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So it was bound to happen sooner or later.  Naomi Klein finally bought into the myth that's been circulating about how Iceland dealt with its monetary crisis -- even on a rec-listed diary here on Daily Kos.  Oh sure, she eventually retracted after it was pointed out to her that this story is full of errors -- but not before being retweeted to heck and back, spreading this yarn further across the internet.

While I've often done my best to try to eliminate this myth, probably the best voices trying to set the record straight are coming from within Iceland itself.  So without further ado, let's see what the Reykjavík Grapevine has to say.

(Content of article reposted with the permission of the Reykjavík Grapevine.  Pictures added by me as a visual tour of this incredible country, in contrast to the downer that is the kreppa that they're still mired in.  If the photos are distracting to you, simply read the Grapevine's article on its original site.)

So here it is, a deconstruction of that error-ridden article, “Iceland’s On-going Revolution,” which is unfortunately making rounds in the Twitter-sphere.

In the first paragraph, the article states: “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.”

There are two errors there. One is obvious. Namely, Iceland is not a member of the European Union. The other one is perhaps less obvious, but it is nonetheless an important point. That is, Iceland did not go bankrupt. This factual error was heavily criticised in 2008 when Iceland’s banks collapsed and news spread that Iceland, the country, had gone bankrupt. This is as wrong today as it was then.

(Above: Iceland's bright colors are a throwback to its history as the poorest country in Europe, which meant that most construction was with sheet metal, needing to be protected by paint, which was commonly acquired as surplus from the ship yards)

Then there’s this statement: “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.”

These numbers are wildly inaccurate (and not to be too pedantic here, but sticking to a multiplier or percent would be helpful when making such a comparison). To set this straight, Iceland’s debt (as in The Central Bank) was equal to 57% of the GDP in 2003 and fell to 43% of the GDP in 2007, according to World Bank statistics. In 2009, that percentage reached 104%.

Now, if by Iceland the author meant Iceland’s banks, then it’s true that the banks’ debt was pretty big—astronomical really—and by 2007, Iceland’s banks did in fact reach 9 times the GDP, though that’s GDP not GNP.

(Above: Harpa, a concert hall in Reykjavík built during the spending boom of the late '00s.)

Then there’s this: “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.”

Again the statement, “At the end of the year Iceland declared bankruptcy” is wrong. And the Icelandic krónur lost more like 50% of its value compared to the Euro any way you look at it.

(Above: Reykjavík has a thriving graffiti art culture, often encouraged or even financed by local businesses.)

Moving on to the next paragraph: “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.”

It’s true; we had a referendum to elect a Constitutional Assembly—a group of twenty-five people tasked with writing a new Constitution. But there were 500 plus candidates to choose from, and the results were nullified because proper election procedures weren’t followed. Rather than hold another referendum, those individuals were ‘appointed’ to a Constitutional Committee. They have now submitted a ‘proposal’ for draft of our new Constitution, but we by no means have a new Constitution yet! This is definitely jumping the gun. Our old one still reigns supreme.

(Above: Iceland's first parliament (debatably the oldest in the world) met here at Þingvellir, where the mid-Atlantic ridge rises above the water.)

Then it says: “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.”

Okay, come on now. It’s the IMF, not FMI. Furthermore, Geir Haarde is from the right-wing Independence Party, which had a coalition with the Social Democrats.

(Above: The Hallgrímskirkja, formerly the tallest building in Reykjavík, has since been surpassed by a large office building built during the boom.)

Back to the Constitution: “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.”

Apparently the author was confused about whether or not we had a new Constitution when she started writing and then did some more research toward the end to realise that yes, it is still a draft with a number of hoops to go through.

The idea that the Constitution was ‘crowdsourced’, as the international media has been keen on reporting, is at best half true. But accepting suggestions via Facebook and an Internet submission form is hardly the same as the Constitution being “written on the internet”. It sounds cool though.

(Above: Despite 1/3 of the population living in remote areas, Iceland has the highest broadband penetration rate in the world.)

While nearly every paragraph in this article is riddled with factual errors, the concluding message is also misleading: “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.”

First of all, it’s naive to think that Iceland was able to stand up to the IMF. In his article, ‘New York Times Reporting Misses the Mark on Iceland, Prints Neoliberal Line’ on, Sam Knight makes some good points: “Why Iceland is pursuing its welfare-for-the-elite policies is anyone's guess,” he says, “but with the IMF providing emergency currency support, it has had influence in diverting Icelandic resources back toward the financial sector.”

