The End of Iceland's Innocence: The Image of Iceland in the Foreign Media during the Financial Crisis

Excessiveness

– 11 – ExCESS ‘The country’s international reputation is ruined.’ Financial Times, October 19, 20081 Until very recently, Iceland was known for its extraordinary landscapes —made up of volcanoes, geysers, glaciers, lava fields and deep fjords—and the rich cultural heritage left by descendants of the Vikings through the sagas. At the turn of the 21st century, this small country of 330,000 inhabitants surprised the West with its unprecedented economic growth, propelling it to the ranks of the richest nations on the planet. The short period of prosperity that ensued, during which the sky was the limit, constitutes Iceland’s ‘New Viking’ period, a time referred to as such because the dozen businessmen behind the growth have been likened to the Vikings given their appetite for conquest. Then, in late September 2008, the world witnessed the swift and spectacular fall of the empire built by these men, and the collapse of Iceland , which sank into a crisis that was first financial, then economic, moral and ethical in nature. And last but not least, Iceland is faced with an identity crisis. Within a few days, thousands of articles appeared in the foreign media, describing Iceland as bankrupt, the first casualty of a growing worldwide crisis, a country humiliated and ruined . The surprise was so great that the media could only wonder how a Western country could be hit by a crisis of that scope, as the following article appearing in Le Monde indicates: 1 Sarah O’Connor, ‘Glitnir chief rolls up her sleeves for mammoth task’, Financial Times, October 19, 2008. – 12 – Yes, how did it come to this? Iceland is not an emerging country; it’s a very modern society of 330,000 inhabitants , the richest Nordic nation after Norway, ranking high in all the international indices. It is a constitutional state whose institutions are similar to those of the Scandinavian countries. And yet, it did come to this.2 A number of assumptions were put forward in an attempt to explain the collapse of Iceland’s economy—inordinate borrowing by companies , banks and individuals; foreign conspiracy; collusion between political and economic powers—but one factor in particular was singled out: excess. Excessive confidence, excessive lack of restraint, excessive finance in light of the real economy. The economists observing the country—which could be described as a laboratory for neo liberalism—were able to foresee what would happen in a situation where value mechanisms, such as new rules for the production of wealth, were pushed to the limit. Before the collapse, borrowing opportunities seemed endless, and the profits were thought to be inevitable . All of Iceland´s natural resources were suddenly in the role of collateral and to be exploited at once. As an adviser with the country ’s Chamber of Commerce said, ‘Iceland has valuable resources in abundance, ranging from fish to clean energy and, as such, they can be leveraged for the good of the nation’.3 After the collapse, columnist A.A. Gill summarized the situation tongue in cheek, saying ‘there is something invigorating about Iceland at this moment—like being with people waking from a dream. It’s exciting and instructive.’4 2 Gérard Lemarquis, ‘L’Islande au bord du gouffre’, Le Monde, October 9, 2008, p. 3. The original quote read: ‘Oui, comment en est-on arrivé là? L’Islande n’est pas un pays en voie de développement, c’est une société très moderne de 330 000 habitants, la plus riche des nations nordiques après la Norvège, qui caracole en tête de tous les palmarès internationaux. C’est un État de droit dont les institutions sont analogues à celles des pays scandinaves. Et pourtant, on en est arrivé là.’ 3 Finnur Oddsson, quoted by David Ibison, ‘Iceland wealth fund is proposed’, Financial Times, April 25, 2008, p. 2. 4 A.A. Gill, ‘Iceland: frozen assets’, Sunday Times, December 14, 2008. – 13 – With hindsight and historical perspective, there were signs warning of what was to come—signs that people seemed either unable or unwilling to heed in the frenzy of the economic boom. In 2006, Jeremy Batstone published an article in Money Week cautioning about the very situation Icelanders found themselves in a few months later: Given the relatively small size of the country’s economy, a sharp fall in GDP would feed its way quickly into the public finances. The budget surplus would be expected...