After many months of planning, PopTech has arrived in Iceland. One of the most common questions I get is why we’re here, so let me offer a few thoughts.
Iceland is a truly remarkable place, both geographically and culturally. To begin with, it’s a physically gorgeous country, filled with waterfalls, glaciers, shimmering northern lights and (occasionally to everyone’s chagrin) volcanic eruptions. The landscape is stark, ethereal, and, often, of recent geological vintage. It’s a place where one can feel humanity perched modestly amid forces much more powerful than itself; after sitting quietly alone in front of the iconic, turbo-charged Gullfoss waterfall for a few hours, if someone had said to me, this waterfall is alive – it’s inhabited by an ancient spirit – I wouldn’t have quite believed them, but I would certainly have known where they were coming from.
And it’s not just the waterfalls. Iceland actually sits atop the meeting point of the North American and European tectonic plates, and the ground itself feels energized and potent. Indeed, the country produces such vast sums of renewable geothermal energy that, if they could, the aluminum smelting industry would happily ship every ounce of Bauxite on Earth here to be turned into soda cans and Boeing airplanes.
Icelanders have other ideas for what to do with all of that subterranean heat, from running year-round, locavore greenhouse farms, to ambitious plans for Internet data warehouses, powered by geothermal energy from below, and cooled by Icelandic breezes from above. (With the right data-protection policies in place, this could turn Iceland into a kind of “Switzerland for Data”.) Other efforts are less grand, but no less visionary: a few years ago, in a small inlet in Reykjavik, some enterprising residents ran some steam tunnels out under the North Atlantic, raising the temperature of the seawater to bathtub levels. Then they imported a bit of beach sand, and voila! – a Caribbean beach, within spitting distance of the Arctic Circle.
Iceland is demographically tiny, with 320,000 residents, almost half of which live in the capital city Reykjavik. The culture is both ancient (this is, after all, the site of the first Parliament ever, in 930AD) and, until relatively recently, so genetically isolated that it has become an important center for population genetics research. Yet, Iceland has, at the same time, been an amazing contributor to global culture – particularly through its extraordinarily rich musical scene, which is now a major export industry. And the music industry’s success is bringing all of the other, more nascent creative industries – art, graphic design, architecture, and craft – to new global audiences.
All of the above would make for a wonderful, fully justified rationale for a visit to Iceland. And really, you should come here. Yet that’s not really why we’re here. Our reasons are at once darker, and more optimistic.
As most people know, Iceland was one of the epicenters of the global financial crisis in 2008. Adjusted for the small size of the country, it was the largest banking collapse in history.
The reasons were prosaic enough, beginning with a 2001 decision by Icelandic authorities to aggressively deregulate the country’s banks. These institutions, run by a group of “Icelandic Oligarchs” promptly went on a buying and borrowing spree, acquiring debt and companies at a furious rate. An economy that once measured its health by the size of the herring catch was now taking a major stakes in companies like AMR, the parent company of American Airlines. The economy quickly overheated, with bank holdings inflating to many times the size of Iceland’s GDP. Iceland’s currency inflated as well, and it attracted vast, disproportionate sums of foreign investment, and there was a big borrowing explosion at home, with Icelanders taking on debt roughly twice the size of their disposable income.
When the meltdown came in 2008, Iceland’s crisis was existential. GDP shrank overnight by 10%; unemployment grew sevenfold. Civil unrest broke out in otherwise placid Reykjavik. When I ask residents how they felt then, in late 2008, the words most often used are “terrified” and “enraged”. I nod, remembering how those same months felt in the U.S.
And yet, Iceland’s path after the crisis could not be more different than the one taken by the United States. In the several years since the crash, the country has criminally indicted its former Prime Minister, Geir Haarde, and is slowly undertaking the criminal prosecution of a number of major bankers. These efforts may not yield great insights, or huge numbers of convictions – one journalist told me that of the 200 criminally culpable, perhaps 20 will see jail time. But they do bring a sense of closure and national unity. Of central importance, Icelanders voted – twice – by popular referendum to let their private banks fail, and not to saddle the public with extraordinary, generations-lasting debt. And now, after some fits and starts, Icelanders have elected 25 citizens to rewrite the country’s constitution.
And what’s the result of all of these activities? The country recently had its debt upgraded to investment-grade status; it’s debt levels are lower than those of countries like Ireland, which, like the US, decided to prop-up its banks. Iceland’s rate of unemployment, while higher than precrash levels, is lower than that of the US. The IMF – which initially decried Iceland’s moves – has since celebrated the country as a model for crisis management. Other small nations are looking to Iceland as a potential model.
It’s essential to point out: not everything is perfect in Iceland – far from it. The story of Iceland’s response to the crisis is not fairy-tail perfect, it’s not linear, and it is not over. Personal household debt, for example, remains crippling – people still have a lot on the family credit card, so to speak. A lot of retirement savings was tied up in those failed banks – and with foreign investment limited, some in the business community fear there could be an inflationary asset bubble as the country is forced to invest its retirement savings locally. And people made more immediate mistakes: after the crisis, Icelanders voted out the existing political parties and voted in a new set of politicians, who have proven to be hugely unpopular. And the constitution, while containing some widely admired principles, has been criticized for having some components that are too complex – some fear it may not pass.
But even so, there are some critically important resilience lessons here, not just for the Iceland but also for the world.
First, the mass social actions that Iceland undertook in response to the crisis helped create outlets for social catharsis and bolstered a sense of commonweal. They helped people feel like they were in the same boat, and gave a sense of agency to the people. The constitutional rewrite process, for example, grew directly out of community organizing.
Second, Iceland’s abundant natural resources – fishing stocks and geothermal energy among them, not to mention the draw of Iceland’s beauty for international tourists – is a huge economic ‘prop’, no matter what else is happening in economy. Having a renewable, clean-energy economy has proven to be a huge resilience-booster for the country. Sometimes you can build the resilience of a fragile system – in this case, the economic one – by bolstering those around it. (As a side note – one feature of the new constitution is the nationalization of Iceland’s natural resources; since they will belong to the nation and not the state, they won’t be able to be sold off to foreign interests.)
Third, it’s important to say that, while Iceland may not be the model for how you deal with a crisis, it may, just as importantly, be another model. After the crisis hit, Iceland was under enormous pressure to undertake a US-like bailout of its banks and impose austerity. What happened since proved that, perhaps there isn’t a one-size-fits-all solution. Whether Iceland’s experience ‘scales up’, it suggests that the US model may not always ‘scale down’ – that states in different contexts may need different models. Diversity matters.
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Next week, in the gorgeous Harpa Center, PopTech will be exploring patterns of resilience in both systems and people – two threads that will, like a helix, twist around one another. After the first day and a half of presentations and discussions, we will introduce the voices of a number of Icelanders – a leading educator, environmentalist, scientist, constitutionalist, musician, entrepreneur and search-and-rescue leader, to not only hear what they do, but to get their perspective on Iceland’s past, present and future.
It should be an amazing conversation. I can’t wait.