Saturday, March 07, 2009

Icelandic madness

A couple of days ago I read one of the best pieces of magazine writing in months; Michael Lewis' staggering look at just what the hell went wrong with Iceland. I think most of us got caught up in our own North American drama last fall, what with the Canadian election, the US elections and the massive crash of the economy. Somewhere in the middle of all that there were headlines that as bad as things were here, Iceland went straight to hell in a hand basket.

There's any number of things to recommend the article. It's a very good "economics for dummies" look at what went wrong. It's a fascinating look at Iceland's culture and how that culture created what happened to the country's economy. It's also has the added bonus of occasionally being darkly funny. While the reason why Range Rovers keep accidentally exploding is amusing, this is probably my favourite.
No one thought that Icelanders might have some natural gift for smelting aluminum, and, if anything, the opposite proved true. Alcoa, the biggest aluminum company in the country, encountered two problems peculiar to Iceland when, in 2004, it set about erecting its giant smelting plant. The first was the so-called “hidden people”—or, to put it more plainly, elves—in whom some large number of Icelanders, steeped long and thoroughly in their rich folkloric culture, sincerely believe. Before Alcoa could build its smelter it had to defer to a government expert to scour the enclosed plant site and certify that no elves were on or under it. It was a delicate corporate situation, an Alcoa spokesman told me, because they had to pay hard cash to declare the site elf-free but, as he put it, “we couldn’t as a company be in a position of acknowledging the existence of hidden people.”

But I think in lieu of all the discussions about Newfoundland independence in recent days, it's also worth taking a look for a small reality check. No, Newfoundland and Labrador isn't the same as Iceland. There's a healthy degree of separation between the two, no matter what some people might have thought.

(I recall deeply hating this documentary when it first aired and wrote as much in The Express, which didn't earn me any friends in certain St. John's arts circles. It might be worth rebroadcasting now for the comedic value, but let's not embarrass Moore any more than she managed to do to herself).

Still, there are lessons to learn in this story from the way Iceland has behaved in recent years. For example, whenever outsiders looked at Iceland's economic "miracle" in the middle part of this decade and went "whoa, whoa, whoa...what the hell are you guys doing?" Such criticisms were batted away with a "you're simply jealous of our success."

There was a belief in the innate superiority of Icelandic culture over those of others. It's a very "inter-bred" community. There was an unwillingness to allow outsiders to get involved in their business affairs, plus a very aggressive, one might almost say, macho attitude and belief that they can do anything. One fishing captain seems embarrassed when confronted with how much he had to learn before he believed he was good enough to captain a ship compared to how long he studied before believing he was capable of understanding world financial issues.

So is all of that possible in Newfoundland and Labrador? Well, large chunks of it you would have to stretch pretty hard to make the connection. But a dislike of outsiders questioning the wisdom of what you're doing? A slightly smug belief in the superiority of your culture over others? Not too hard a stretch...

What happened in Iceland couldn't have happened in Newfoundland simply because so much of what went wrong there was because of how badly the banking industry was run. (Food for thought, would an independent Newfoundland and Labrador have its own bank? Because nothing bad has ever happened in our history with locally run banks). That doesn't mean there aren't lessons to be learned from what happened with Iceland. Reading this article should be mandatory in government circles and a good primer for the rest of the province.

Last Five
1. The battle for straight time - A.C. Newman
2. All U can eat - Ben Folds
3. Working class hero - Green Day*
4. Take to the sky - Tori Amos
5. Song to Woody - Bob Dylan


Anonymous said...

Unrelated to the post: I am jealous of your Jameson.

Anonymous said...

Speaking of madness, this just in…..

Newfoundland Nationalists reacted today to yet another injustice dealt to them from their mainland overlords.

St. John's, NL. -- (Reuters). An outraged Bloc Newfoundland and Labrador Party (BNLP) spokesman, speaking on the grounds on anonymity, called the small number of winning Tim Horton's roll-up-to-win cups in the province another "slap in the face" from the mainland and an insult to Newfoundlanders everywhere.

