A nation in catharsis
Saturday evening in the centre of Reykjavík. Large fat snowflakes pour on the heads of the folks who've come out for a stroll along Laugavegur, the city's biggest and busiest shopping street. Despite the chilly wind, the sidewalk is full of people. The air is crystal clear, the atmosphere is festive. In the bars and restaurants, behind the windows merry companies are sitting. A stream of cars, most brand new 4x4s, is slowly passing by along the street. All windows are wide open, the hi-fis are booming with music. The crowds are cheerful; drivers and passers-by are exchanging advice and addresses of the best restaurants in town with strangers - if such a thing ever existed in this tiny nation.
All in all, Reykjavík is bracing itself for yet another lively night. Because Icelanders are upbeat yet again, and they have every reason to celebrate. Something has changed in the air since the last few times I came back here from the opposite end of the world that I'm now calling my home.
A change that would be quite a shock for the foreign visitor who's not familiar with the mindset of the locals. Because it wasn't so long ago, in fact just 5 years prior, that then prime-minister Geir Haarde made that grim address to the nation, appearing in all his gloom on TV and informing his compatriots of the impending national bankruptcy. "God bless Iceland", his last words were, and they left the nation in disarray.
Turned out Glitnir, Kaupþing and Landsbankinn, the three biggest financial institutions in the land, had acted way too aggressively and taken too many unreasonable risks. And when Lehman Bros collapsed and the shareholders started withdrawing their capitals in panic, the big three turned out to be insolvent. The government responded with adopting a set of emergency laws; many Icelanders lost their savings, unemployment (until recently, almost completely unknown in Iceland) increased four-fold (9.2%), and inflation skyrocketed to 17%. Thus, Iceland became the European country that was the most severely affected by the crisis.
But now, just five years later, the economy of my dear island nation has managed to recover, despite all the bumps along the way. In 2013 the GDP registered a third consecutive year of growth, unemployment is again contained below 6%, inflation is under control, the national budget is almost balanced, and the trade balance is positive once more - the country exports more goods than it imports.
Many Europeans, both experts and laymen, are looking at the fast recovery of their northern neighbour, and asking themselves if the recipe for success of the small island nation is applicable for larger economies. Perhaps not? But then, what's so special about Icelanders? Is it the size of the economy? Some have said it's the cultural homogeneity, but that sounds too simplistic. Then what? What is this northern magic that we speak of?
The answer to this question does have a lot to do with the economic specifics of the place, yes - but it's also strongly related to psychology. As for the economy, unlike most other countries, Iceland chose not to bail out its failed banks with public money. Probably not so much for ideological reasons, but because the small economy wouldn't be able to cope with it anyway - i.e. out of pragmatic considerations. The credit institutions had accumulated debt surpassing the GDP ten-fold. So the government only gave guarantees for the private savings of its citizens. There was a referendum with a single question: should foreign creditors be compensated (mostly British and Dutch citizens). The overwhelming majority said no, so the government didn't pay a dime of compensation. Which of course got quite a few people angry overseas, and prompted threats of international isolation - which never happened. As well as called quite a few sharks to come circling the troubled country, as soon as they had sniffed blood - but they never bit into its flesh.
Iceland's recovery was additionally aided by the devaluation of the national currency. After the crisis, the Icelandic króna lost almost half of its value against the euro. This was good for the development of the fishing industry, which is the exports-orientated backbone of the Icelandic economy. Other industries such as aluminium are now able to sell their production at much lower prices than pre-crisis times. The third favourable factor is of course Iceland's natural treasure of cheap geothermal energy and water power.
The devaluation of the króna also stimulated the tourism industry. The low exchange rate (plus the [in]famous eruption of that volcano with the impossible name Eyjafjallajökull) attracted unprecedented numbers of nature enthusiasts and urban tourism fans. For the last couple of years, tourism has even replaced fishing as the number one industry in the country.
The strict rules of control on the movement of capital flows that were adopted during the crisis period, have guaranteed that the bulk of the revenue stays within the domestic economy. The investors could operate on the local market, provided that they invest their money in local enterprises. And this has prompted the launching of hundreds of new businesses in Iceland.
And here's where the second aspect of the Icelandic success story really kicks in, the psychological side of the equation. Although during the crisis many Icelanders lost their savings and their jobs, and though many still haven't completely shaken off their debts to this day, after 2008 my people started building their society anew. They took the crisis as a chance to reshape their country.
As the founder of the Ministry of Ideas, Guðjón Már Guðjónsson says, "When everybody here had a lot of money, the nation's innovative potential had reached an all-time low. Why should we occupy ourselves with discovery when we have so much stuff to buy, they used to say. Thus, the financial boom became a hindrance to thinking". Indeed, for years the banking sector was sucking the smartest brains in the country.
