Iceland was last in the news when they throwing corrupt bankers in jail for 3 to 5 years, while making them pay millions in personal fines.
This is, of course, a far different approach to justice than Eric Holder's method in which bankers are Too Big To Prosecute and federal regulators turn a blind eye to abuses.
Instead of bailing out bankers, Iceland forgave homeowner debts.
So what has this non-neoliberal approach done to the Iceland economy?
While the euro area grapples with record joblessness, led by more than 25 percent in Greece and Spain, only about 4 percent of Iceland’s labor force is without work. Prime MinisterSigmundur D. Gunnlaugsson says even that’s too high.During the 2008 collapse, Iceland's stock market fell 90% and its GDP shrank 10%. Unemployment peaked at 9.3%.
“Politicians always have something to worry about,” the 38-year-old said in an interview last week. “We’d like to see unemployment going from where it’s now -- around 4 percent -- to under 2 percent, which may sound strange to most other western countries, but Icelanders aren’t accustomed to unemployment.”
Because of popular protests, the government refused to bail out the banks at the expense of the general economy.
Policy makers overseeing the $14 billion economy refused to back the banks, which subsequently defaulted on $85 billion. The government’s decision to protect state finances left it with the means to continue social support programs that shielded Icelanders from penury during the worst financial crisis in six decades.Iceland set aside around 43% of its budget with the Welfare Ministry last year, around the same percentage as before the crisis.
Iceland will be writing off up to $32,600 of household mortgage debt, around 13% on average.
Britain and Netherlands are suing Iceland again for reimbursements on failed deposits.
"I wouldn't say we are concerned about this," Gunnlaugsson said. "It is unlikely they will get very much out of this because there is no state or government guarantee."“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”
- Iceland’s President Olafur Ragnar Grimmson
That's last statement is not totally true. Iceland's capital controls has in effect limited their access to global finance. Thus Iceland was forced to impose modest austerity measures.
It is those austerity measures, combined with Social Democrat's interest in joining the Euro, that caused the ruling government to get voted out last year.
Iceland is the only country in the world to have launched legal proceedings against a politician for presumed involvement in the financial crisis. The country’s courts were asked to rule on whether Geir Haarde, the former prime minister, could be held responsible for the financial crisis. Haarde was acquitted on three out of four charges against him, but was found guilty of breaking the law on the responsibility of ministers.
Sun Feb 16, 2014 at 9:05 AM PT: I believe that the issues that some people here have with my diary isn't anything I've written, but is instead what they think I've said.
I've never said things are "rosy" in Iceland. For some reason people want me to paint a complete picture of Iceland.
I didn't do that, nor did I intend to do that. My intention was only to focus on what Iceland did right concerning the banks, and what the fallout has been because of those specific decisions.
In that context I have seen nothing to show that I didn't present the facts correctly.