Scandinavia on the Skids: The Failure of Social Democracy
(Part 4 of a 7 part series on Scandinavia “Socialism”)
“Whenever I speak as head of state, I speak about peace. I will say it as often and as long as necessary,” the straight-talking President Vigdis Finnbogadöttir told me.
It was the winter of 1980, shortly after she won the presidency, the first female in the world to win a democratic presidential election.
“Think what we could do with the money that goes into militarism! I am a premeditated pacifist. Wars and armies are absurd things. We have no army, no militarism. We are a peaceful, independent people,” asserted the charismatic president.
Iceland had achieved its independence from Denmark during WWII after 600 years of colonialism. This could occur basically on the condition that the United States could have the coast guard station at Keflavik as a military base. In 1949, Iceland joined NATO on Iceland’s condition that it wouldn’t have a standing army. Throughout the 1960s-70s, Vigdis, as she prefers to be called, demonstrated against the US military presence, often marching the 50 kilometers to and from the capital Reykjavik and the base.
Keflavik was turned back to Iceland in 2006 for Iceland’s coast guard and civilian use. However, the liberal Prime Minister Sigmundur David Gunnlaugsson let the US navy take over the base again in September 2015 due to the bogus threat of “the Russians are coming”. A half year later, the people forced him out of office for corruption and tax evasion.
Vigdis was never a member of any political party. She was a cultural worker educated in French literature at the Sorbonne. When elected president she was head of Iceland’s theatre, and noted for being a single mother to a daughter she had adopted years after her divorce from a doctor.
“I think my election was the result of the woman’s day strike we had on October 4, 1975. No lady did a thing the whole day. I was striking like everybody else, as were all my actresses.”
The United Nations had proclaimed 1975 as Women’s Year. A committee made of five of womens organisations in Iceland organized a day to protest for equal wages, equal treatment. Ninety percent of women did no housework; most did not go to their jobs; and 25,000 demonstrated (out of a 220,000 population). Many pointed to Vigdis as their choice for president.
“We have accomplished a lot for such as a small population. We have no real poverty, hardly any unemployment, everyone has food and shelter. And Imagine! We succeeded in harnessing the strong elements of nature: ice, rapid waters, fire, and even lava. We are the only nation to detour a lava stream to save a village and then used the lava to heat all the homes not destroyed,” President Finnbodattir concluded.
After leaving the president’s cozy office, I took the ferry to the mentioned village, Vestmann Islands, whose 5000 people function totally self-sufficiently on cheap, renewable and clean geothermal energy. I was so impressed with this healthy, scrappy, fishing people I decided to return next summer (1981) and take a fishing job. Icelandic net fishing was one of two of the hardest jobs I have undertaken; the other was cutting sugar cane in Cuba. Fishing Iceland’s cold waters is dangerous. I recommend seeing the Iceland-made film, “The Deep”.
From the end of WWII to the present, Iceland’s economic development and direction approximates the rest of Scandinavia, summarized in other pieces. Suffice it to say that neo-liberalism was introduced in 1991 by a social democratic-led coalition government, as has been the case in other Nordic countries. In 2000, the social democrats merged with other political parties in the Social Democratic Alliance. Since then most Iceland governments have cut taxes on wealth, deregulated some public services, cut pensions, deregulated the market, and the public banks were privatized with deregulation to follow, which led to the 2007 financial crash. The financial crisis started in this tiny island-nation when three private banks, which had been public, collapsed.
In 1980, net debt to foreign countries was at 36% of the GDP. When the real estate bubble burst, debt rapidly rose to 246% of GDP. In 1980, household debt per portion of income was 21%; it rose to 227% with the crash. The bank defaults totalled $114 billion. GDP was only $19 billion. They lost 10% of their GDP, and their currency fell 35% in value.
Unlike all other nations with capitalist-run economies, Icelanders refused to bail out the criminal bankers. Parliament passed emergency legislation to take over the major banks domestic operations and established new banks to handle them. The government, however, did not take over any of the foreign assets or obligations. Those stayed with the original banks gone bankrupt. (1)
Folk got behind recovery. Many politicians now listened to the people and refused to cut back on social services. People utilized their natural resources to attract the tech industry. Commercial fishing remained strong. The tourist industry bloomed. The International Monetary Fund conceded that Iceland “surpassed pre-crisis output levels”.
