Wicelandic Post

Currently there appears to be an undercurrent of social instability not seen in Iceland in modern times.  To respond, we should examine five dimensions on the security spectrum which can be considered to be especially revelant in Iceland in the present.

These dimensions are:

-          Traditional Military

-          Economic vulnerability and  instability

-          Breakdown of order, no “rule of law”.

-          Social vulnerability and instability, disorder, alienation,

-          Uncontrolled migration, refugeeism, IDPs

These five dimensions are all especially relevant to Icelanders in the wake of the economic disaster of 2008. It can be argued that effects of the crash were especially potent because Iceland had pursued a reckless economic strategy, without having secured proper safeguards by way of international co-operation. The result is a social vulnerability unprecedented in modern times.

Shelter stability

Although there is a broader view to be taken of Iceland’s security concerns, together these dimensions can form a chain of consequences which need to be adressed in Iceland’s current state. Together they can be examined and “packaged” as Shelter Stability concerns. Traditional military and economic security are pillars which need to be protected and upheld in order not to become the causes which consenquate a breakdown of the other three dimensions of order, social instability and migration/internal displacement.

Although a tradtitional domino effect might see the first one in line push the other ones in a straigth line towards a collapse it might be more useful to couple the military and economic concerns together as the possible catalysts for the other three. Military and economic stability enhances the strenght within the others. But if one or both of the former crumble then the others are in danger too. A small nation like Iceland, with a miniscule economy, a tiny currency and militarily dependent upon others is especially vulnerable to shifting winds of change in world politics and the global economy.

Traditional Military

From the early days of the republic, Iceland had been provided with the necessary military support it needed by the United States of America. The US felt its presence was necessary to first counter Nazi and then Cold War threats to its mainland from the North Atlantic. Iceland benefitted handsomely from the arrangement through the presence of the world’s strongest military power as well as the financial assistance provided through the Marshall plan which helped Iceland take a giant step from a third world agricultural society to a modern state in the twentieth century. After the collapse of the Berlin wall in 1989 and the accompanying fall of communism in Eastern Europe and the Soviet States, global security concerns moved away from the North Atlantic to different parts of the world. That point at the end of history as proposed by Francis Fukuyama seemed to signal the beginning of the end of US military presence in Iceland and so it became that in 2006 the last fighter jets departed from Iceland.

Iceland was a founding member of NATO in 1949 and the organization assumed the responsibility of providing the country with the required military security. Iceland now runs the Icelandic Air Defence System (IADS) which is a part of the NATO Integrated Air Defence System (NATINADS). Apart from air policing from NATO, Iceland does not have a direct military presence anymore. What the US had provided though was not only military or economic security but also support on the international stage, as was evident by the Cod Wars between Iceland and the United Kingdom. In turn Iceland would more often than not support the US’s global endeavours, most notoriously as a member of the Coalition of the Willing which supported the US decisison to invade Iraq in 2003. The special relationship between the two nations epitomised tit for tat politics on the international level. When Iceland was no longer militarily important for the US, the extended support on which it could count on evaporated as well.

Although armed conflict is currently constricted to different parts of the world, there is no reason for the country to take the status quo for granted.  The Risk Assessment Report from 2008 does not consider Iceland’s participation in the Coaltion of the Willing to have upped the risk for terrorism, and downplays the possibilities of such acts being carried out on Icelandic soil. Iceland similarly does not have anything but basic contingency plans for WMD attacks within its borders or in the vicinity, and concentrates on suppording the Interntional Atomic Energy Agency (IAEA). But it does touch on the changing nature of global interests, such as possible show of ambition from Russia and in Iceland’s case, especially in the High North. As shipping routes could possibly open due to global warming, the rush to secure interests by larger nations could affect Iceland directly. A possible NATO expansion towards Russian borders could also provoke a harsh response from Moscow.

Economic vulnerability and  instability

In October 2008 an economic crash in Iceland wiped out three of the countries largest banks. The asset depreaciation in Iceland amounted to 280 percent of nominal GDP, being nearly five times larger than the second biggest depreaciation of all times which happened in Indonesia in 1998. Scheduled for an earlier release, the Risk Assessment Report ended up having to be re-written with a massive increase in the emphasis on economic security. The vulnerability of a small state with an open economy is clear throughout the report. “The free transfer of capital and the permission obtained by Icelandic banks to operate branches in other countries within the EEA, enabled them to borrow from other banks and accept savings in foreign currencies and therefore experience a rapid growth. But all supervision was in the hands of domestic entities.”

In 1993 Iceland had joined the European Economic Area  (EEA) to gain access to the markets of Europe. But while opportunites beckoned for Icelandic businesses, economic policy and management proved hard to control. “The Central Bank here was small and weak and so was the state treasury. The state’s finances were admittedly just about free of any foreign debt but interests remained high and caused foreign capital (Glacier Bonds for example) to flow into the country and push the currency up. It lead to a purchasing power which had no base in reality”.