He adds: “If Iceland had refused to share the IMF's worldview, it could have been denied funds necessary to implement capital controls and stop the Krona's tailspin. Failure to adhere to the IMF's demands could have also caused Iceland's sovereign credit rating to drop significantly, which could have isolated Iceland from international capital markets (despite the fact that credit ratings agencies, in the wake of 2008, are in need of urgent reform).”

(Above: Iceland is highly dependent on both imports and tourism of its incredible landscapes for its economy.  The weak Króna has boosted tourism but dramatically reduced the buying power of the country's citizens.)

Whether or not influenced by the IMF, one might note that two of the three banks that Iceland “let fail” because it couldn’t bail them out (they were nine times the country’s GDP), have been re-privatised and there is currently a debate about privatising the third.

Not to mention, there’s the case of HS Orka, in which 98 percent of a publically owned geothermal energy company was sold to Canadian company Magma Energy (now called ‘Alterra Power’), giving it access to geothermal energy in the Reykjanesbær peninsula for 65 years with a renewal option for another 65. This erupted in controversy with Björk leading the crusade against Magma Energy. Alas, it was without success.

The case might as well feature in Naomi Klein’s book, ‘The Shock Doctrine’.

(Above: A highly geothermally-active country, Iceland not only generates nearly all of its power from renewable resources, but pipes the waste heat into homes as a dirt-cheap hot water utility rather than throwing it away into rivers as we do in America)

Furthermore, while Iceland may seem like a symbol of sticking it to the financial institutions that brought about the financial collapse, the people really haven’t escaped the burden. To quote respected political commentator Egill Helgason in an article that will print in The Grapevine on Friday: “According to an OECD report Iceland has put more money into its failed financial institutions than any other country except Ireland. So in this way Iceland is not a model—the people in Spain need not wave Icelandic flags.”

To the contrary of the message put forth in this article, “Iceland’s On-going Revolution,”  and the notion that Iceland was able to resist the shock doctrine, he says: “The political debate in Iceland has gotten horribly stale and repetitive. In some places Iceland is held up as being a model of how to survive an economic crisis and rebuild society. For most Icelanders this seems totally wrong. Some politicians, including our President, like to flaunt this view when they go abroad, but this is definitely not the feeling in Iceland.”

So, @NaomiAKlein have we crushed the hopes of millions? As a publication we strive to practice good journalism, though we have to say that a part of us is reluctant to correct these kinds of articles, as it is nice to see citizens of other nations, like Spain and Portugal, being inspired by our story. Hope has to come from somewhere.

(Above: The black columnar basalt beaches near Vík í Mýrdal were carved by the action of rogue waves travelling unobstructed from as far away as Antarctica)

Anna could have continued on, mentioning the countless other mistakes, such as getting wrong the percentages on the last referendum, the details of the legal battle with the UK and the Netherlands, or the year Iceland gained it's independence... but there's only so far you can kick a dead horse.  As much as we may want some perfect symbol of a country "standing up to the man", a nation that supposedly did what we're asking other countries to do, Iceland is not that nation.  But don't let that detract from all that Iceland is, has been, and will be in the future.

I'll leave you with a couple more shots of the country.

(Yeah, it's really all that and more)

Originally posted to Rei on Wed Aug 24, 2011 at 06:04 PM PDT.

Also republished by EconKos.

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Comment Preferences

  •  I don't know who's more correct here... (2+ / 0-)
    Recommended by:
    Nulwee, Wee Mama

    ...but I haven't seen anything to suggest that Iceland did anything as revolutionary as what Argentina did under Duhalde in 2003.  Of course, that situation was entirely different.

    Let us resolutely study and implement the resolutions of the 46th Convention of the Democratic Party!

    by Rich in PA on Wed Aug 24, 2011 at 06:10:43 PM PDT

  •  Jesus, that is beautiful beyond words! (sorry, (21+ / 0-)

    the points made about sloppy research are good ones, but I cannot get beyond the stunning beauty of the landscape.)

    Sign me up for the tour bus!

  •  Columnar basalt in the second to last photo. (5+ / 0-)

    That is volcanic rock.

    "Hahai nō ka ua i ka ululā'au" -- Hawaiian proverb.