Best of all, Icelanders jailed the criminal bankers. By early 2016, 26 bankers had been sentence to a total of 74 years in prison. Charges ranged from breach of fiduciary duties to market manipulation and embezzlement (thievery). The average sentence was from four to five and one-half years. They are serving time in open prisons. They spend their day doing laundry, working out in the gym, searching the internet. Prisoners are offered work and education opportunities. All six prisons in Iceland are small with capacities ranging from 10 to 45, a total of 121 places.
President Olafur Ragnar Grimmson, who replaced Vigdis in 1996, explained Icelanders’ thinking:
“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures.”
“Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies, and allowed to go bankrupt if they have been run in an irresponsible way? [We will not] let ordinary people bear their failure through taxes and austerity. People in enlightened democracies are not going to accept that in the long run.”
Many thousands had rallied at Reykjavik’s main square on freezing days between October 2008 and January 2009, banged saucepans, linked arms in a circle around the parliament building, pelted it with food, and demanded the “left” coalition government resign.
In January 2009, the SDA-Independent Party coalition broke. An interim SDA-LGM (Social Democrats plus Left Green Movement) government was formed to lead until April election, which it won. But this “left” government also capitulated to EU and elite pressure, and proposed a repayment deal “Icesave” to UK and Dutch creditors. The SDA-LGM government even announced drastic cuts in public spending. Hospital and school employees were laid off and wages cut. Some “leftist” politicians even suggested seeking membership in EU.
One of the few solid powers Icelandic presidents have is to sign proposed parliament laws before they can be effected. President Grimmson, a former political science professor who had debated the right-wing economist Milton Friedman at the University of Iceland, took the unusual step of vetoing the appeasing bill to bailout customers of the private banks. In the ensuing referendum, March 2010, 93% of the people voting backed up their president.
Despite this set-back, and a drastic slump in support, the “leftist” government tried once again to pay foreign creditors, this time in instalments. On 20 February 2011, President Grimmson again vetoed the bill. In the second referendum, 9 April 2011, Icelanders again rejected to pay $5 billion to Britain and the Netherlands.
Sigmundur David Gunnlaugsson, head of the centrist Progress Party ran against the “leftist” coalition on a platform of “cleaning up”, of fighting bank corruption and tax fraud. His party won the parliament elections and he took over as PM in May 2013. Sigmundur David worked with the president in refusing to pay the British and Netherland governments, a struggle finally sanctioned legally by the European EFTA Surveillance Authority. The centrist PM appeared more loyal to the people than the “leftists”.
Three years later, when the Panama Papers exploded, PM Sigmundur David was interviewed by Swedish SVT television. Icelander free lance journalist, Johannes Kr. Kristjánsson was the point man. He was one of 376 journalists from 76 countries working on the 11.5 million Panama Papers documents coordinated by the International Consortium of Investigative Journalists (ICIJ).
During the interview Sigmundur David said it was most important for everyone to pay a fair share into society and that paying less than one’s share constituted cheating society. When asked if he had any connections to a foreign company, he replied that he always reported his financial assets. When Kristjansson asked specifically about his connections to Wintris, a foreign company and a creditor of failed Icelandic banks, he said he had disclosed all requested information to the government. He became indignant and walked out of the interview. He and his wife made public statements about “journalist encroachment into their private lives” and denied any wrong doing.
News coverage of the Panama Papers revealed that he and his wife shared ownership of Wintris, bought to invest his wife’s inheritance. Sigmundur David also failed to disclose his 50% share when he entered parliament. He later sold his share to his wife for $1, the day before a new law took effect that would have required him to disclose his ownership as a conflict of interest.
People were furious. Many cursed the government for trying to make Iceland into a Banana Republic. Demonstrators were on the streets every day once again, in greater numbers than in Iceland’s history.
On April 5, President Olafur Ragnur Grimmson refused to dissolve parliament when so asked by the desperate prime minister. This forced Sigmundur David’s hand and he resigned his office.
