Publication of investigation commission report into country’s financial collapse
Icelandair (an Icelandic airline) spokesperson, Gudjon Arngrimsson, gave an optimistic statement to the press; saying that, “If managed properly, the unprecedented focus on Iceland can create great opportunities for tourism on the island”. He claims not to recall similar attention being paid to Iceland ever before. The eruption at Eyjafjoell and the ash cloud resulting from it has caused disturbances to air traffic in all European countries, and resulted in hundreds of thousands of people being stranded, all over Europe. The commotion caused by the volcanic ash cloud has, however, been most fortunate for the Icelandic capitalists; since it has diverted attention from the content of the recently published report of The Special Investigation Commission – set up by the Icelandic parliament to investigate the causes and origins of the collapse of Iceland’s oversized banking sector. It can be said that nature has intervened for the benefit of the Icelandic ruling class.
Political significance of the report.
According to the laws passed by the parliament which set up the The Special Investigation Commission, its task was to find out the truth about the causes and origins of the financial sector’s collapse. This is not common in Icelandic society: that a commission set up by the parliament is, according to the law, literally obliged to tell the “truth” about the subject concerning it. The significance of this report is enormous in the Icelandic context. The anticipation of the report has been great and its publication has been delayed at least three times. It was originally supposed to appear in late February. The publishing of the report and its contents will be useful for the examination of the processes and events which led to the country’s economic meltdown and may help to raise the level of political discussion in the country. Actors reading it out in a theatre brought home the potential for mass protest just before the other volcano – Eyjafjoell – erupted.
The government, which was in power when the banks collapsed is said to have shown “extreme negligence”, by ignoring the warning signs given about the size of the country’s banking sector. The three large banks were given almost unlimited opportunity to grow, and warnings about the Icelandic state not being able to guarantee its banking sector if things took a turn for the worse were largely ignored. The country’s banking sector grew 20-fold in size in only 7 years. The bulk of loans granted by the three large banks – Landsbanki, Glitnir and Kaupthing – were to holding companies and investment funds who owned shares in the banks (or the other way around). Many of those companies were based outside Iceland. The report also claims that the owners and CEO’s of Landsbanki were reluctant to accept the terms of the British Financial Services Authority for the moving of its “Icesave” accounts to a UK-based daughter company. In July 2008, Landsbanki received a letter from the British Financial Services Authority, which advised them to move the “Icesave” accounts to a British daughter company, for example Heritable-bank, so that the accounts would be guaranteed by the British deposit fund. The report claims that here the Icelandic authorities, especially the Federal Bank, missed an important opportunity to minimise the damage caused to the national economy.
The Federal Bank’s central board is criticised in the report for negligence on that particular issue. Geir H. Haarde, who was Prime Minister when the banking system collapsed, has claimed the banks themselves are mainly to blame for the collapse. Already by the year 2006, the collapse of the country’s banking sector was inevitable. This is an interesting statement coming from Haarde, who up until the nationalisation of Glitnir, went to great lengths to convince the Icelandic public that the banks were in good shape. The report clearly and unambiguously exposes the myths of neo-liberalism; such as the idea that economic growth and value could be created merely by increasing the mobility of capital and giving the financial sector a leading role in the economy. The Icelandic banks, and the oligarchs who owned them, are, according to the report, responsible for share price manipulation and exaggerating asset values. This was done by both balance-sheet juggling and using cross-ownership to exaggerate values of companies and assets. For example, the airline investment group, FL-Group, increased its value in just a few months from 5 billion isk to 20 billion, though cross-ownership balance-sheet juggling. The Icelandic Economic Fraud Investigation is now looking into a transaction of 3 billion isk from the accounts of FL-Group to an account of Kaupthing in Luxemburg.
The crisis of the Icelandic ruling class.
There is tension within the Independence party, the traditional party of Icelandic capitalism, at the moment, because of the report’s content. The party’s constitution has been changed: a clause which has been there since 1929 (when the party was founded) used to say that the party stood for “individual freedom and free enterprise with the interests of all classes in mind”. It also claimed to stand for “Icelandic national interests”. Now, “individual freedom” has been taken out and it claims to stand for “equal rights and free enterprise”. Perhaps this is now being done because it seems too obvious that their “individual freedom” has primarily been the freedom of financial oligarchs to use the economy as their private casino. The notion of “national interests” has also been taken out. This is because large sections of Icelandic capitalism, and subsequently, significant sections of the Independence Party leadership, are now prepared to abandon their treasured “independence” for joining the EU.
The party’s deputy Chairperson, Thorgerdur Katrin Gunnarsdottir, a former minister of education, has resigned from her post within the party, due to controversy regarding loans granted to her husband from the banks, which amount to 1,7 billion isk. She attempts to dodge the bullet by claiming that they are not her loans, but her husband’s. Gunnarsdottir said recently in an interview that she found it strange that politicians and governmental institutions were not able to hinder the overgrowth of the banks. In this, there are echoes of the Danish philosopher, Søren Kierkegaard, who claimed that life could only be understood afterwards! Controversy regarding large loans from the big banks is also haunting the party’s Chairman, Bjarni Benediktson, who received loans worth 170 million isk in the years between 2005 and 2008. The Independence party has now decided to hold their national congress sooner than they had planned, because of the information given in the report about mistakes made by their ministers in government and “unusual” links they had with the big businesses, which are seen to have caused the meltdown. Illugi Gunnarson, prominent Independence Party MP has temporarily resigned from his post while the investment funds of the banks are under further investigation, as he was a board member of one of Glitnir’s funders.
