On the Icelandic Way and Capital controls

In a recent book „Ísland ehf. auðmenn og áhrif eftir hrun“ – Iceland ltd., the Oligarchs and their Influence after the Crash – (Vaka/Helgafell, 2013) the authors, Magnús Halldórsson and Þórður Snær Júlíusson, both economic analysts in the media, give an overview of the „Icelandic way“ after the crash 2008. Specifically they try to estimate the ongoing transfer of wealth and the subsequent polarization of society. In the final chapter (p.205-292) they deal with the Icelandic experience of IMF-imposed capital controls. They were meant to be a short-term fix, but have now lasted almost five years.

Here are some of the highlights of their coverage:

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Vadovu Klubas: 15 year anniversary, Church of St. John´s Vilnius University, June 6th, 2013

On June 6th “Vadovu Klubas” – an association of business leaders in Lithuania – celebrated their 15 years anniversary in St. John´s Vilnius University. The president of Lithuania, Dalija Grypauskaité – a former Minister of Finance and commissioner of finance – addressed the assembly. I was invited to give a key-note speech on the ” Peaceful, Baltic Road to Freedom” and the response to it by the international community.

Since capitalists worldwide are this year celebrating the 300 years anniversary of the Scottish philosopher/economist Adam Smith, my Edinburgh University background came in handy to give my audience a few warning words on the dangers of unrestrained markets, supported by wise words from the social-democratic thinker, Tage Erlander, and the recently erected pope Francis (a former priest in the slums of Buenos Aires). While in Vilnius this spring, teaching at the university, the Lithuanians celebrated the 25 years anniversary of Sajudis, their independence movement. On June 3d, LRT (the Lithuanian public television channel) showed a new documentary on that occasion. This included an interview with me, focusing on the main events 1988-91. (This can be approached on the Internet).

Here is the text of my speech given in the Church of St. John´s, Vilnius University, on June 6th.


It is June 6th, 1990, 23 years ago to the day. The foreign ministers of all European states – along with the US and Canada – are assembling in Copenhagen. This meeting was one of a series, convened to end the Cold War. On the agenda was disarmament and arms´control; cooperation instead of confrontation in interstate relations. Respect for the principles of human rights and self-determination of nations.

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The editors of BALTIC STUDIES – a periodical on international affairs and politics – asked me to review an article by a Danish scholar on the policy of the Danish government (and major parties) on the Baltic nations´ struggle for their restored independence. My review was published on the Magazine´s web side. – JBH

This article is not so much about Danish support for the Baltic struggle for independence; rather it is about domestic politics – electoral maneuvers between the major parties on how they could be seen to express „small state sympathy“, without risking the wrath of the Soviet Union or the displeasure of powerful allies. It is therefore of interest, mainly for those who want to know what happened behind the scenes in Danish politics. For those who want to understand the risks and potential dangers for the Baltic nations of seceeding from the Soviet Union, it is hardly of any interest.

Unlike the nations of Central and Eastern Europe which retained their nominal sovereignty, the Baltic states were annexed into the Soviet Union, following up on the Molotov-Ribbentrop pact and its secret protocols. Under Mr. Gorbachev the Soviet leadership seemed to be ready not to apply force to prevent the liberation of Central and Eastern Europe and the unification of Germany, in return for major disarmament agreements and the „peace dividend“ involved. But when it came to the break-up of the Soviet Union itself – there Mr. Gorbachev set the limit. And when it became evident that his halfhearted attempts at reform inside the Soviet Union had failed , he had only one major aim left for staying in power: to keep the Soviet Union together – under a new constitution – at all cost. Failing that, he would lose his grip on power.

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Recovering from the Crisis: INSIDE OR OUTSIDE THE EMU?

April 9th The Institute for International Relations and Political Science, Vilnius University, held a seminar on the international financial crisis, comparing the fates of countries inside and outside the euro-zone. Main speakers were Jón Baldvin Hannibalsson, former Minister of Finance and Foreign Affairs of Iceland, Dr. Ingrida Simonité, former Minister of Finance of Lithuania and Dr. Baldur Thórhallsson, Head of the Center for Small States´ Studies at the University of Iceland. Dr. Ramunas Vilpisauskas, Head of the institute introduced the speakers, but Mr. Bo Tillberg from the Nordic Council of Ministers´ Office was moderator.

Following are the speaking-notes of Mr. Hannibalsson:

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The Nordic Model

February 2 this year the Economist published a special edition on the Nordic model. The authors came to the conclusion that the Nordic model had turned out, during the era of globalization, to be the most successful socio-economic model on the planet. It combined both efficiency and prosperity. It was both the most competitive and the most egalitarian society on earth. But, neo-liberal, as the Economist is, the authors tried their best to give credit for this unique success story to Sweden´s conservatives, who have had a chance in government for a few years, to tinker with the system at the margins. But the system remains fundamentally intact.

I sent a letter to the editor with a reasoned critique of this ideological misconception. It says a lot about the editorial policy of the Economist, that despite welcoming their readers´comments they somehow failed to publish any serious critique. Here is the text, which they did not publish:

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„What´s wrong with Europe? And by the Way: Why don´t you Fix it?”

