Icelanders see Icarus-like fall of greed

By David Ibison in Reykjavik

Published: Financial Times October 24 2008

It is still possible to buy minke whale sashimi or lobster tails with wasabi in Reykjavik’s better restaurants. But conspicuous consumption in crisis-hit Iceland is being replaced by a newfound parsimony in the form of blodmör black pudding.

“We are starting to eat blood sausages again – things our grandmothers made,” says Andri Snaer Magnason, one of the country’s leading novelists. “It reminds us of a generation that came through a crisis with a strong set of values and helps us realise that these were the real values.”

The shift from sashimi to sausages captures the economic and psychological impact the looming collapse of the island’s economy is having. Icelanders face recession, a spike in unemployment, high inflation and the erosion of international credibility and respect built up over the past decade.

The hopes that underpinned the economic model of free markets embraced by the rightwing Independence party over 17 years are deeply questioned. “This society was not on the right track,” says one senior Icelandic diplomat.

Reykjavik is awash with overseas bankers and private equity executives scouting for opportunities and its banking assets are being sold on the cheap. A rare 1888 cognac was picked up in Reykjavik by an overseas buyer flush with foreign cash – one of the first but not last bargain-basement purchase of Icelandic assets by opportunistic foreigners.

Trade flows are starting to reverse. The 70 per cent drop in the value of the krone has led to the creation of a website to export of top-quality used cars at knockdown prices. The government is reportedly considering tax breaks to boost this business. But now the pace of the past two weeks’ events has started to abate, the blame game begins. Top of the list is Gordon Brown, UK prime minister, who used anti-terrorism legislation to freeze the assets of the country’s banks. “How can you compare my grandmother’s bank to al-Qaeda?” Mr Magnason demanded to know.

Icelanders have started an online anti-British campaign, with pictures of themselves or their children holding “We are not terrorists” banners. The blogosphere hums with anti-UK rhetoric.

But such expressions of anger are matched by an excoriating introspection about the ways Icelanders sowed the seeds of their own collapse.

“What we didn’t know was that when the banks were taking risks, they were not taking it themselves but on behalf of Icelanders – nurses, teachers, doctors,” said Mr Magnason, who predicts a strong shift to the left in coming elections.

He sees recent events as the Icarus-like plunge of a greed-is-good philosophy: “the beauty of what has happened is that we are seeing mythology at work,” he said.

One Icelander says people are better mannered to each other than they were a month ago, reflecting not only a demise of selfishness and their shared experience of the crisis, but also because they know unemployment is a real possibility and there will be no shortage of replacement workers. Such grimly pragmatic visions of the future prevail. Reykjavik has been renowned for its Range Rovers, driven by the newly rich, muscling their way down narrow streets.

“Now we are going to be like Cuba,” says one banker. “In 30 years’ time, there will be 30-year-old Range Rovers driving around.”

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