Here's a more detailed article I've written for the socialist Frontline magazine on the latest situation in Iceland. It should be out later this month but I though I'd post it here as well so people can read it while it's as topical as possible:
Iceland: a nation in revolt
The dramatic events of recent months in Iceland may have had relatively little mention in the UK media yet they provide one of the clearest indications in recent years not just of the failure of neoliberal capitalism but of the potential for ordinary people to resist and reject those who rule over them and the dominant ideology they seek to impose. In what is perhaps a sign of what we may see in other nations should the crisis continue and intensify, the government was forced to resign after months of mass demonstrations outside parliament which culminated in the building being brought under what could be described as a state of siege by thousands of protesters on the 22nd of January. New elections have been called for April and the people of Iceland have been forced to rethink their country's direction both socially and economically for the years ahead.
Economic background to the crisis
Iceland for the last 19 years has been ruled by governments led by the conservative Independence Party, first under Davíð Oddsson and then Geir Haarde. Davíð Oddsson who was Prime Minister from 1991 until 2004, and is now the most hated man in Iceland, is widely seen as the architect of the Thatcherite policies which allowed the financial sector to emerge out of nowhere, becoming the source of the country's new found wealth. The banks were privatised, taxes were cut back and regulations slashed. In addition Iceland, unlike its Nordic neighbours which have largely maintained relatively high and progressive personal tax levels, has adopted a system of flat taxation (currently at 36% of people's income), being one of the few countries outside Eastern Europe to do so. Corporation tax has also been steadily reduced and currently stands at 18%.
In some ways the Independence Party's neoliberal policies appeared, economically at least, to have been a success and in GDP per capita terms Iceland became, for a number of years, the third richest European nation after Luxembourg and Norway. A wealthy class with their luxury apartments and enormous cars emerged and a culture of aspiration was endlessly promoted among ordinary working and middle-class Icelanders. Yet the foundations of Iceland's economic miracle had always been shaky and much of the country's visible wealth was bought with borrowed money. The deregulated banking sector which was at the forefront of the country's new economy had been quickly building up enormous debts which by last year had astonishingly reached ten times the country's total GDP.
The potential for disaster though had been completely ignored by those in a position of power and it wasn't until the collapse of the bank Glitnir on the 29th of September 2008 that people started to become aware of the scale of the problem. Within the space of a just a few days the krona then plunged by around a third and soon afterwards on the 7th of October the second major bank Landsbanki went into administration. Part of Landsbanki was the internet savings scheme Icesave and when withdrawals by British savers were restricted Gordon Brown outrageously used anti-terrorism laws to freeze Icelandic assets in the UK, a move which some say contributed to the collapse of the last remaining bank Kaupthing days later.
The effects of the crisis were very quickly felt by ordinary people as workers started getting laid off, inflation soared to 18% and people have lost their homes and cars. While unemployment was minimal back in September it is now estimated at over 7% and it is believed that this year the economy could contract by as much as 10%. As a result many families have started relying on charity food aid and the welfare system has been overwhelmed by the numbers of people seeking state assistance. Icelanders have understandably been outraged over the situation and at the years of recklessness at the hands of their government and banks which directly led to it. A popular movement of resistance has began to emerge and from October onwards protesters had gathered regularly in their thousands outside parliament in Reykjavík.
People take to the streets
Repeatedly those at the top have refused to accept any responsibility, assuring people that everything was fine, that the banks were sound just days before they collapsed and, once they had, that it would be no time before the economy would pick up again. Perhaps unsurprisingly people have seen through the lies of the powerful and political activism in its various forms has flourished. One of the organisations which sprung up, and which was involved in the protests outside parliament, is the grassroots campaign group Raddir fólksins (Voices of the People) with the singer and activist Hördur Torfason one of the people who helped get it started. Outraged at the behaviour of the political and economic classes who bankrupted his country he tells, in an online interview, how at the beginning he went to parliament square with a megaphone and talked to and listened to the views of ordinary people. From there a popular movement was built up and the protests became a regular occurrence with the aim of forcing those in a position of power to accept responsibility and resign - namely the government and the boards of the Central Bank and Financial Services Authority. At the height of the demonstrations in Reykjavík as many at 10,000 people were in attendance, a significant figure for a country with a population of just 300,000.
