The real germ of the economic crisis is to be found a little later, in 1991, when the fishermen were given permission to trade the quotas and use future catches as collateral to borrow money. As one commentator put it, ‘One decision two decades ago destroyed the country.’
Gísli Pálsson has been studying Iceland’s fishing communities since the early 1980s and was the first academic to document the effects of the quota system. ‘I do think there is a connection [between the 2008 crash and the quota system],’ Pálsson told me. ‘The owners of those first quotas became rich overnight. All the quotas ended up in the hands of maybe fifteen private companies. And the property rights were hidden, there was a mystification of ownership. Then the owners began to move their profits from these fifteen fishing companies into banking.’
Why on earth did no one object when these fishermen-come-bankers began to go rogue? There were frequent warnings from foreign economists and commentators. ‘It is really difficult to explain. Critical discussion became silenced, including here at the university – this building was built by a fund from one of the millionaires,’ Pálsson gestured to the room around us. ‘Critics were marginalised as people who couldn’t take pleasure in the success. These businessmen were very visibly offering funds for research, building public buildings, museums, festivals, whatever.’
‘It’s true, there was a lot of money trickling down through society,’ journalist Bjarni Brynjólfsson, editor of the independent monthly magazine the Iceland Review – as well as a part-time fishing guide – told me later that day at his offices downtown. ‘All the restaurants were full with bankers, but of course it was very unhealthy – it wasn’t real wealth, it was all borrowed. You have to understand that these organisations [the banks] basically grew over our heads. I don’t think the bankers in Iceland were doing very different things from foreign bankers, but I think they took up their methods raw, they didn’t cook them at all, and then at the end they started doing some really funky stuff, like lending to each other. I was watching them closely and wondering how these guys could just keep on borrowing and borrowing, and they never seemed to sell anything except between themselves. They never put their own capital at stake.’
What happened in Iceland in the early years of this century seemed to me to be so very un-Nordic (tellingly, Finland, Sweden and Denmark all aligned themselves with the British in the dispute about the Icesave debts when British companies, local authorities and individuals, tempted by the high interest rates, deposited significant sums with the Icelandic bank, Landsbanki, only to see it all disappear when the bank went under). The concentration of business, media and political power in the hands of a few extreme ideologues, the blithe accumulation of surreal quantities of debt, the stretch Hummers and the private jets – it all seemed more redolent of Thatcher’s Britain, or the US, than Scandinavia.
One night I dropped by one of Reykjavik’s more flamboyant restaurants, a relic from the high times with shimmering flock wallpaper, perspex Philippe Starck chairs (the default choice for people who want to appear design-savvy but aren’t), and a menu touting dishes featuring combinations such as foie gras and pineapple, and a hamburger ‘New Fashion’, with Tandoori sauce, camembert and parma ham. ‘This, truly, is the ugly side of rampant neo-liberalist capitalism,’ I thought to myself, leaving hurriedly. ‘Not even the Swedes would put camembert and Tandoori sauce in a burger.’
The starkest contrast in terms of the Icelander’s Nordic siblings is with their direct ancestors, the Norwegians. While they were nurturing their oil wealth with the cautious attentiveness of an orchid farmer for his blossoms, the Icelanders embarked on a crazy, magpie-like land grab of the most glittering foreign assets they could find – football clubs, hotels and department stores – combined with the most ill-advised borrowing since Antonio offered Shylock a pound of flesh as security.
‘It was like we needed to do everything better and more shiny than any other nation,’ one former bank employee, now unemployed, told me. ‘It was like we had some kind of super race in Iceland which could bring to Europe and Britain a new model of doing things.’
‘There is this Viking culture: everybody has grown up hearing how great the Vikings were,’ Terry Gunnell, a British expat who has lived in Iceland for some years, told me. ‘In the sagas, whenever an Icelander goes anywhere they are always taken straight to the king, no messing. They go to Norway, and the king of Norway says, “Hey, come back to my place!” They still feel that way: like Vikings, equals of anyone. They all grew up being told, “We may be small but we are equal to anyone.” Iceland is the little man who sees himself as having a big voice. “You can’t invade Iraq without asking us first,” and so on.’