Dagana 8. – 9. nóv. s.l. var ég heiðursgestur á þingi Eystrasaltsþjóða (Baltic Assembly), sem haldið var í Vilnius, Litháen. Þing Eystrasaltsþjóða er sömu gerðar og Norðurlandaþing. Þar hittast þingmenn, ráðherrar, embættismenn, sérfræðingar og fjölmiðlungar til að ræða sameiginleg hagsmunamál. Aðalmál þingsins var Evrópumál og samstarf Eystrasaltsþjóða (og Norðurlanda) innan Evrópusambandsins. Ég flutti þarna svokallaða stefnuræðu (key-note speech) undir heitinu:

„What´s wrong with Europe? And by the Way: Why don´t you Fix it?“

Ræðan fer hér á eftir í slenskum búningi.

Fræðimenn, sem vandir eru að virðingu sinni, hafa fyrir sið að telja upp lykilorð í upphafi máls síns, til að skerpa athygli lesandans. Fari ég að þeirra fordæmi, þá ættu eftirfarandi lykilorð að brýna hugsunina:

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The following is the text of a key-note speech given at the Baltic Assembly in Vilnius, Lithuania, on November 9th. In the speech I deal with the causes of the international financial crisis, the specifics of the euro-crisis and conclude by proposing a list of solutions. The following is the text of a key-note speech given at the Baltic Assembly in Vilnius, Lithuania, on November 9th. In the speech I deal with the causes of the international financial crisis, the specifics of the euro-crisis and conclude by proposing a list of solutions.

In academic papers, the authors often single out key-words to have their readers concentrate their minds. Following their example, here are some key-words from my speech, to start you thinking:

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Privatization á la Rus

October 10., 2012, Mr. Brian M. Carney, editorial page editor of the Wall Street Journal (Europe), published op-ed in his paper under the heading: Fishing for Trouble in Iceland. Mr. Carney had been visiting in Reykjavík, where he conferred with his neo-con colleges at the university (Hannes Hólmsteinn, Ragnar Árnason o.fl.), who are underpinning the ship-owners´ (LÍÚ) campaign against the government proposal that they be obliged under the law to pay for their exclusive access to the fishing resources in Iceland´s economic zones. Mr. Carney had been taken for a ride on this issue by his friends as evidenced by the misinformation that pervaded his article. In response I sent an article to the WSJ, seeking to correct the most blatant misinformation. On October 17th the WSJ published excerpts from my article, heavily censored.Here is the article uncensored.

By Jón Baldvin Hannibalsson
What a pity that Mr. Carney should have run such a fool´s errand the other day in Reykjavik (see: Fishing for Trouble in Iceland, WSJ, Oct. 10). Unfortunately he has let himself be duped into believing that the oligarchs, who have been given (for free) exclusive access to the valuable fishing resources in Iceland´s economic zone, are willing to pay „the market rate“ for the privilege, whereas an ideologically driven left-wing government won´t let them.

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Aths: Ísland greiddi atkvæði með – en Litháen gegn – aðild Palestínu að UNESCO hjá Sameinuðu þjoðunum. Af þessu tilefni hafði Ramunas Bogdanas, fyrrverandi aðstoðarmaður Landsbergis, sjálfstæðishetju Litháa, viðtal við JBH með vísan til þess, að JBH hafði frumkvæði að stuðningi alþjóðasamfélagsins við sjálfstæðisbaráttu Litháa þrátt fyrir andstöðu bæði Bandaríkjanna og Þýskalands á þeim tíma. Hvers vegna styðja Litháar þá ekki sjálfstæðisbaráttu Palestínumanna með vísan til eigin reynslu?
Viðtalið birtist á útbreiddum vefmiðli í Litháen og fékk mikla umfjöllun. Það leiddi m.a. til þess, að utanríkismálanefnd Seimas (þjóðþings Litháa) efndi til opins málþings um málið. Viðtalið fer hér á eftir óbreytt.

Q: How did Iceland vote at the UN on admitting Palestine as a full member of UNESCO?

A: Iceland voted yes, since we support the Palestinians´ claim for statehood. We think this is a small step in the right direction. I fully agree with our foreign minister, Mr. Skarphéðinsson, on this issue. I think that Israel´s intransigence and brutality vis a vis Palestinian civilians is one of the great tragedies of our times.The victims of European racial prejudice and brutality have now become the perpetrators of those vices themselves. It is not merely immoral, but stupid, since it goes against the long-term Israeli national interest. It actually endangers Israel´s future security. The US has utterly failed as a mediator in the Israeli-Palestinian conflict and has lost all credibility as such. The silent US aquiesence in the continuous expansion of illegal Israeli settlements in the occupied lands has disqualified the US as a mediator. Both, the US and Israel, have to be helped out of this mess. Before they call upon themselves the rightful wrath of people, suffering from unmitigated injustice.

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WHEN WILL THEY EVER LEARN? The crash 2008 (HRUNIÐ) revisited, three years later.

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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