On the day when the former PM of Iceland goes on trial for his part in the banking crisis, the rest of us can only look on and wish our politicians were accountable too
The former Prime Minister of Iceland, Geir Haarde, goes on trial today for gross negligence for his part in the Icelandic banking collapse. I’ve followed events in Iceland reasonably closely for quite a while now, infatuated as I am by the people living on that slightly crazy little lump of volcanic rock in the North Atlantic. A few years ago Iceland really was the perfect example of what was wrong in the relationship between politics and commercial interests.
Iceland is a country of about 350,00 of which all but 50,000 live in a tight cluster round about Reykjavik. So this is a country smaller in population than Edinburgh, but it had three large commercial banks – Landsbanki, Glitnir and Kaupthing. These banks followed the standard neoliberal pattern; first of all state banks, then privatised, then allowed to develop a hyper-leveraged-banking model. They built up apparently limitless wealth through apparently risk-free gambles with apparently endless piles of cheap money. It worked brilliantly. Then it didn’t.
There was another aspect of this catastrophe which is perfect neoliberal play-book and that was the virtual merging of the state and the large corporate sector, to the extent that in Iceland the then three main parties (Social Democrats, the Independence Party and the Progressive Party) basically adopted a bank each. In a country as small as Iceland it is inevitable that all aspects of national life will bleed into each other, but the treatment of Parliament as an almost clan-based oligarchy with explicit conflict of interests throughout the economy was simply unstable. Everyone in power (commercially or politically) was compromised; there was simply no oversight. So no different from here other than in scale.
Or rather, no different before the crash but very different since. Let me paint the picture for you. Had Britain behaved like Iceland this is what would have happened next. First, we would almost as one have said ‘enough’. We would have gone to our kitchens where the whole family would have taken pots and pans and headed into the streets. There we would all have marched on Westminster (we’re talking half of the entire population). There we would have surround parliament banging the pots and pans until the politicians simply gave up power. In the ensuing election we would have elected a left-green alliance. We would have stood up to the IMF and the bankers. And would would now be putting Tony Blair and Gordon Brown on trial for gross negligence.
Who can argue with any of this? The biggest scandal of all is that no-one – not a single person – has been held accountable for this economic terrorism. It is (to my mind) simply unbelievable that the British elite has got together and decided among themselves that no-one should be made to pay for what they have done (Goodwin has paid only in reputation and only then by accident). And so who has any incentive not to do it again?
I don’t think anyone could claim that no gross negligence has taken place here; why no court case? It’s not about being vindictive, it’s partly about justice but mainly about moral hazard. Because if Blair was facing a court for his corruption of British society, would Osborne be quite so gung-ho about the risky and radical reforms he is pursuing now? He knows that if he trashes the economy now through any acts of gross negligence the worst that will happen is that he’ll have to resign in a few years’ time and live out his life in exceptional comfort.
The board of directors of a company are at least in theory criminally responsible for the actions of the company. Should a politician face no sanction if they are proved to have acted with massive incompetence or virtual fraud?
Forget what you’re told, Iceland really is a model for Scotland…