Iceland learns the hard way
AS AN ISOLATED outpost in the far northern ocean, Iceland rarely seems like a model for anything. But these are not normal times, and Iceland's travails in the current worldwide economic storm hold lessons for other, larger countries.
Johanna Sigurdardottir, who emerged from Saturday's parliamentary election as the next prime minister, offered one such lesson when she summarized the will of Icelandic voters: "The people are calling for a change of ethics." This was the former flight attendant and union organizer's blunt way of casting blame on those responsible for Iceland's current plight.
Her meaning was clear to the 320,000 Icelanders. The previous governing party, the conservative Independent Party, enabled a small cluster of profligate bankers and entrepreneurs to wreck Iceland's banking system. The three main banks took on debts far greater than the entire Icelandic economy. The currency, the krona, has depreciated nearly by half, while unemployment soars toward 10 percent and the government has had to ask the International Monetary Fund for a $10 billion bailout.
In the Icelandic context, a change of ethics means that extreme versions of laissez-faire economics can no longer be allowed to endanger the well-being of an entire society. Icelanders in the past had been relatively free of the reflexive anti-Americanism common to parts of Europe. But in the aftermath of a global economic implosion born in the United States, even Icelandic voters have decided that American-style unregulated markets are not infallible; that the unleashed hounds of self-interest can devour the common good.
Sigurdardottir's sensible remedy for Iceland's weakened condition is to join the European Union. Her case is primarily pragmatic and economic. As well as becoming eligible for EU subsidies, Iceland could obtain the advantages of adopting the relatively sound euro to replace its own collapsed currency. But the prime minister's proposal to apply for EU membership provokes opposition from her coalition partners, the Left-Greens - who are reluctant to join what they consider a capitalist club - and from Icelanders who fiercely object to a move that would mean opening Iceland's waters to continental fishing fleets.
If there is an Icelandic paradigm other countries might emulate, it suggests not merely a turn to a less volatile, more steady model of regulated free markets but also a temperate way of adjusting to globalization. If currents from one variety of globalization were originally to blame for Iceland's economic woes, the cure may be found in a different form of globalization - the model represented by the European Union. Many other countries could benefit from a similarly cooperative approach. 