The President of Iceland, Olafur Ragnar Grimsson, is criticised by the Investigation Commission for having gone too far in his support for the country’s financial oligarchy and their expansion abroad. The President has played a different role in Iceland, for he has no political power. His function is in many ways similar to royal families in other European countries, except he is elected. The President is supposed to be “a symbol of national unity”, a mystifical and pious pretension. But now, the President is more controversial and is primarily seen as having acted as an agent of big business. His populist move of refusing to sign the "Icesave" law, and thus triggering a referendum on it which showed 93% against, has not been enough to redeem his reputation in the eyes of the public.
Two of the most prominent financial oligarchs – Bjorgolfur Thor Bjorgolfsson and Jon Asgeir Johannesson – have given public apologies for their business conduct and “mistakes” they made in managing their financial empires. This “initiative” of theirs has backfired however, and is generally seen as an embarrassing and false spectacle. The Icelandic capitalists seem, however, to be re-thinking their previously arrogant self-confidence and trying to excuse themselves by blaming others, for example, politicians or insufficient regulation, for their blunders. The understaffed and inexperienced Financial Services Authority in Iceland is also being blamed for the meltdown. This is hypocritical, since this situation of the Financial Services Authority was not considered a problem until the capitalists needed a scapegoat.
"Parliament of the streets"
The need for organised struggle.
"The private banks failed, the supervisory system failed, the politicians failed, the administration failed, the media failed, and the ideology of an unregulated free market utterly failed." Johanna Sigurdardottir, the Prime Minister of Iceland, thus summarises the lessons to be drawn from the report. The Minister for Finance, Steingrimur J. Sigfusson, is keen on merely blaming the previous government for the “mess” they have made of the national economy, which the current government has got to “clean up”. This is merely done to mask the government’s inability to meet the needs of workers, youth and pensioners. It is not enough just to blame the bankers and the previous right-wing government for the “mess” they have made of the national economy. Especially since it is obvious who the new government is serving, despite the stated wish to, “let the burden of the crisis fall on the shoulders of those most able”.
The government is working to restore the same capitalist system which is the cause of the crisis. Its policies result primarily in workers and youth paying for the crisis of capitalism, while the financial oligarchs get billions of their debts written of at the expense of the working class and middle layers. None of the established political parties represent the interests of workers. Therefore we have to organise our struggle to defend living standards and public services ourselves, with the aim of creating a new political formation which is able to fight for the interests of workers and youth. We must stop the process of the bailing out the financial oligarchs by refusing to pay their debts abroad. The cuts in health care, education and social security must be stopped.
International socialism the solution
Youth unemployment has become a problem in Iceland for the first time in decades. To avoid large sections of Icelandic working class youth becoming marginalised from society; as well as to counter the ills of rising unemployment, we must shorten the working week to 30 hours to give more jobs to those who need them, without loss of pay for anyone. To counter the effects of inflation on living standards, we must insure that wages and other income rise automatically with inflation. The large supermarket chains should be nationalised under democratic control and management of workers to reduce the increased costs of living. To counter the rise in housing and rent, we should nationalise housing owned by large contractors and construction companies under the democratic control of workers and youth, and build more social housing to create affordable accommodation for workers and youth. All debts of working class households and students to the banks should be written off. Partial writing off of debts should also be offered to the middle class households in difficulty. The banks should be nationalised under democratic control and management of workers and all their books and accounts should be opened so we can see where the billions went. The fishing industries, aluminium smelters and oil companies (gas station chains) should be nationalised under democratic workers’ control and management; and their books should be opened as soon as possible so we can get the information we need to plan the economy to meet the needs of all. We need the money created by those industries to defend living standards and public services.
The weekly demonstrations being held under the title “Parliament of the streets” are a step in the right direction, but having demonstrations outside the parliament is not sufficient to counter the onslaught of the ruling class and its politicians on living standards and public services. We must plan out struggle, set ourselves clear goals and have a perspective on what we want to achieve through it.
Contrary to what many capitalist commentators and politicians claim, there is no “Icelandic” way out of the crisis. The financial oligarchy of Iceland was an active and eager participant in the global capitalist system, and the scale and the depth of the meltdown of the national economy only exposes how vulnerable it is to what happens on the international financial markets. The Icelandic economy has always been dependent on the outside world.
When the government started inviting multinationals to set up aluminium smelters in the country, the goal was primarily to make the national economy less vulnerable to changes in the price of fish on the world market. We therefore have to have a global perspective and link our struggle to defend living standards and public services up with similar struggles of the working class in other European countries; so we can be better able to defend ourselves. We must also learn from struggles which are being fought in other countries. The “ethical” and national capitalism which many in the ruling class are presenting as a “solution” to the “mess” neo- liberalism has made in Iceland represents a reactionary, fake solution, which will only undermine the situation of workers and youth further. We need a socialist and internationalist solution to the crisis of capitalism, in Iceland and around in the world.