    John Boehner? The sleaze bucket who hands out bribes from big tobacco on the House floor?

    by Nulwee on Wed Aug 24, 2011 at 06:54:11 PM PDT

    •  Yep. :) (8+ / 0-)

      That's Svartifoss, in Skaftafell.  Iceland has tons and tons of columnar basalt.  And not just straight, perfectly aligned stuff.  If I had to pick the most incredible place I've visited in Iceland, it'd be the canyon of the Jökulsá about halfway between Ásbyrgi and Dettifoss.  The rock in the area was laid down 10,000 years ago, a huge thick volcanic mass, and then was carved out in just two flood events.  Each flood event lasted just a couple days, but during those days channeled 50x as much water as the Mississippi.  The formations are like something from another planet.  I'd find myself staring into a concave depression on a twisted rock spire, with the roar of the Jökulsá coming from the wrong direction (ahead of me instead of behind, due to the focused refection), with the columns of basalt radiating outward, ten-thousand hexagonal ridges, each capped with what looks almost like a contorted face, reaching around me.  And on one side, a natural staircase, heading up, up, up, then twisting, escher-style, and traversing the "walls" and the "ceiling".  I mean, just unreal.  I walked it under the light of the midnight sun.  It was practically a religious experience.

  •  Gorgeous photos (6+ / 0-)

    this is somewhere I want to go to some day.  Where are the photos from?  Are they yours?  If so, lucky person.  If not, where can I see more?

    •  I took video, not photos ;) (6+ / 0-)

      And my video isn't edited together yet, so it's still over a thousand raw clips.  But I'll get it together some day.  For now, these pictures  are mostly from places I've gone and pics that I felt were representative of the whole country.  For example, I camped right where that tall waterfall (3rd picture in the bottom set) was taken (then hiked the trail beside it and saw about two dozen more waterfalls like that) up onto glaciers between two highly active volcanoes (Eyjafjallajökull and Katla) through a storm so intense waterfalls were going sideways and I was staying hydrated by drinking the water streaming across my face.  The visibility was so bad on top that we couldn't see the markers, and ended up walking out too far onto Katla's glacier, finding ourselves staring at a huge crevasse as a chunk crumbled off perhaps 10 meters away.   The next day we went right over one of Eyjafjallajökull's vents, where the rocks were still hot from last year's eruption.  Then down into the steep rainbow-covered green canyons of Þorsmörk.

      Oh, and the picture after that is Bláa Lónið, the Blue Lagoon.  Yet another nifty use of "waste water".  The geothermal seawater makes your hair stiff but does wonders for your skin.  And it made my nail polish come off, too  ;)  The colder and windier the air above it, the better the warm water feels.

      I could keep going, but you get the picture.  :)

  •  There's no free lunch. n/t (1+ / 0-)
    Recommended by:
    johnny wurster

    Ideology is an excuse to ignore common sense.

    by Bush Bites on Wed Aug 24, 2011 at 08:44:16 PM PDT

  •  How difficult would it be to... (3+ / 0-)
    Recommended by:
    Nulwee, NonnyO, Wee Mama

    ...expatriate to Iceland?

    •  It depends whether you're skilled or unskilled (1+ / 0-)
      Recommended by:
      Wee Mama

      labor.  And, of course, whether or not you speak Icelandic.  Unskilled labor is pretty easy to get jobs in Iceland even if you don't speak Icelandic -- fish processing, cleaning, aluminum, construction, etc.  There are lots of Polish immigrants in particular working in such fields, Skilled labor is pretty difficult unless you speak Icelandic (even though essentially everyone there between the teenage years and the elderly speaks awesome English; Icelandic is the language that they speak with each other).

      Once you get a job, you have to pay for your own healthcare for the first six months.  After that, you're put on the national heathcare system and you don't have to worry about that anymore.  After seven years of residence, you can apply for citizenship.

      •  Hmmm...doesn't sound like they'd want me. (1+ / 0-)
        Recommended by:
        Wee Mama

        I'm an erotic illustrator....I draw guys (and sometimes women) having sex with each other. It's a skill but not much in demand internationally. On the other hand I can pretty much conduct my business anywhere with internet service and a nearby Post Office. I'm 57 or so and would decline any healthcare services....maybe still get my teeth checked once a year. As far as language I think I could pick up some basics by osmosis but really, I've gone months at a time not having a conversation with anyone (other than greeting a bus driver or thanking a cashier) so maybe I can skate by since I have no problem being virtually silent. A smile and a wave might suffice for the next fifteen (or less) years I expect to be around. One of the good thing about expatriating to Iceland is I won't have to worry about being bombed by American drones like I might be in Venezuela or Costa Rica or anywhere else that might have shit America wants in the future...

