Iceland before and after the fall
The title says it all
Efficiency, Fairness, and Social Cohesion in Europe and the United States: Incomes, Hours of Work, and Equality with an Afterthought on Iceland,
CESifo Working Paper No. 6025, August 2016. In Sustainable Growth in the EU, edited by Luigi Paganetto, Springer 2017, under a shorter title.
Democracy in Iceland under stress
Iceland´s New Constitution Is Not Solely a Local Concern
Challenge, December 2016, see a short version here.
On the collapse of Iceland´s Social Democratic Alliance from 30% voter support to 6%
Spineless Social Democracy
Social Europe, 5 April 2017.
Iceland´s constitutional saga in historical light
The Anatomy of Constitution Making: From Denmark in 1849 to Iceland in 201
7,

Forthcoming as a CESifo Working Paper, 2017. Will be posted soon.
With some of its main opponents all over the Panama papers, the new constitution is far from dead
Iceland’s Citizen Constitution: the Window Remains Wide Open

VerfBlog, 2016/4/06.
Iceland's political crisis is deep, our democracy is under threat
Chain of Legitimacy: Constitution Making in Iceland
Iceland and Ireland, Eight Years On
Milken Institute Review, 25 Agust 2016.
Here is the story of the role of high tech in Iceland´s constitution making
Digital Tools and the Derailment of Iceland´s New Constitution
(with Anne Meuwese)
Forthcoming in Digital Democracy in a Globalized World, edited by Corien Prins, Peter Lindseth, Monica Guisse, and Colette Cuijpers, Edward Elgar, 2017. 
On Iceland ´s uneven receovery from its home-made crash
Iceland´s Seven Meager Years
VoxEU, 26 November 2015.
New paper on Iceland after the crash
Social Capital, Inequality, and Economic Crisis 
Challenge, June 2015. Presented under a slightly different title at the 27th Villa Mondragone International Economic Seminar in Rome 23-25 June 2015. 
Constitution Bill, accepted by 2/3 of the voters in a national referendum in 2012, since held captive by Parliament, English translation
See also the English website of the Constitutional Council in session April-July 2011 as well as of Iceland´s Constitutional Society.
2016 Iceland Country Report
Background paper for the Bertelsmann Foundation´s Sustainable Governance Indicators Report with Grétar Thór Eythórsson and Detlef Jahn.
Earlier reports in the series: 2015, 2014, 2011, 2009.
Does political gridlock on Capitol Hill signal a flaw in the US constitution? The paper draws parallels between Iceland's current constitutional crisis and the US situation
From Constitutional Reform to Fortified Democracy
VoxEU, April 2015.
New paper with Per Magnus Wijkman on the economics and politics of Iceland's natural resource dependence
Double Diversification with an Application to Iceland
In Economic Diversification Policies in Natural Resource Rich Economies, 2016, eds. S. Mahroum and Y. Al-Saleh, Routledge.
Flirting with a farewell to democracy
Constitution on Ice
Shorter version forthcoming in The Politics of the Icelandic Crisis in 2015
Here is an excerpt from Democratic Audit at the London School of Economics
Some have asked, seriously: Is Iceland a 'failed state'?
Iceland: How Could This Happen?
In Reform Capacity and Macroeconomic Performance in the Nordic Countries, eds. Torben M. Andersen, Michael Bergman, and Svend E. Hougaard Jensen, Oxford University Press, 2015
Iceland's government of the politicians, for the politicians, by the politicians
Democracy on Ice
OpenDemocracy, June 2013
New, technical paper with Gylfi Zoega on Iceland after the fall
The Dutch Disease in Reverse: Iceland’s Natural Experiment
OxCarre Research Paper 138, Oxford Centre for the Analysis of Resource Rich Economies, May 2014
How the parliament failed to accept the crowd-sourced constitution
Putsch: Iceland‘s crowd-sourced constitution killed by parliament
www.verfassungsblog.de
First-world countries, third-world politics
A Tale of Two Debtors: Iceland, Ireland — and Their Banks
Milken Institute Review, April 2013
For the story of the making of a new post-crash constitution, see
From Collapse to Constitution: The Case of Iceland

In Public Debt, Global Governance and Economic Dynamism, Springer, 2013.
Here is the story of Iceland's shaky recovery from collapse
Iceland, Rising from the Ashes
Prosperity Index, Legatum Institute, 2012
For a shorter version of events, see
Constitutions: Financial Crisis Can Lead to Change

Challenge, September-October 2012.
For the long version of the story of the crash, see
From Boom to Bust: The Iceland Story
in Nordics in Global Crisis
(2010)
For the story of the referendum, see
Constitution Making in Action: The Case of Iceland
VoxEU, 1 November 2012.