On the 20th of January the situation on the streets suddenly became more dramatic as up to several thousand people clashed with the police who used pepper spray and made over 30 arrests. Outside parliament people banged pots and pans, blew horns and made as much noise as possible to disrupt its first meeting of the new year, staying on through the night and lighting bonfires to keep themselves warm as well as burning the large Norwegian Christmas tree. The following day Prime Minister Geir Haarde's car was surrounded and pelted with eggs and snowballs and thousands surrounded government buildings which had red paint thrown over them. On the 22nd police used tear-gas for the first time since the anti-NATO protests in 1949 to disperse people from around the parliament as rocks, paving stones and bottles were thrown at the building and at the Prime Minister's office, smashing windows and injuring several police officers.
According to the Icelander Eiríkur Bergmann writing in The Guardian “The word ‘revolution’ might sound a bit of an overstatement, but given the calm temperament that usually prevails in Icelandic politics, the unfolding events represent, at the very least, a revolution in political activism". A people who, like most Europeans, were once politically apathetic and rarely took to the streets for any reason have became angry and engaged with what is happening around them. A sense of protest can be felt right across Icelandic society and those who have taken to the streets can be found in all age groups and walks of life. It is not just the poor who have suffered from the crisis but also the professional and middle classes who have faced large numbers of job losses and risked losing their homes and cars due to the enormous levels of personal debt. Icelanders have also used new information sources to bypass the mainstream media and there has been a surge in political blogs and online activism.
After the three days of intense protests Prime Minister Geir Haarde announced on the 23rd that a new election would be held in May and that he had been diagnosed with cancer and didn't intend to continue beyond that point. However the protesters wouldn't go away until their demand that the government resigned had been met. From the beginning of the crisis opposition within the social-democratic Alliance to their coalition with the Independence Party had been growing considerably and when the party's Reykjavík branch voted in favour of pulling out on January the 22nd it seemed likely that their days of participation in the government were numbered. On the 26th of January the party officially terminated the coalition after the Independence Party refused to sack the Central Bank's board and agree to a cabinet reshuffle. Geir Haarde shortly afterwards called for a national unity government but this was ultimately rejected by the Alliance and Left Greens when, after several days of negotiations, they announced their intention of forming a new minority government together which would govern until a new election on the 25th of April.
The new government's programme, announced on February the 1st, includes the intention to alter the constitution so as to make reference to public ownership of the nation's resources resources and allowing greater opportunity for the use of national referendums. Also included has been the cancellation of the Act giving generous pensions to Ministers and MPs, measures to stop people losing their homes and assurances that the needs of ordinary people will be taken into account as much as possible and the welfare system protected. One of the new government's first decisions was to call for the resignation of Iceland's three central bank governors, including its Chairman, former PM Davíð Oddsson. Yet in a show of contempt for the Icelandic people Mr Oddsson has refused to accept all responsibility and repeatedly ignored the requests of the new Prime Minister Jóhanna Sigurðardóttir for him to stand down.
The Left Greens
For such a small country Iceland has a surprisingly diverse political scene. On the the left there is the Left Greens who were founded in 1999 as a more radical alternative to the merger of the Social Democrats, People's Alliance, National Movement and Women's List into today's centre-left Alliance. From the beginning they have placed a strong emphasis on environmental issues, gender equality and national independence from organisations such as the EU and NATO. In the first two elections they were able to gain 9% of the vote, growing in 2007 to 14% on the back of a strong campaign against the construction of several large aluminium smelters, something the government of the time was keen to promote. With 3,000 members and a popular and respected leader, Steingrímur Sigfússon, they have been in a strong position to represent themselves as the main political opposition to the status-quo as neoliberal capitalism becomes irreparably discredited in the eyes of many Icelanders.