The Icelandic economy would have imploded without the global economic crisis which started with homeowners defaulting on their mortgages in the United States in 2007. As money markets shut their doors and there was no more borrowed money available to support the ill-fated bubble, Iceland’s crisis hit home hard. What then followed caught many Icelanders by surprise. All of a sudden the country appeared to have few friends in the world who were willing and ready to help. The Central Bank sought assistance from Washington but was rejected, and the Nordic countries were surprisingly slow to come to the rescue. Of course everyone was busy dealing with the crisis in their own backyard but Iceland seemed to have no safe haven to turn to, which it had hitherto counted on the US to provide. With its tail behind its legs, Iceland turned towards the International Monetary Fund (IMF), as had been suggested to the Central Bank by the European Central Bank earlier in 2008 and described by US Treasury Secretary Timothy Geithner  as the “kiss of death”.

Then there was the matter of the IceSave accounts which stripped thousands of individuals, charities and municipalities in the UK and the Netherlands of their savings. Landsbankinn’s online savings account had proven popular for offering the highest rates of return but the money was lended out at the other end, usually against collateral of little or no value. The Icelandic government had guaranteed all savings in Icelandic banks but not in their foreign branches on the eve of the economic crash. This and the subsequent failure to conclude an agreement with the Dutch and the British governments has appeared to block Iceland’s assistance from the IMF. Dominique Strauss-Kahn, the managing director of the IMF said on March 30, 2010 that the board needed a majority of votes to approve futher assistance, and he was not sure if it was guaranteed. “I have always said Icesave is not a condition for the IMF, but we need to have a majority in the board. If the Icesave question is solved, I’m sure there will be a majority. If the Icesave question is not totally solved, I don’t know if there’ll be a majority on the board.”

So it is that in the spring of 2010, Iceland finds itself in an economic and military limbo. A small state swimming alone in the sea of international turmoil for the time being. While Iceland is still in the aftershock of the events of 2008, it is interesting to examine the possible effects.

Social unrest

Breakdown of order, no “rule of law”.

Interestingly the Risk Assessment Report does not mention breakdown of order, or the possibility of internal civil unrest. But in January 2009, an angry crowd protested (mostly peacefully) outside Althingi and other official buildings until the government was forced to resign, an unimaginable scenario in Iceland just a few months earlier. Although payment systems withstood the pressure of an economic crash and daily operations of the society were not interrupted, the public faced with great uncertainty showed unexpected volatility and willingess to display hostility towards officials and the government.

It appears as if the business-blocks which controlled the banks were milking them by lending to themselves with little or nothing of worth backing those loans up. This happened with political parties on the watch which had actively sought funding from these very business blocks. One and a half year later, no individuals from the business side or the political side have been charged with wrongdoings or inappropriate behavior. The “broken windows” theory of urban decline states that minor forms of pulic disorder can lead to serious crime and a downward spiral of decay. In matters of urban decay the visual cues are graffiti, public disorder, trash and ill-kept properties which indicate that residents are indifferent to their neighborhood. Applying this to society as a whole, citizens who get the feeling that crime and injustice goes unpunished may become indifferent towards the social order.

Social vulnerability and instability, disorder, alienation,

At a seminar at Bifröst University in February 2010, political science professor Ólafur Þ. Harðarson from the University of Iceland disclosed his findings that 20% of voters polled had participated in demonstrations in the last few years, a very high number in his opinion. His findings also indicate that the public has become slightly more interested in politics, but more disillusioned with the political parties. This indicates an alienation from the democratic process and the political elite. Trust in the parties is at an all time low according to Ólafur and it emphasises the need for reform in the political arena. With increased alienation, social vulnerability rises.

Uncontrolled migration, refugeeism, IDPs

According to Statistics Iceland, the population of the country decreased for the first time since 1889 in the twelwe month period between January 1, 2009 and January 1, 2010, from 319,368 to 317,630 (Statistics Iceland, 2010). For a country which has enjoyed a long streak of increase in its population and an annual average growth of 1,6% in the past five years, this is something of an anomaly and prescriped by most as due to the effects of the economic crisis.

Icelanders are seeking opportunities abroad, in Canada and Norway for example. The benefits of collecting wages in a foreign currency are obvious if your debts are in Icelandic Krona’s which has plummeted more than one hundred percent since 2007. Another benefit is escaping the decrease in social welfare which comes with the large national debt. If scores of able citizens leave the country at a dire moment then the recovery is going to be harder and take longer time. If young people and skilled workers sense that their opportunities are better abroad then the long term social consequences of the economic crash might end up being costlier than anyone dare calculate.

Challenges and solutions

Comparing Iceland’s general approach to security with that of other Nordic countries, professor Alyson Bailes and Þröstur Freyr Gylfason observe what stands out for most observers is the relative detachment of the general population and the dislike for preparedness and planning.

This description perhaps strikes to the heart of the matter on what Icelanders can generally improve to tackle these five dimensions of security? Bailes and Gylfason remarked that Iceland presented an “intriguing arena to “test drive” and further probe the qualities of, the social security concept.” Pointing out the need for reassessment and new approaches to security in the wake of the US military leaving, the authors are concerned with the lackadaisical approach to forward planning in Iceland.