For shorter bits and pieces, see
Iceland: After the Fall
Milken Institute Review, First Quarter, 2010

For Constitutional Assembly Questions and Answers,
see this and this. And this. And this and this, post-referendum. And this. And this. And now this.
Iceland's corrupt and dysfunctional political class in action
Democracy on Ice
OpenDemocracy, June 2013
And here is part of the story as reported in the Faroese daily press, Dimmalćtting and Sósíalurin. These are news reports on a conference held in Torshavn 2 March 2012, attended by some 500 participants, including 22 out of 33 Members of Parliament. See this and this.
New Constitution: Two thirds of the voters said Yes
Iceland: Direct Democracy in Action
OpenDemocracy, November 2012
National Constitutional Assembly election declared null and void, a uniquely scandalous event in the history of democracy:
Decision of the Supreme Court 25 January 2011 (Icelandic original)
Constitution Making in Action: The Case of Iceland
VoxEU, 1 November 2012
Prof. Reynir Axelsson's Commentary (Icelandic original) Prof. Axelsson concludes: "The only real and only significant deficiency in the election was that the Supreme Court spoiled it by a Decision which is demonstrably based on false reasoning and dubious sources of law. ...Perhaps in our next elections we should call for the assistance of the Organisation [for Security and Co-operation in Europe] to protect Icelandic democracy from our highest court?"
Crowds and constitutions
VoxEU, 13 October 2011
Guđbjörn Jónsson (retired) exposes the illegality of the Supreme Court's decision. (Icelandic original)
Open Letter to the Supreme Court
From crisis to constitution
VoxEU, 11 October 2011
For lecture presentations on the Iceland story, see a long version and a short version
Houston, we have a problem: Iceland's capital controls
VoxEU, 1 June 2011
For a discussion of various aspects of economic policy and governance, see background report for the Bertelsmann Sustainable Governance Indicators project; see a more recent background reports here (2014 Iceland Country Report) and here (2015 Iceland Country Report).
Iceland's Special Investigation: The plot thickens
VoxEU, 30 April 2010
For context, here is a list of the ten largest US corporate bankruptcies of all time compared with Iceland.  
Eleven lessons from Iceland
VoxEU, 13 January 2010
Here is a letter from the Constitutional Society to the UN Human Rights Committee to call its attention to the failure of the Icelandic Parliament to honor its promise to ratify a new constitution with a provision on public ownership of natural resources. This matters because the UNHRC in 2012 made this promise a condition for dropping its case against Iceland resulting from the committee's binding opinion in 2007 that Iceland remove the discriminatory element from its fisheries management system. Here is an Icelandic translation of the letter.
Governance, Iceland, and the IMF
VoxEU, 26 September 2009
 
Is Iceland too small?
VoxEU, 19 Agust 2009

Iceland warms to Europe
VoxEU, 21 July 2009

 

Iceland and its financial predicament: History and context
VoxEU, 10 July 2008

Events in Iceland: Skating on thin ice?
VoxEU, 7 April 2008
 


What, if anything, has changed since January 2009, when we published your thoughts on 'What we had // What we can expect'? And what can we expect?

Oh, lots of things have changed.

For starters, the IMF has now left the stage, having helped Iceland to weather the crisis with money and, more importantly, as always, advice.

Like it or not, the technical know-how necessary to navigate the treacherous waters engulfing Iceland as the banks collapsed in 2008 did not exist in the country’s civil service, and so foreign assistance was absolutely essential. Had the authorities, to avoid losing face, asked the Nordic countries for help rather than the Fund, the Nordics would almost surely have directed Iceland to the Fund, the world’s chief source of expertise in dealing with deep banking crises. So, the IMF was the only game in town, with significant input from the Nordics. Not even the political opposition in parliament, let alone civic society, proposed serious alternatives to the Fund-supported rescue operation.

And now, three years after the crash, the economy is beginning to grow again, partly because the exchange rate of the króna appears at long last to be roughly correct, which is good for exports as well as for domestic firms competing with imports. It follows that unemployment is remarkably low. Even so, inflation remains too high and too many households find it difficult to make ends meet. Eurostat reports that 13 percent of Icelandic households find it very difficult to make ends meet compared with 2 percent to 4 percent in Denmark, Finland, Norway, and Sweden. In our part of Europe, only Spain (14 percent), Portugal (20 percent), Greece (24 percent), and Latvia (24 percent) have relatively more households in such dire straits. Where it counts, Iceland has clearly parted company with the Nordics.

So, Iceland still has miles to go.

Besides, it remains to be seen how the IceSave twist will play out in court. It appears quite possible that Iceland will be required to pay a significantly higher amount of money than was stipulated in the agreement between the Icelandic, British, and Dutch governments that was defeated in the second IceSave referendum of 2011. It also remains to be seen how the cases expected be brought by the Special Prosecutor against those suspected of having robbed the banks from within and others will fare in court.