The Danes have a saying about the Icelanders which long predates the economic crisis, but which seems more apt than ever: ‘They wear shoes which are too big for them, and keep falling over their shoelaces.’
Dr Elizabeth Ashman Rowe, lecturer in Scandinavian History at the University of Cambridge, also felt the Icelanders’ Viking attitudes might be at the root of their contemporary economic misadventure: ‘It is true that Viking-era Icelanders were a group of people who wanted their rights respected, they didn’t want anyone telling them what to do and their system was one which rewarded people who were clever or bold. And that behaviour is echoed in the causes of the financial crisis.’
Perhaps this inbred sense of superiority was one of the reasons why all criticism of their banking sector was so easily quashed in Iceland. Any criticism from outside was dismissed as bullying, as was the case in 2006 when the Danish national bank published a report warning that Iceland’s banks were on the path to oblivion. The Icelanders dismissed this as jealousy.
Eventually, though, reality bit. ‘I started working for a bank in 2007 and already after three months there was no money,’ Inga Jessen, a local woman I got chatting to in one of Reykjavik’s many cool but half-empty coffee shops, told me. ‘We didn’t know when we were going to get paid. They started firing people. I remember one colleague would come to work every day and say, “Everything is going to hell!” and we were, like, “Yeah, right,” we didn’t quite believe it.’ Inga finally lost her job managing large office buildings in Europe in late 2008.
By early 2009 Michael Lewis was describing Iceland as ‘effectively bust’. He claimed to have heard Range Rovers exploding from his hotel room as the locals carried out insurance fraud on their now debt-ridden vehicles. He let rip with a scattergun of insults, calling the women ‘mousy-haired and lumpy’, and the men barbaric. ‘Thursday, Friday, and Saturday . . . half the country appears to take it as a professional obligation to drink themselves into oblivion,’ he wrote.
But who was to blame for the economic mess? While I was there the Icelandic media was reporting a wave of paint attacks by disgruntled Icelanders calling themselves Skapofsi (‘Rage’) on the property of some of those deemed responsible. These included the former CEO of Kaupthing Bank, Hreiðar Már Sigurðsson, whose home was redecorated with a Pollock-esque dash of red, as well as the Hummer of Björgólfur Thor Björgólfsson, the richest man in Iceland.
If you are looking for a poster boy for Iceland’s economic misadventure, Björgólfsson fits the bill. As well as being Iceland’s first billionaire, he is the grandson of Iceland’s leading businessman of the early twentieth century, Thor Jensen, and son of one of the most ‘colourful’ entrepreneurs in Iceland’s history, Björgólfur Guðmundsson, an ex-convict, ex-footballer, recovering alcoholic and, as of July 2009, bankrupt. Together with his son Guðmundsson made his money selling booze to Russia and used it to buy, among other things, West Ham Football Club (which he eventually sold in 2009), and a controlling stake in Landsbanki. Until the crash, many Icelanders saw Guðmundsson as a benevolent father figure, as they had his father before him: both doled out cash to social and cultural causes.
The Guðmundssons were among roughly fifteen families, collectively known as ‘The Octopus’, whose ‘blue hand’ had a grip on much of
the Icelandic economy. Several of them have now left Iceland in shame, while others are keeping a low profile.
Retail entrepreneurs Jóhannes Jónsson and his son Jón Ásgeir Jóhannesson are also often mentioned in this context. As owners of the Baugur Group they controlled most of Iceland’s media and retail sectors – including, in Britain, House of Fraser, Hamleys and, evidence of a rather literal approach to foreign investment, the frozen-foods chain Iceland. Baugur collapsed in early 2009 and finally began to lose its iron grip on Iceland’s media (although, as is typical of the murky web of Icelandic ownership, at the time of writing Jóhannesson still owns TV channels and newspapers).
