so…..So much for the smart Economy waffle…….(.Vigilience.)
David MCWilliams, There’s something very biblical about your picture. Who survives: the good man or the bad man? How come Job got the toughest time of all? I’ve been holding on to what I think is your central question this time: “Maybe, if we want to avoid the Icelandic conundrum, where very good countries go bad, all we have to do is control the irrationality of the markets by heavy regulation.” Maybe. Certainly we have experience of what’s happened under a non-existent touch regime. Not simply no regulation, but active encouragement of bankers to stop being so prudent. “Come on,… Read more »
[…] Iceland… that’s where David McWilliams has been, thinking… […]
Paul, I’m afraid, we ARE going to “go bad”. We just have to accept it, face it, and DEAL with it. It might be that the “Big Boys” are getting their money out, off-shore, to a “safe-haven”, or whatever, and leaving us minowes to pay for it, as taxpayers; The fact is that they always WIN; and they are now. We will pay and we will be FORCED to, on April 7th. That is our LOT, I’m afraid – unless you own alot of gold and have a private jet – you can bet the Boyos do! Everyone is looking… Read more »
To summarise where we think things are and have been in Ireland in recent times!!!!…1 Throw money at the Banks,and throw Budgets at the people.,,,,,,,2. Privatise profit, socialise debt……..3. All the information for the crony.s ..no information for the people except edited FOI requests at a price…… 4.Interest roll-ups for the wealthy, stiff demands for the people……5Tax avoidance for the wealthy, Tax at source for the people……6 KPMG et al advice for the wealthy, Joe Duffy phone in’s for the people…..7.Lobbying for the vested interests, wait and see what we have planned for ye,for the people…. 8 Private subsidised health… Read more »
@ Jim: “I suggest Ireland should demand new elections, and elect candidates with clear and workable solutions to the present difficulties,including the rooting out af all croneyism,cowboys,nepotism,or any other ISM that stands in the way of true Democracy”
I would agree with you Jim if I had heard of some Irish people having stated the wish to be such candidates. We can all name a few clever analysts
who propose smart solutions, but how many of them – or their followers – have said they are prepared to stand for office at a coming election?
Before the expiry moment arrives on the above article I want to say the following as I believe it is relevant : Dingle – is an old Icelandic word and name .You can find a place called Dingle in Southern coast of Sweden near the Norweigen Border .I was there .It’s landscape is similar ; and Kerry Cute Hoorism – those wise monks on Skelig Rocks that freely left to travel to Iceland following the path of the colourful Puffin bird arrived in a coastal land in Iceland and Westmann that was very green .They had already been to Greenland… Read more »
Rockall Basin – we may have to revert to this matter in above again if we want to increase our soverign claim over the vast natural resourses beneath the sea beds to the north west .
Moon Talk – as I said in an earlier article the Great Suction begins tomorrow and make no mistake gradually all of you will notice it .I mentioned that a Great Change will occur and an experience that has never before happened.A progressive pull will increase daily until it’s peak the 10th and afterwards it disapears. During this crossing the experience will materialise on a plane of a great sense of Frustration where ALL personal initiatives will be Blocked and Opposition looks us all in the face .It is very stark .Emotions will run high near and far away from… Read more »
DMcW characterizes the traditional economic thinking (as he sees it): the successful countries have good health and education etc while those that collapse are corrupt, illiterate, badly managed and intolerant. This is both easy to grasp and essentially right. But under the deregulated, Washington consensus it didn’t work like that. The IMF would impose strict cuts, presumably included health etc, as a condition for a loan. They wanted to see fiscal rectitude, privatization and the like (correct me if I’m wrong). It’s much easier to see now how all this was wrong. Those who spread this ideology (but that’s far… Read more »
Philip – the moon is @u already …..slow down
Ruairi, “David, this is the PD fee market virus that has stained Irish politics considerably since its birth and PD wannabees in FF have allowed that ideology to continue to punch above its mandated weight by using left of centre and traditional FF votes to push through this failed vision of Western society.” I agree; our problem soon, however, is that this is the same ideology that the Lisbon Treaty sucks us into: globalised free market. Articles 113-118. So, do we vote yes to get the ECB to save us from the damage this ideology has conspired to cause, or… Read more »
Josey, thanks for the link to Max Keiser – straight talkin’ stuff!
Would a single world currency solve this problem – make it impossible for currency traders to profit from others’ grief?