To achieve its purpose, the cleanup after the crash must, as I see it, rest on two pillars: first, economic reform and reconstruction now underway, and, second, court cases against those suspected of having broken the law. The nine-volume, 2.300 page report of the Special Investigation Committee of the parliament paved the way. The Financial Supervisory Authority has referred to the Special Prosecutor almost 80 cases of suspected violations of the law in connection with the crash. The total number of cases is expected to exceed 100 when all is said and done. Attempts to unseat the post-crash director of the FSA have thus far failed.

How long will it take for Iceland to regain economic and social parity with the Nordics? This is impossible to know. For one thing, no one knows how long the rather stringent capital controls will remain in force, controls that were originally intended to last only two to three years and should, therefore, have been out of the way by now. Also, no one knows whether the political class will revert to its nasty old habits now that the IMF is no longer calling the shots from short distance. Further, no one knows how the cases against those who pushed Iceland off the cliff will fare in court.

A failure by the authorities to produce convictions – to make the culprits behind the crash face justice – may have a demoralizing effect on the population to the point of triggering significant exodus from the country, to Norway and other places. This must not happen. The country cannot afford it. Economics and law, efficiency and fairness, must go hand in hand.

For Reykjavík Grapevine, January 2012.

2009 – Highs and Lows
2009 ended less well than it began. At the beginning of the year there were realistic hopes that Iceland could, with a little help from its friends, pull itself rather quickly and painlessly out of the crisis triggered by the collapse of the banks the year before. The application for EU membership in mid-year signaled that Parliament was at last willing to try to clean up its act by proposing to submit to the discipline required of EU members. Apparently, however, the government mistook the IMF’s willingness to go along with a postponement until 2010 of tough spending cuts and tax hikes for a sign that the crisis was perhaps not as deep as was feared at first. The government allowed the reconstruction of the failed banks to drag on. The pointless and protracted squabbling in Parliament on the IceSave deal with the UK and the Netherlands derailed necessary reforms. The delays have practical consequences. For one thing, the relaxation of the stringent capital controls that were promised to be temporary has been put on ice with no relief in sight. For the most part of 2009, the reconstruction program supported by the IMF, the Nordic countries, Poland, and the EU was held hostage by an incompetent and corrupt political class which, as the National Audit Office disclosed just before the year ended, had received huge chunks of money from the failed banks and other, in many cases undisclosed, sources. The year ended in eerie uncertainty about whether the President would sign the IceSave bill or not. If he doesn’t, expect a bumpy ride ahead.

Reykjavík Grapevine, January 2010.


2008 – What We Had

In 2008, we had more of the same: an insufficient awareness among bankers, businessmen, and politicians that things had gone wrong. One simple thing should have opened their eyes – the impression from official statistics that, almost overnight, Icelanders had by 2007 become fifty percent richer than North Americans as measured by national income per person. This was clearly not the case, however: it was an illusion stemming from an overvaluation of the króna which, accordingly, was bound to depreciate regardless of the dire straits of world financial markets. The Icelandic crash was an accident waiting to happen. It did not help that much of the business elite and the banks danced in lockstep as witnessed by the glowing reports put out by the Chamber of Commerce in 2006 and 2008 claiming that everything was fine, including the banks. Many politicians towed the line, partly perhaps motivated by the need not to be perceived as publicly undermining the banks. Grave mistakes were made before, during, and after the onset of the crisis, not least by the Central Bank. It is essential to have an impartial study of what went wrong. The best way to accomplish that is to have an independent international Commission of Enquiry study all aspects of the breakdown and deliver a report to the Icelandic people as soon as possible.

2009 – What We Can Expect

In 2009, we will see further change. At first, the crisis will deepen, with more firms closing down, more workers losing their jobs, and possibly political turmoil. Then, we will before the year is out if all goes according to plan begin to see the rudiments of a reversal and ultimate recovery as a result of the government’s economic program already in place with IMF support. The program is fine as far as it goes, and cannot be reasonably criticized on the same grounds as IMF-supported programs in Asia were criticized a decade ago. The program will hurt, true, but that is not the IMF’s fault. It is imperative for the government – the current one if it continues to refuse to step aside or any new government that would take its place – to stay the course charted by the IMF-supported program, to embrace the program as its own because that is what it is, and to explain it to the public rather than give the impression that it would have preferred to do something completely different. The Central Bank’s sullen mood is particularly unhelpful, and poses a risk to the government’s ability to fulfill its part of the agreement with the IMF. If the program is successfully completed, with appropriate adjustments along the way if necessary, the recovery at the end of the road can be quite swift and robust. For this to occur, the government needs to implement growth-friendly reforms that go beyond the program and find ways to restore shaken confidence at home and abroad. An application for EU and EMU membership would help signal that Iceland does not want to be viewed as a free rider, let alone an international outlaw. Less hubris, more humility would also help. The financial crisis that engulfed Finland, Norway, and Sweden almost 20 years ago was not as grave as the one confronting Iceland now, but it is still worth recalling that even without help from the IMF Iceland’s Nordic neighbors emerged from their crises stronger than ever. Iceland can do the same.

 

Reykjavík Grapevine, December 2008.


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