What was Iceland like before HRUN (crash)? What were the main causes of the crisis? Is anyone responsible? A few conspiracy theories. What are the main consequences? Are there any solutions? Are there any lessons to be learnt?
What was Iceland like before?:
While Europe was devastated during World-War II, Iceland became rich. Despite receiving Marshall aid twice per capita what war-torn countries in Europe received, Iceland continued to maintain a closed and protectionist system: Imports were restricted, exports were licenced, prices were state-regulated, fishing was heavily subsidized, the krona was regularily devalued by government fiat, banks were state-owned, directors of banks and funds as well as other high officials were political appointees, inflation was rampant, real rate of interest was negative, receiving loans was based on political favouritism. Coalition governments were, with rare exceptions, lead by the two major parties: The Independence Party (conservatives) and the Agrarians (who called themselves progressives). Those two parties between them ran a spoils-system (crony-capitalism). All major business (exports/imports, banking, insurance, retail, oil-distribution, and the spoils of servicing the US- naval base) were devided between companies run by party loyalists. This had nothing to do with a free-market system. This was a corporatist system (cf. Mexico), where political power was used by two dominant cliques to distribute favours to party loyalists. It was a politically administered oligopoly. This system was by definition corrupt at the core, but with widespread popular participation.
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