Thursday, April 26, 2012

Iceland President: Banks are Harmful

When the financial collapse began (c. 2008), some powerful players were calling for austerity in Iceland.  Instead, under this President's leadership, they took control of the debt and refused to bail out the "too big to fail" banks.  Call it a semi-Jubilee.  Most crucially, the rejected the Anglo-American orthodox IMF model:

His country's strength came from recognizing the problem was not just an "economic and financial challenge", but a "profound social, political, and even judicial" challenge.  After the crisis, the country held a full judicial investigation, and went against "the prevailing economic orthodoxies of the American, European and IMF model."

"It was absolutely very tough indeed," Ólafur says. "Every big financial institution, both in Europe and in my own country was against me, and there were powerful forces, both in Iceland and Europe, that thought my decision was absolutely crazy."

The results have been impressive:

"Iceland is repaying its IMF loans early, unemployment is down, and growth is above average.  The crisis remains front page news in Greece, Italy and Spain — countries that followed a very different response from Iceland's."

His problem isn't Europe, but the European and American banking system. He says Iceland's lesson is that "If you want your economy to excel in the 21st century [...] a big banking sector, even a very successful banking sector, is bad news.   You could even argue that the bigger the banking sector is, the worse the news is for your economy," he adds.

"I have never understood the argument — why a private bank or financial fund is somehow better for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector".


degs said...

This is welcome and extraordinary news. What an incredibly brave man - a modern Solon. We can only hope that other nations have the foresight and courage to follow suit.

Justin said...

I agree. Unfortunately, few men reach such positions of power, because the system is rigged to favor those who support the Money Interests. True populists cannot raise the money to attain positions of power.