Iceland Leads the Way
By Shlomo Maital
In the United States, despite the fact that the global financial and economic crisis began there, and was caused by irresponsible actions by senior executives in the financial services industry, not a single banker has been sent to jail on criminal charges. Banks have paid large fines for civil suits, but for the most part, those fines pale in comparison to recent profits. And to add to the insult – the Republicans have managed to modify the Dodd-Frank provision that keeps banks from investing in exotic derivatives (the kind that caused the problem in the first place).
But there is a country that has behaved differently. Iceland, with only 325,671 epople and 103,000 sq. km. in area. Iceland has been independent (from Denmark) only since 1944. Its banks were out of control in the first decade of the millennium and expanded irresponsibly. The collapse following 2008 was massive. Iceland had 20 percent inflation in 2008 and 8 per cent unemployment in 2010. Its debts were huge. But Iceland cleaned up the mess. Bankers were sent to jail. Iceland’s national debt was gradually reduced. Iceland managed to maintain its social welfare system despite the enormous financial crisis.
According to an Icelandic economist, “after the infamous crash of 2008, the Icelandic economy shrunk in 2009 and 2010. However, since 2011, the economy has been growing at a respectable rate, by 2.1% in 2011, 1.1% in 2012 and 3.5% in 2013. While purchasing power has yet to reach its pre-crash peak, and many families are still acutely aware of the crash when trying to make ends meet, the economy had safely exited recession.” Lately, the economy has slowed. And Iceland’s conservative government has practiced austerity, which in Europe has failed. Despite this, little Iceland has emerged from a deep crisis that was worse perhaps than in any other country. And without much help from anyone.