When the financial crisis hit I was fascinated with what Iceland would do. I mean, how does an ENTIRE country go bankrupt? And when they do go bankrupt, what’s next for them? How do the people there live their lives? I read as much as I could during the crisis about it, and there just wasn’t much news. Would the citizens riot? Would there be food shortages? Would it become “The Walking Dead” there quickly? It was just really hard to find any news at all.
I just started reading this article today and it’s amazing because it looks like Iceland figured it out. They are recovering and they did it the complete opposite of the way the United States attempted to recover:
As everybody knows now, we did not pump public money into the failed banks. We treated them like private companies that went bankrupt, and we let them fail. Some people say we did it because we didn’t have any other option, there is clearly something in that argument, but it does not change the fact that it turned out to be a wise move or whatever reason. Whereas in many other countries, the prevailing orthodoxy is you pump public money into banks and you make taxpayers responsible for the banks in the long run, and somehow treat the banks as if they are holier institutions in the economy than manufacturing companies, commercial companies, IT companies, or whatever. And I have never really understood the argument: why a private bank or financial fund is somehow holier for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector.
So if you add all of this together and throw in the devaluation of the currency as well, it’s clear that what some people have called the Icelandic model includes a number of measures and approaches that have not been adopted in other countries. On the contrary, it includes some methods in the process that go directly against what has been adopted in other countries. But the outcome is the Icelandic economy is recovering faster and more effectively than any other economy, including the British and the American that suffered from a big financial crisis in 2008.
– Iceland’s President, who is up for re-election