But most of the blame has been borne by the centre-right Independence Party, which had ruled Iceland since 1929, and primarily by its ex-prime minister, latterly chief of the central bank (and now editor of the country’s main newspaper, Morgunblaðið), Davíð Oddsson, and his successor as PM, Geir Haarde.
Many of these politicians and businessmen were close associates: they went to the same schools and colleges (primarily Reykjavik’s exclusive Latin School), and socialised together. And here is exposed Iceland’s great Achilles’ heel. In a country with only 319,000 people, everyone is pretty much guaranteed to know everyone else within one or fewer degrees of separation, and Iceland’s ruling class does seem to have had an especially incestuous history.
‘These loans [from Icelandic banks to their own shareholders to enable them to buy more shares] just serve as a nasty reminder of how corrupt things had gotten here,’ one Icelander was quoted as saying in a UK newspaper shortly after the crash. ‘This is such a small society, so businessmen, regulators, the media and politicians all end up in bed together.’
‘If you want to understand how someone is hired in an Icelandic company, you start by looking at the political connection,’ Sindri Freysson, one of Iceland’s leading poets and novelists told me. ‘If it’s not that, then you look at the family tree, and if it’s not that, then there is only one explanation: Alcoholics Anonymous! It is a close-knit society, but that allows for nepotism and cliques, which is all part of this economic problem. You will hire someone from your sports club, or who is in your family; there is a lot of that here and probably because we are so used to it, we don’t call it corruption. It’s very hard to avoid, and it is a problem when you come to bring these people to justice.’
It seems the very same social connectedness that encourages long-term stability, accountability, equality and prosperity elsewhere in the Nordic region has had quite the opposite outcome in Iceland.
As far back as 2001, the EU anti-corruption organisation Group of States Against Corruption (GRECO) warned that, in Iceland, the ‘close links between the government and the business community could generate opportunities for corruption.’ A good example of just how entangled government, media and business get in Iceland is the case of the vetoed media-ownership bill of 2004. Introduced to break up monopolistic ownership of the media by private companies (essentially it was targetting Baugur), the bill was sensationally vetoed by the president, Ólafur Ragnar Grímsson, who took the unprecedented step of refusing to sign it. It turned out that Grímsson’s former campaign manager was now the director of one of the TV stations that would have fallen foul of the new law, and that his daughter was employed by Baugur.
Meritocratic ideals and democratic freedoms are always going to struggle in a country where the talent pool is the equivalent size of Coventry’s (although, thus far, Coventry has yet to swindle Holland out of 4 billion euros). And if there is a limited number of doctors and teachers, that is also likely to be the case in terms of entrepreneurs, politicians and economists. That is why Icelanders are, by necessity, the world’s ultimate jacks of all trades. Many of the people I interviewed had second jobs as taxi drivers or tour guides, and that multitasking extends up the social ladder: the former prime minster is often described as being a poet, for instance; his foreign minister was a physiotherapist.
One cannot overemphasise, I think, how very, very few Icelanders there actually are. If they were an animal species, they would be on the WWF’s endangered list – the human equivalent of a yellow-nosed albatross. It is remarkable that they have been able to build any kind of a national infrastructure at all. ‘Do they have heart surgeons, speech therapists or yoga teachers?’ I wondered. Is there anyone who can translate Bulgarian, or such a thing as an Icelandic heptathlete? (Yes, as it turns out. Her name is Helga Margrét Thorsteinsdóttir.) And how on earth do the TV talent shows function? Presumably by now the whole nation has performed ‘Hallelujah’ for Simon Cowellsson at least once?
‘We had X Factor,’ said Brynjólfsson. ‘But they pretty much ran out of people after the third season. It always amazed me when I lived in Hackney that you had a population there of, what, 1.5 million, but no cinemas. We have pretty much everything, but maintaining it all is a huge burden.’
Another aspect which differentiated Iceland from the other Nordic countries was a lack of a truly free, diverse press. You can’t move for serious, independent broadsheet newspapers throughout the region, but in Iceland the press was either owned, or very closely influenced by, the neoliberalists, who effectively shut down any contradictory discourse.