The annual contest, run by the national chain based in Ontario, has millions of prizes ranging from cars, cash and stereos to free coffee and muffins. The BNLP is upset that more prizes have not been won in Newfoundland and Labrador and claim the majority are won in Ontario and Quebec.

Demanding their "fair share" of prizes and threatening to leave Canada, a couple of homes across the Island replaced the Canadian flag with the pink, white and green tricolour said to represent the nonexistent Republic of Newfoundland.

"Where are our muffins and coffees? It’s just like that goddamn 6/49", the spokesman shouted, "all the winners are in Ontario and Quebec". A spokesman for Tim Horton's could not be reached for comment but in a press release the coffee chain called the accusations unfounded. It stated that prizes are distributed equally throughout the country based on a region's population.

The statement offered little comfort to the BNLP whose spokesman demanded an immediate apology. Failing that, he threatened that the province would leave Canada. That's the second such threat from the BNLP in less than a week and comes on the heels of last weeks "no Newfoundlanders chosen in the first round of the NHL draft" controversy.

The spokesman went on to question,"Who the fuck do they think we are? And who the fuck is Tim Horton? Another mainlander, that’s who".

Anonymous said...

I was always amazed at the prescence that Glitner had in the fishing industry in Atlantic Canada. There are some CDN banks that have significant exposure to that industry but most of the risk is offset by Fed loan guarantees. The Icelandic banking crowd were face and eyes into the Nfld industry and I am surprised that there has not been a company go down in the last year as a result. There are many CDN banks that will barely touch the fishing industry (unless it is best of breed) because it is such a risky industry and a less than stellar track record.

Mireille Sampson said...

Robert Peston over at BBC has done similiar wonderful explanations of "what went wrong" from the british perspective...don't need to be an economist to understand it. Of course, he's also that way that messengers are. He was the one who broke the news (massive scoop) about RBS's ill-health that resulted in the line-ups of people outside the bank to withdraw their money.

Even good ol' stodgey Lloyd's is up the creek, they bought an ill bank in what some characterize as a shotgun wedding, turned out the bought bank had much more bad debt than originally believed...Lloyd's is now 75% owned by the taxpayer.

That other country NL is so often compared to: I wonder if Ireland would have been as bad off as Iceland if it weren't for the EU and the euro. I've got a feeling the sorry state of things in Ireland will cause Ireland to do what the Brits never could force them or lawyer their way around - changing tax law. Lots of british business moved to Ireland for the lower corporate taxes, but Ireland's going to need to raise money. This mess also means it's more likely the Irish will stop voting against the EU.

towniebastard said...

The Jameson's belongs to Cathy. You'll have to suck up (er, ask nicely) to her for a drink.

SRD said...

The problem with robert peston is that after seeing rory bremner's impersonation, I cannot hear or see peston himself, without thinking of bremner as peston (it all in the intonation, so even worse on radio than TV), and hence just can't take him seriously...the Vanity Fair piece is fab. thanks for the link. i'm not even going to mention the scottish banks.....

The Perfect Storm said...

Hubris is the theme of the article, and also that of the ancient Greek tragedies inviting us to vicariously delight in how the mighty have fallen.

I was fascinated moreso in the article's undertone that, apparently, women wouldn't have let this happen.

Given enough rope, we're all human.

Risk taking is in our nature. When some seemingly foolish leap into the unknown works out brilliantly, by association we assume its author is too.

Of course, ignoring all signs of danger ahead and rushing forward where even fool's fear to tread is just .... manly.

The rest of the broken failures are what we call wisdom ... and I have the T-shirts to prove it.


WJM said...

It might be worth rebroadcasting now for the comedic value, but let's not embarrass Moore any more than she managed to do to herself.

Even worthwhiler: cobble together a bunch of arts grants and other other people's money to make a documentary comparing Iceland, 2008-2009, to Newfoundland, 1933-34.

I'm in, but only if I get to go to Iceland.