Certainly, Iceland is hardly alone amongst small states in the way that it needs to face its security dilemma in a pro-active way. According to professor Baldur Þórhallson, Iceland was the only small state within Europe that had not secured for itself a political or economic shelter was also first state to fall victim to the economic crisis of 2008. “A small state like Iceland, needs a strong economic shelter provided by powerful neighbors or international organizations to withstand international economic turmoil and protect its interests in the international community.”

Small states like Iceland need a cohesive strategy in its security planning, more even than most others according to Bailes in another paper. So to wrap up the discussion on the five security dimensions are suggestions on five areas where Iceland could begin work to improve its shelter stability outlook.

1) Strengthen the seperation of powers

By neglecting constitutional reform since the beginning of the republic, Icelandic politicians have stood idly by while the executive powers of the government have grown disproportionally against the legislative and judicial branches. The executive branch is traditionally formed by the majority in the legislative branch, and until 2009 it was almost unheard of that all ministers did not occupy a place in both. The executive branch also appoints judges to power positions in the judicial branch and therefore it can be argued that it holds an advantage over both, whereas it can exert pressure on or reward those who owe their postions to towing a party line.

A constitutional assembly scheduled for late 2010 is a step in the right direction and hopefully it will strengthen the seperation, perhaps by making it impossible for individuals to occupy seats in two branches at the same time, and/or holding seperate elections for each branch.

2) Pro-actively seek further international co-operation

“Whereas most other nations have modified their implicit concept of sovereignty to include as an important component the right to participate in international organizations and sit at the table where regional and global decisions are being made, a majority of Icelanders have stuck to an older notion of sovereignty as freedom from outside infl uence—freedom to remain “special” in the ranks of nations.” – Robert Wade, professor at London School of Economics.

So what options are there on the table for Iceland? Firstly a dedicated approach towards European Union membership talks with the goal of full participation. Membership of the EU and participation in the common currency would provide Iceland with a economic shelter  likely to help it withstand storms in global financial markets. According the Thorvald Stoltenberg’s report to the Nordic foreign ministers, Nordic Cooperation on Foreign and Security Policy from 2009 there is a widespread desire within all Nordic countries to strenghten their cooperation on military security, as well as larger cooperation with NATO and the EU. Finland, Sweden and Denmark are all members of the EU, while Norway’s oil fund and NATO membership enables it the financial  and military security to stand outside the union, but with participation the EEA. Iceland’s military security position would be greatly enhanced as a fully fledged participant in a Nordic’s security initiative and as a member of NATO.

Membership in the EU would enhance that dimension further, as well as the economic security dimension. Scholars like Eirikur Bergmann have argued for the enhancement of Iceland’s sovereignty by taking a pro-active approach.

3) Build, support and listen to entities which can produce a full range analysis and outside the box thinking

In the computer industry, hacking contests are a big deal when it comes to developing computer security. Instead of chasing down hackers, they are invited to attack the systems which are being tested, with rewards on offer for those who can find faults which can be exposed. In 2002, the government of David Oddson dismantled the National Economic Institute which had been entrusted with the task of monitoring the national economic climate and performance and performing econimic research with the aim of advising the government and Alþingi in economic affairs. While many of the institute’s tasks were transferred to Statistics Iceland, many bemoaned the absence of a seperate, critical entity when the economic collapse was impending. A resurrection of such an institute would be a good move, as well as the conception of a National Security Institute, focusing on monitoring the security dimensions relevant and irrevelant to Iceland at any given time, thinking outside the box to challenge pre-fixed ideas of security and possible risks.

4) Engage in active and open discussion and debate with non-state actors

Non-government organizations play an important role in providing checks and balances towards government policies, action and inaction. When Richard Thomas, an analyst for Merril Lynch criticized the state of the Icelandic banks and the government’s policy towards them in June 2008, then minister of education, Þorgerður Katrín Gunnarsdóttir questioned his motives in the media and suggested he needed re-educating. This was similar to the response from Icelandic officials and financial institutes when Danish newspapers and analytical institutions criticized the business model of the Icelandic banks. The Icelandic government,and for that matter the Icelandic media needs to be more welcoming towards critical debate and discussion with non-state actors such as foreign and domestic media, financial analysts, academics, charities and organizations. Those actors often operate with a focus and knowledge on certain issues, which can be useful for state actors concerned with a larger picture. A country which takes such discussions seriously can do wonders for its reputation if people get the feeling that the governing body listens to concerns just as well as praise.

5) Emphasis on critical thought and forward planning

Lastly, it is important for a country in need of reform to  enhance the freedom Immanuel Kant emphasised, which is to use reason publicly in all matters. Perhaps the most ambitious but necessary step is to enhance the role of critical thought in Icelandic society. Through the education system, students should be purposefully taught to apply critical thought to matters small and large. It would be more likely to deliver more alert citizens into society and into private and public workplaces. An Icelandic society built upon values which emphasise critical thought would be more likely to learn from its mistakes and prepare for the future.

Related posts:

1. A “Special” Iceland
2. EU Membership – The Time and The Place of the Social Democrats
3. The taxpayer’s deep pockets