Iceland’s president explains why the world needs to rethink its addiction to finance

A few days ago, Adam Taylor, journalist for the Business Insider interviewed Ólafur Ragnar Grímsson, who has been President of Iceland since 1996, and announced last month he would be running for a fifth term. Keep reading to hear his thoughts on Iceland’s recovery, and how a large financial sector can ruin a nation. Ragnar Grímsson connects the dots in a openly manner that unfortunately proves to be very rare in contemporary politics all around the world. Definitely a must-read.

You can find the full transcript on Business Insider.

Some noteworthy paragraphs:

Whereas in many other countries, until recent months, there was a tendency to read this, through 2008, 2009 into 2010, primarily as an economic and financial challenge. And I think one of the reasons Iceland has come out of this crisis earlier and more effectively than anyone could have expected, even ourselves, is that early on, we approached this not just with economic and financial challenge, but also attempted to deal with the profound profound social, political, and even judicial challenges, which the collapse of the bank brought about

As everybody knows now, we did not pump public money into the failed banks. We treated them like private companies that went bankrupt, and we let them fail. Some people say we did it because we didn’t have any other option, there is clearly something in that argument, but it does not change the fact that it turned out to be a wise move or whatever reason. Whereas in many other countries, the prevailing orthodoxy is you pump public money into banks and you make taxpayers responsible for the banks in the long run, and somehow treat the banks as if they are holier institutions in the economy than manufacturing companies, commercial companies, IT companies, or whatever. And I have never really understood the argument: why a private bank or financial fund is somehow holier for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector.

And my answer was clearly, not only with respect to the democratic structure of Iceland, but also with respect to Europe’s contribution to the world. What is our primary legacy to countries and nations in modern times? Is the European democracy the right of the people? Capitalistic financial markets can exist in many other parts of the world, even without democracy. So in my opinion, Europe is and should be more about democracy than about financial markets. Based with this choice, it was in the end, clear that I had to choose democracy.

We have, however, concentrated on our recovery, and paradoxically, what we are seeing in the last two years is that many sectors in Iceland: the energy sector, the tourism sector, the IT sector, the manufacturing sector, and the fishing sector are doing better in the last two years than they did prior to the banking crisis. And you might also find it interesting that the collapse of the banks revealed to us a very interesting aspect of modern banking, which I think has been more or less overlooked in this discussion in Europe and in America in the last two or three years: the Icelandic banks, like all modern big banks in Europe and America and all the other parts of the world, are no longer banks in the old-fashioned way. They have become high-tech companies. High-ranked engineers, mathematicians, computer scientists, programmers and so on and so forth. And their success depends largely on how successful they are in hiring people with this education and capability, not necessarily those trained in business schools or finance, but in engineering, mathematics, computer science and so on.

The third reason is that climate change is happening faster in the Arctic than anywhere else in the world. The melting of the Tundra in Russia, and elsewhere in the Arctic, opens up the possibility of what some people call the methane bomb exploding, which will be much more dangerous than the CO2 effect. So the breaking point in fundamental disastrous climate transformation of the entire globe will happen in the Arctic. So the need for scientific cooperation for systematic observation of what’s happening to the ice, the frozen tundra, both the sea ice and the Greenland ice sheet, and the tundra in Russia as well, is one of the most critical factors in the future of mankind. I know it sounds big, but that’s a scientific reality. At the beginning of this week, I was at the conference in Boston hosted by the Fletcher school on the future of the Arctic, and I also had meetings at MIT and Harvard on this.

Tags: bailout, financial crisis, Iceland, Ólafur Ragnar Grímsson