Polls showed that two-thirds of the people had lost faith in the Establishment. The small Pirate Party, founded in 2012 as a protest to the banks and the Establishment, had won three seats in the 63-seat parliament in the previous elections. Between the time of the Panama Papers exposure and July 2016, polls indicated that between 30 and 43% wanted the Pirates to win the next elections. Originally scheduled for April 2017, the new PM, Sigurdur Ingi Johansson, Progress Party’s deputy leader, promised an election sometime in the fall 2016.
When David resigned President Grimmson was encouraged to run for a fifth term. A month later, however, the media revealed that his wife was connected to a tax haven in the British Virgin Islands. The company, Lasca Finance, was actually in the hands of her parents but the embarrassment and implication was too great for the president. He withdrew early from the May-June campaign, claiming there were enough qualified candidates.
Gudni Thorlacius Jóhannesson, one of the nine leading contenders for president, is an historian and lecturer at the University of Iceland. He had never run for office and never been a member of a political party. His optimistic prognosis, though, captured the spirit of many voters. On the one hand, he condemned the tiny elite that run the political Establishment, the business community, and much of the media. On the other, he pointed to the impact that activism can have in a small, tightly-bound population. He praised the activist demonstrators and the Pirate Party as positive factors that can save the tiny nation from a state of corruption and elitism.
Jóhannesson said he would oppose membership in the EU. He hoped when Britain is out that it and Iceland would work together and form with Norway, also a non-member, stronger ties. Jóhannesson won the June presidential election with 39% of the vote. The candidate with the most votes wins and takes office on August 1. He would have had more votes if not for the European Championship games in France where 10 percent of the population (33,000) was rooting for their team.
Perhaps Jóhannesson will be accompanied by the anti-authoritarian Pirate Party if it leads the next government. It has broadened its agenda, which began with three points: having no main leader, an offer of asylum to whistleblower Edward Snowden, legalizing pornography. One of its founders, Birgitta Jónsdóttir, worked closely with Wikileaks and Julian Assange, who had visited Island.
Their platform now embraces: transparency of “all pertinent information required to make informed decisions”, a view that equality is a “fundamental human right” which should be guaranteed by law and society, improve conditions for small industry, bind a “minimum living wage into law”, treat drugs liberally as in Portugal and help people who have a drug problem in a “humane way”, reform copyright laws so as not to rationalize censorship, diversify education on all levels and make sex education mandatory in schools—rule by direct democracy.
On the key controversial subject of EU, the Pirates say, “the public should make a well-informed decision via a binding referendum.”
Organizers of the party feel kinship with the Swedish party of the same name, the new Alternative party in Denmark, Bernie Sanders, Syrisa in Greece and Podemos in Spain.
Icelanders are showing a way that we who want a better world for the 99% could listen to. Our ideals for a future of justice, equality and peace can best be assured if we live in small communities and practice participatory democracy where we live, assuring that elites cannot exist or dominate. Small is beautiful!
This small population is the world’s most well read. They generally appreciate poetry and many write poetry. Icelanders are known for their classic sagas and for being skilled chess players. We can learn from them for their tenacity, for their tight-knit fellowship, without which they would not have been determined enough to jail criminal bankers, or overthrow—without armed struggle—a corrupt, lying prime minister, nor win soccer games against countries far bigger then them.
This is the first time in European Championship soccer history that such a small nation qualified to play, and did so by beating the Netherlands and Turkey (75 million). Once in the games they beat Austria, and tonight, as I write this conclusion, the dogged team beat England, a former Imperial nation with 55 million people. The numbers of players registered in soccer clubs in England is five times the entire Icelandic population. (France took them out in the next match, 5-2. But the team did not hide their heads on the contrary.)
So, let us be convinced that we can beat the bad guys even though we are only a minority of activists, who have no cannons or nuclear weapons. The majority hardly ever acts, but they can back up a dedicated minority struggling for justice.
Next: Denmark: Bernie Sanders for Prime Minister
(1) Sources used here include the January 26, 2016 article, “Iceland sentences 26 bankers to 74 years in prison” by Grouch E. Geezr, posted on www.popularresistance.org, July 26, 2016; Edward Robinson and Omar Valdimarsson’s “This is where bad bankers go to prison”, March 31, 2016.
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