August 2011, Week 1


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Tue, 2 Aug 2011 21:46:38 -0400
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Iceland's On-going Revolution 

By Deena Stryker 
Daily Kos
August 1, 2011


An Italian radio program's story about Iceland’s on-going
revolution is a stunning example of how little our media
tells us about the rest of the world. Americans may remember
that at the start of the 2008 financial crisis, Iceland
literally went bankrupt.  The reasons were mentioned only in
passing, and since then, this little-known member of the
European Union fell back into oblivion.

As one European country after another fails or risks failing,
imperiling the Euro, with repercussions for the entire world,
the last thing the powers that be want is for Iceland to
become an example. Here's why:

Five years of a pure neo-liberal regime had made Iceland,
(population 320 thousand, no army), one of the richest
countries in the world. In 2003 all the country’s banks were
privatized, and in an effort to attract foreign investors,
they offered on-line banking whose minimal costs allowed them
to offer relatively high rates of return. The accounts,
called IceSave, attracted many English and Dutch small
investors.  But as investments grew, so did the banks’
foreign debt.  In 2003 Iceland’s debt was equal to 200 times
its GNP, but in 2007, it was 900 percent.  The 2008 world
financial crisis was the coup de grace. The three main
Icelandic banks, Landbanki, Kapthing and Glitnir, went belly
up and were nationalized, while the Kroner lost 85% of its
value with respect to the Euro.  At the end of the year
Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in
Icelanders recovering their sovereign rights, through a
process of direct participatory democracy that eventually led
to a new Constitution.  But only after much pain.

Geir Haarde, the Prime Minister of a Social Democratic
coalition government, negotiated a two million one hundred
thousand dollar loan, to which the Nordic countries added
another two and a half million. But the foreign financial
community pressured Iceland to impose drastic measures.  The
FMI and the European Union wanted to take over its debt,
claiming this was the only way for the country to pay back
Holland and Great Britain, who had promised to reimburse
their citizens.

Protests and riots continued, eventually forcing the
government to resign. Elections were brought forward to April
2009, resulting in a left-wing coalition which condemned the
neoliberal economic system, but immediately gave in to its
demands that Iceland pay off a total of three and a half
million Euros.  This required each Icelandic citizen to pay
100 Euros a month (or about $130) for fifteen years, at 5.5%
interest, to pay off a debt incurred by private parties vis a
vis other private parties. It was the straw that broke the
reindeer’s back.

What happened next was extraordinary. The belief that
citizens had to pay for the mistakes of a financial monopoly,
that an entire nation must be taxed to pay off private debts
was shattered, transforming the relationship between citizens
and their political institutions and eventually driving
Iceland’s leaders to the side of their constituents. The Head
of State, Olafur Ragnar Grimsson, refused to ratify the law
that would have made Iceland’s citizens responsible for its
bankers’ debts, and accepted calls for a referendum.

Of course the international community only increased the
pressure on Iceland. Great Britain and Holland threatened
dire reprisals that would isolate the country.  As Icelanders
went to vote, foreign bankers threatened to block any aid
from the IMF.  The British government threatened to freeze
Icelander savings and checking accounts. As Grimsson said:
'We were told that if we refused the international
community’s conditions, we would become the Cuba of the
North.  But if we had accepted, we would have become the
Haiti of the North.' (How many times have I written that when
Cubans see the dire state of their neighbor, Haiti, they
count themselves lucky.)

In the March 2010 referendum, 93% voted against repayment of
the debt.  The IMF immediately froze its loan.  But the
revolution (though not televised in the United States), would
not be intimidated. With the support of a furious citizenry,
the government launched civil and penal investigations into
those responsible for the financial crisis.  Interpol put out
an international arrest warrant for the ex-president of
Kaupthing, Sigurdur Einarsson, as the other bankers
implicated in the crash fled the country.

But Icelanders didn't stop there: they decided to draft a new
constitution that would free the country from the exaggerated
power of international finance and virtual money.  (The one
in use had been written when Iceland gained its independence
from Denmark, in 1918, the only difference with the Danish
constitution being that the word ‘president’ replaced the
word ‘king’.)

To write the new constitution, the people of Iceland elected
twenty-five citizens from among 522 adults not belonging to
any political party but recommended by at least thirty
citizens. This document was not the work of a handful of
politicians, but was written on the internet. The
constituent’s meetings are streamed on-line, and citizens can
send their comments and suggestions, witnessing the document
as it takes shape. The constitution that eventually emerges
from this participatory democratic process will be submitted
to parliament for approval after the next elections.

Some readers will remember that Iceland’s ninth century
agrarian collapse was featured in Jared Diamond’s book by the
same name. Today, that country is recovering from its
financial collapse in ways just the opposite of those
generally considered unavoidable, as confirmed yesterday by
the new head of the IMF, Christine Lagarde to Fareed Zakaria.
The people of Greece have been told that the privatization of
their public sector is the only solution.  And those of
Italy, Spain and Portugal are facing the same threat.

They should look to Iceland. Refusing to bow to foreign
interests, that small country stated loud and clear that the
people are sovereign.

That’s why it is not in the news anymore.


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