But today, people think differently. They generate new business ideas, they create software and internet companies, they open music clubs, they give new life to old crafts, they create high fashion, etc. After the crisis, and partly thanks to smart and well-measured government intervention, and this constant openness to ideas coming from the grassroots, the Icelandic "creative economy" is flourishing. The state of mind and heart has radically changed these days. Today, no one thinks they're powerless to cope any more. Instead, everyone shares this feeling that everything is possible.
The new look on life is now stimulating thousands of Icelanders. Time and time again I'm hearing people say they don't want to return to the times of deceitful bounty before the crisis. The times when Iceland was being given as an example of a financial paradise. Today many people, both old and young, are saying they're happy that the government had quit this insanity of trying to present Iceland as an island where everyone is a finance genius driving a Porsche. "We're grateful for the collapse", Jón Gnarr, the new Reykjavik mayor says. "It saved us from ourselves!"
His story is as telling as it is fascinating, by the way. The people of Reykjavík decided to throw away the established parties whose elites are widely associated with the "banksters" of the finance industry (some of whom are now behind bars, which is yet another thing without parallel in the world, apart from Iceland's many firsts, like the first openly lesbian prime-minister, etc). So they gave their trust to The Best Party, founded by 47 y.o. comedian and painter Jón Gnarr. Iceland, the new mayor says, should focus on its strong sides: "We've never been too good in dealing with money, but we've always offered good culture and creativity. Let's bet on that!" Now as a mayor, he has invested millions to complete the previously halted construction of the emblematic Harpa concert hall, which has now become one of the symbols of the city.
Meanwhile, he's been one of the most fiscally responsible mayors in the history of the capital. And despite the inevitable tightening of the belts, he has earned a lot of respect and trust from people for his prudency. Because he strives to include the public in all his decisions and actions, instead of creating an artificial gap between himself and the citizenry. He's using the public idea-forging platforms that Icelanders have launched with such enthusiasm ever since the crisis triggered this new drive for direct democracy, and he's listening to every idea and discussing it with a wide array of representatives of the public, trying to find the best long-term solutions. And this model is replicated all throughout Icelandic politics nowadays, with projects like the above mentioned Ministry of Ideas.
Of course, it's still unclear how much longer Iceland's stunning ascent will go on. It's true that most households still have debts amounting to their two-year income. Nevertheless, it's beyond any doubt that the Icelanders' spirit has again taken a positive direction. This is a resilient nation that has survived through the centuries in the harsh conditions of the extreme north. And today they've figured the only way of survival is to roll up the sleeves, and take their destiny in their hands. They do have all reasons to celebrate their newly found independence on the streets and cafes of Reykjavík. Because freedom comes in the mind first, and their minds are already free.
Ps. For the short time that I have to spend around the holidays while back here in Iceland, before I return to SA, I've had the rare opportunity to attend one of the sessions of the Ministry of Ideas, one of the most prominent creative think-tanks in the country. It was amazing. The feeling of being part of something big, inside the forgery of the future of the nation, defies any words. There were quite a few interesting people there whose very presence, and whose personal stories can't help but inspire. Here are some examples.
Skúli Mogensen, a businessman who has returned to his homeland to support Iceland's new beginning. At the time of Iceland's plunge down into the abyss, Skúli was living in Montreal. But in 2009 he returned to Iceland to help its recovery. So far he has worked in the sphere of telecommunications, but in 2011 he founded the Wow Air company, and soon thereafter, he bought one of the two major competitor companies on the Icelandic airfare market. Today Skúli is one of the major investors in green technologies in the land.
Guðjón Már Guðjónsson, a networks expert now trawling for ideas for the future. Just a few weeks after the financial collapse, the businessman created the Ministry of Ideas, a think-tank that collects ideas and gathers businesspeople, grassroots activists and all other sorts of folk who are willing to work for the recovery of their country, and discuss the values the newly cleansed Icelandic society ought to espouse. The inauguration summit of this "Ministry" saw over 1500 people attending, which is half a per cent of the entire Icelandic population.
Ragnar Kristinn Kristjánsson, the biker guy. In his youth, Ragnar created the first mushroom farm in Iceland. But then he sold it, and carried away on the wings of the financial frenzy, he bought a Porsche and he embarked on a series of high-risk financial undertakings. The crisis brought him to bankruptcy. Today he owns a shop for electric bicycles, and is a major advocate for this means of transportation (most of the Icelandic population lives in the capital Reykjavík and the adjacent towns, one of which, Hafnarfjörður is my home town, so the everyday distances are pretty manageable for most people, bicycle-wise).
Birgitta Jónsdóttir, a family friend, and one of the "Pirates" who are fighting for direct democracy, or as they call it, "real democracy". She's a poet, writer and editor, and is currently working for Wikileaks (Iceland has adopted laws that explicitly make it a safe haven for whistleblowers). She's been member of the Alþingi, the national parliament, since 2009, and is one of the founders of the Pirate Party. Their primary goal is to achieve full transparency in public affairs, and direct participation of the public in all decision-making.
Btw, indeed, the pirate spirit is very strong with this country. Saw this along my jogging route the other day. Loved it. :)