        •  Given your field... (0+ / 0-)

          you'd probably find Iceland's culture interesting.  It's a very sexually-liberated country.  For example, Reykjavík's LGBT pride fest is the biggest annual festival in the country; this year's fest was attended by 1/3rd of the country's population, and their drag competition was held in Harpa (their equivalent of Madison Square Garden).  People really don't give a rat's arse who you sleep with.  When their lesbian prime minister signed their same-sex marriage bill, it had just passed their parliament 49 to 0.  "Dating" in Iceland is seen as roughly synonymous with "sleeping with".  There's very little social stigma associated with hookups, but if you hook up with the same person several times in a row, you're sort of de-facto assumed to be seeing each other, and then cheating is thereafter frowned upon.  Marriage rates are very low, yet the birth rate is not.  There's little pressure to get married; people marry if they want to.  They have children if they want to.  Parents live together if they want to.  Single parenting is common, but there's lots of government and family support.

          •  Wow. Sounds positively Paradisical! (1+ / 0-)
            Recommended by:

            Plus snow and volcanoes, right? It sounds like everything I'd like in an environment. Now I'm going to seriously investigate just how I can transport my carcass over there...Thanks!

            •  Snow varies widely. (1+ / 0-)
              Recommended by:

              Reykjavík only had 14 snow days last winter, although that's unusually low.  But usually snow doesn't stick there.  In the northeast, however, they get snowier winters, the highlands more, the mountains even more, and there are lots of glaciers where there's snow all the time (including the biggest glacier in Europe, Vatnajökull -- which has a beautiful terminus at one point called Jókulsárlón, if you want to look up pictures).  Ironically, the northeast is warmer than Reykjavík in the summer.

              Volcanoes?  You better believe it!  ;)  Tons of them.  There's all sorts of mini-"yellowstones" all over the country, and eruptions are quite frequent (although some are subglacial -- those mainly manifest with "jökulhlaup" floods, which take out the bridges in the south -- they rebuild them in a matter of days, though, it's really amazing).

  •  Maybe in the future (4+ / 0-)
    Recommended by:
    Nulwee, NonnyO, Rei, Wee Mama

    all the depressing news can come with photos of Iceland so we can feel better while we're reading?

    Amazing diary but I must admit to getting whiplash - depressing correction- amazing photo - even more depressing correction - even more amazing photo! And on it went.

    Thanks for the diary. It's obvious we all wanna go - I guess summer is the best time?

  •   ❤ ❤ ❤ the pix!!! (4+ / 0-)
    Recommended by:
    vets74, Rei, Wee Mama, ursoklevar

    Yes, I also appreciate the research and all the work you put into the critical analysis..., but I am enamored of a land I've never seen because I know a small bit of the history of the place and the people who settled there..., so I love the images.  :-)

    ❤ ❤ ❤

    I'm sick of attempts to steer this nation from principles evolved in The Age of Reason to hallucinations derived from illiterate herdsmen. ~ Crashing Vor

    by NonnyO on Thu Aug 25, 2011 at 02:40:14 AM PDT

  •  You missed one more howler of a mistake (3+ / 0-)
    Recommended by:
    johnny wurster, Rei, Wee Mama
    Then it says: “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.

    This number has to be wrong.  How does a $2 million loan solve a multi billion dollar debt crisis?

    What's really distressing about this particular mistake is that it demonstrates that many people who "comment" about the financial crisis and economics not only don't know what they're talking about but don't have even a little bit of number sense.  In other words, whoever wrote this doesn't really even understand the difference between millions and billions.  

    I often encounter this -- as when people talk about the bailouts being in the billions, or trillions or tens of trillions without seeming really to understand the scale of the numbers they are throwing around.

  •  Recognizing that this post (4+ / 0-)
    Recommended by:
    johnny wurster, vets74, Rei, Wee Mama

    is a bit mixed in its view of Klein, I've always thought of her as essentially the Thomas Friedman of the left. Too caught up in neat metaphors and big picture narratives to really think about the nuances of an issue and/or rely on hard data to support her conclusions.

  •  Can't wait to go! (1+ / 0-)
    Recommended by:

    I'm looking forward to not being the tallest person around. And also being around sex-positive folks!

  •  Great Diary (0+ / 0-)

    Very well done.

    Thanks for taking the time to set the record straight

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