In a number of the opinion polls conducted over the last few months the Left Greens have emerged as Iceland's most popular political party and they will be trying hard to hold on their strong position in the run up to the election on April the 25th. Support for the centre-right Independence Party has naturally been badly hit by the crisis and it appears likely that, for the first time in decades, parliament could be dominated by the left. With the social-democratic Alliance and Left Greens keen to continue their joint coalition both parties will be competing to gain the most support and therefore be in the strongest position to lead the next government. Interim Prime Minister Jóhanna Sigurðardóttir from the left-wing of the Alliance, and the country's first female and openly gay PM, is someone who also enjoys a high degree of respect among Icelanders, being seen as someone likely to stand up for the disadvantaged, and her brief time as leader of the nation has helped her party regain much of its popularity in recent weeks.
A likely area of contention for any new government and one of the issue where the strongest disagreement exists between the Alliance and the Left Greens is Iceland's proposed EU membership. After the crisis initially set in and particularly with the rapid collapse of the krona there was a surge in support for Iceland joining the EU with the Independence Party dropping its active opposition to membership and the agrarian Progressive Party officially coming out in favour. As the Alliance has long backed membership this leaves the Left Greens as the only major party still strongly opposed. However according to the polls much of the early enthusiasm appears to have dissipated with the majority of the public again on the 'no' side as the issues involved get discussed and debated in more detail. People are also aware that even if Iceland does get accepted quickly into the union it is unlikely to be allowed to join the Euro any time soon due to the strict fiscal rules imposed upon member states.
The main drawback of membership for Iceland specifically is in the area of fishing, which with the collapse of the nation’s banking industry is likely to become an even more important part of its economy in the years ahead. At the moment Iceland as part of the EEA (European Economic Area) can stay out of the Common Fisheries Policy and therefore can set its own quotas and regulate who fishes off the Icelandic coast. If they joined the EU, on the other hand, they would be forced to open their waters to fisherman from other European nations and would have to accept centrally agreed quotas which they would have little control over. Iceland has long fought for national control of its fishing stocks, getting into several skirmishes with Britain in the 70s in the so-called 'Cod Wars', and over the last few decades they have arguably done a far better job at building a sustainable fishing industry than any of the member states of the EU.
Where now for Iceland?
What type of Iceland its citizens can look forward to, now that the banking sector lies in ruins and is likely to have a much reduced role in future, will surely be at the front of people's minds in the run up to the election. Economically many would like the country to return to a more traditional way of life, utilising its vast natural resources and rebuilding the fishing communities which have dwindled in size as people pursued new lives in Reykjavík, once just a small town but now home to around half the nation's population of 300,000. The last decade or so of riches now has an air of unreality to it as all the money which flooded in has disappeared again just as fast with nothing much left to show for it apart from half-built apartment blocks and luxury car dealerships whose customers have vanished into thin air. Despite their difficult financial situation though a number of Icelanders have spoken of their relief that this period of their history is now over and that anger and resentment is again possible, that a culture of scepticism and critical debate has replaced the blind faith in capitalism and the free market which was once so common.
The anger at the Fred Goodwins of our world who have stolen so much from ordinary people while leaving a trail of destruction in their midst is something that can be felt more and more in every country as the human implications of the economic crisis have became clear. Not just in Iceland but also in Greece and Latvia have people resorted to direct action to show their discontent at the policies of their governments. Recently in Ireland, a country whose famed 'Celtic Tiger' economy has run out of steam and where few of the benefits have been spread to the working population anyway, hundreds of thousands have taken to the streets in anger. Iceland however is the first country where the protesters have succeeded in achieving their main goal and represents a spectacular, if socially disastrous, testament to the instability of neoliberal capitalism. Only under such a system could a resource-rich country go overnight from one of the world's wealthiest to a bankrupted state whose population are, in large numbers, facing the loss of their homes and their jobs and where families can't even afford to feed themselves without relying on help from local charities.