Jealous of Iceland
Yes, I am jealous of Iceland. You see, they are facing their reality, and, while unpleasant, at least they are getting on with the necessary adjustments.
Iceland, a tiny island nation with 315k souls, managed to rack up a stunning $100 billion in banking liabilities (half of which was external) that dwarfed its gross domestic product of approximately $14 billion. Well, not everyone in the country caused it; it turns out that about 50 people were involved in racking up those debts while everybody else was looking the other way.
The defining characteristic of something that is unsustainable is that it will someday stop. Without being an economic genius or delving too deeply into brain-splitting economic minutiae, we can readily appreciate how such a debt load proved to be unsustainable. One cannot forever increase one's debts relative to one's income, which seems to be intuitively obvious to everyone except bankers and conventional economists. So the music stopped playing one fine day in late September of 2008, and the dream was over even more suddenly than it began.
What had been an unsustainable accumulation of debt just stopped. Suddenly and irrevocably. One day the story all made perfect sense, and the next day it did not. One day Iceland was the fifth on the global list of per-capita wealth; the next it was headed somewhere lower, although how far it will go is yet to be determined. Such is the way of bubbles.
Loud and noisy demonstrations erupted, the usurious menace of the international banking cartel was soundly rejected by a public referendum, and then the good people of Iceland settled down to the business of figuring out the dimensions of their new economic reality.
I was recently in Iceland, by invitation, to give two talks: one, to a group working on creating sustainable systems in the world, and the other, a public talk at the University that was generously funded by a local world-class entrepreneur.
On my very first taxi ride in the country, I asked the cabbie what he thought of bankers. "Bankers!" he spat, "I am not a violent man, but if you gave me a gun and lined them up, I would shoot them all!" Navigating around this outburst, I steered the conversation into safer waters, seeking to find out what he thought was the root of the problem. In the course of our conversation, I opined that his analysis of "too much debt," with which I heartily agreed, needed to be shaded with the observation that half of that was external debt and much of that was denominated in something other than Icelandic currency (a rookie mistake in international financing, if ever there was one). He readily agreed, and had numbers at the ready.
As our discussion wound through economic principles, both micro and macro, I wondered how many cabs I would have to get into in my own country, the US, in order to have such a passionate and enlightened conversation about something of such elemental importance as this. Ten? A hundred? A thousand?
Then at the sustainability conference, I happened to sit next to someone who worked at the Icelandic central bank during one session. How did the bank view itself? "We are embarrassed and concerned over our some obvious failings," was the response. The Finance minister gave the opening talk, and echoed this sentiment, displaying honesty, introspection, and humility over what had transpired. Everywhere I turned, I found the people of Iceland to be knowledgeable about the roots and details of the crisis into which they were plunged and eager to explore the possibilities and consequences to their future.
In short, I was jealous; very, very jealous.
Here is an entire nation of people who are ready to accept that they were living too far beyond their means and conclude that it was time to face the music. While still mid-journey and in the throes of discomfort (40-70 year-old Icelandic males are presently recorded as being "very angry" by researchers), they are getting on with it. There are no calls to double down on new national indebtedness to 'get things back to how they were.' They are not overrun with economists explaining how it would make sense for their central bank to simply flood the world with more Icelandic kronur. There is no sense that the illusory wealth brought about by the vast accumulation of debt is some sort of natural birthright that must be unquestioningly preserved.
In short, their attitudes and policies are nothing like those in the US.
Upon my return to the US, I was immediately greeted by the news that the recession had somehow ended a year ago, a period of time in which the number of civilians unemployed for 27 weeks or more had increased by 2,000,000+, and also heard that the Federal Reserve was considering expanding its money printing operations (in other words, the return of QE as a policy tool). These are two highly contradictory pieces of information, when you stop and think about it. The government is facing a sea of red budgetary ink as far as the eye can see, states are hemorrhaging, and housing continues to slump along. In all of this, one is hard pressed to find any sort of a conversation that goes like this: "We overdid it, there, and now it's time to tighten our belts and get used to living within whatever means our economy can actually support."
I could recite an nearly endless litany of facts, quotes and data all supporting the idea that the US is hell-bent on returning itself to a level of economic activity and growth that was provably overdone and unsustainable.
The difficult part for many in the US, including me, is the effort that it takes to maintain a vigilant stance when immersed in such a deep pool of complete denial. Part of me screams, "Get on with it already!" even as another part of me really does not want to get on with anything at all, preferring to use these steady moments to become better prepared for and more adjusted to whatever the new reality is going to be.
I note with mounting concern that I no longer care about things that used to provide me with much amusement and passion in the past. It's a form of burnout like we see in movies about war. The first time a single bullet gets shot past a new platoon, it sparks a vigorous reaction, "My god! That could have hit us! Yikes!" but by the end of the movie, some guys are standing around giving orders and talking to each other as mortars explode nearby and a steady whine of bullets fills the air around them. They no longer care, because they have been worn down in some elemental way, as if the human brain can only remain on high alert for so long before protecting its internal circuitry by shutting some of it down. Or perhaps it's simply what biologists call 'habituation' -- the process by which even sea slugs can be taught to ignore mild electrical shocks. My defense against this process of shutting down is to give talks, meet people, and increase my own personal and community resilience.
Through all of this, I find myself jealous of Iceland, whose natural and cultural resources permit an attainable vision of a stable and prosperous future, and which seems to be getting on with things by closing the gap between its prior excesses and future prospects.
Perhaps the lesson here is that Iceland did not come to its senses entirely on its own and had to be forced by external circumstances to begin this process of adjustment. Perhaps we should calibrate our expectations about the future based on our assessment of what 'forcing functions' will lead to change in our own countries. Perhaps that's just the way of the world.
I think I already know what those forcing functions are for the US. I have a rough sense of their timing. I just need to constantly remind myself that while vigilance in the face of denial is tiring, it is also necessary. There is much to be thankful for, and I am grateful for the time that we have been given to prepare ourselves.
All the same, I also wish that we'd get on with it and begin to close the enormous gap between our national expectations and reality. So, all in all, I am quite ambivalent on the matter.
Iceland has all the pieces it needs to construct a wonderful and sustainable future, and I sincerely hope that it will. In the meantime, I'll be harboring a sense of jealousy about their head start.