‘Four newspapers, twelve magazines, no press,’ was a 2005 headline in the free English-language newspaper, the Reykjavík Grapevine, one of the few independent media voices in Iceland at the height of the economic boom. ‘Every writer we got, as soon as they got some success, would be recruited by Baugur or Landsbanki for some kind of project,’ complained a former editor.
‘It had become a very unhealthy society in that these guys controlled the media,’ said Brynjólfsson. ‘Anyone who criticised them, they bought them up. I was fired [from celebrity gossip magazine Se og Hør] because I was critical of them.’
By the end, virtually all the media – from the state-run TV and radio, to private TV channels and newspapers – was under the control of people closely affiliated to the ruling Independent Party. Even the National Economic Institute was abolished in the late 1990s after publishing one too many reports questioning the direction in which the country was heading.
So, it would seem that a country can be too small, too socially knitted, too tightly tied for its own good. Strong social networks can, in certain circumstances, turn to incestuous corruption and the shutting down of democratic discourse. You can, it turns out, be too Nordic for your own good.
Chapter 3
Denmark
SO WHERE, I wondered, did this leave the country in terms of its place in the Nordic family?
For centuries Iceland’s intellectual class were almost exclusively educated in Copenhagen, and even today the Danish capital is an important – perhaps still the most important – cultural metropolis for Icelanders. There are more flights from Reykjavik to Copenhagen per day than to any other destination, and more Icelanders live in the Danish capital than in any other place outside of the island. Many, perhaps even the majority of, Icelandic families, have Danish relatives.
The Danish language dominated the Icelandic education system for many years. Middle-aged Icelanders told me that, at school, most of their books had been in Danish, although despite this, they said they still found it easier to speak Norwegian or Swedish (which made me feel so much better about my own struggles with Danish). But for younger Icelanders – the generation that grew up with a US air base in their back garden and British programmes on TV – English is the dominant second language. ‘I think Danish is a dinosaur for them,’ said Pálsson.
For his colleague Professor Unnur Dís Skaptadóttir and her family Denmark still has a great deal of meaning. She too has relations in Denmark – in her case, a grandmother – and, as it does for many of her countrymen, Denmark retains a vestigial air of superiority and refinement. ‘When I was growing up, anything cultured or good was Danish,’ she told me. ‘If it was good, it must be Danish. Wives would go to Denmark to learn to cook [as searing an indictment of
Icelandic cuisine as one can imagine], it was considered the height of civilisation. People would use Danish words to show how civilised they were, even my mother’s generation. she was sent to Denmark as a teenager to learn proper housekeeping. It was where good girls learned to behave.’
According to several Icelanders I spoke to, their respect for the Danes was rarely reciprocated, and even today they feel that the Danes look down on them. One Icelander I spoke to told a story of chatting up a Danish girl in a bar in Copenhagen: ‘As soon as I told her where I was from, she was gone. I think they look at us as one step up from Greenlanders.’ Another told me her brother had been out in Copenhagen once and overheard some Danes call him ‘that retarded Icelander’ in Danish, assuming he couldn’t understand.
The Icelanders tend to respond to Danish slights with humour: ‘People often make jokes speaking Icelandic with a Danish accent,’ said Skaptadóttir. ‘It is very funny. We don’t make jokes about Norwegians speaking Icelandic, only Danes.’ He did an impression of a Dane speaking English – a kind of indignant squawk. (To be fair, pretty much anything sounds funny spoken with a Danish accent, even Danish.)
This should not be misinterpreted: there is no real anti-Danish sentiment in Iceland. ‘We love Danes,’ one taxi driver told me when I told him where I lived. ‘If any Icelander says he hates Danes then, well, you get jerks everywhere. We may look more like Norwegians, but if an Icelander meets a Dane, a Swede and a Norwegian he will get on best with the Dane. We have the same sense of humour, like the Brits. But Norwegians . . . oh my God, they are so boring. I think the Norwegians are, in a way, our little brother in solidarity against the Danes over the years.’
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