The 2008 Financial Crisis triggered serious political metamorphoses in many countries, both large and small. One such country, Iceland, experienced a series of peaceful political demonstrations that enticed the shift of government and the emergence of a new Constitution. Despite being a small (population 318,000 people) and fairly peripheral country, Iceland has always sought to be acknowledged by the world community. Even its recent peaceful demonstrations were conventionally viewed as an ordinary reaction to economic recession (in the meantime, the protests proceeded the various occupy movements).
Sociologist Richard Bater in his OpenDemocracy article from 1 December 2011 said that there are “serious lessons to be learned from Iceland that may also be applicable to other, larger states.” The Iceland’s case illustrates the tragedy of the “constitutional democracies” in a way it has been practiced in a variety of states recently: when the creation of the new Constitution by ordinary citizens appears to be a revolutionary exception, not a rule… “Never again can the world be told by the custodians of the old that the people cannot be relied upon to write the contract between citizens and government, and write it well.
In 2007, a UN report ranked Iceland as the most prosperous country in the world using such criteria as life quality, life expectancy, income per capita, and access to education. In 2003, Iceland privatized its banking sector. To attract foreign depositors, they introduced online banking, and with minimal expenses offered savers relatively high interest rates. One such product, IceSave drew €6.7 billion from British and Dutch depositors. However, along with the rise of foreign direct investments, Iceland’s foreign debt was growing as well. In 2003, the bank debt amounted to 200 percent of its GDP, by 2007 it was 900 percent. Meanwhile, Icelandic banks pursued aggressive policies taking advantage of the strengthening króne, at the cost of rising debts. As a result, when the world crisis broke out, the country went bust. Three major Icelandic banks – Landbanki, Kapthing, and Glitnir collapsed and were nationalized. The krónelost 85 percent of its value against the euro.
The economic difficulties triggered mass social indignation because the symptoms of the approaching crisis were systematically suppressed in the media, and as many would suspect, the suppression benefited the state authorities, who were actively involved in offshore bank activities.
Later on, when other states were trying to bail out their credit systems through issuing soverign debt, supporting sinking banks, cutting social spending, and raising taxes to pay for such bailouts, the Icelandic taxpayers refused to help the banks to pay off external debts created by Iceland’s failed banking class. To reimburse foreign depositor in private Icelandic banks, each Icelandic citizen owe the equivalent of 100 pay off the debts accumulated by private banks in their business with other private banks each citizen would be literally required to pay €100 monthly for 15 years.
The Icelanders demanded change of the government that lost people’s trust. In January 2008, singer/song writer Hörður Torfason began to sing protest songs outside the Icelandic parliament. In October 2008, he went out in the street with a microphone and started encouraging people to speak up. In a week, Reykjavik’s streets were shaken with mass organized demonstrations.
By that time, Hörður Torfason had earned reputation of a dissident. In the 1970s, he sang protest songs and voiced antigovernment sentiments. As a result, he had to move to Denmark. He was the first public figure in Iceland who openly declared he was homosexual. He composed 20 albums with political songs and later became a symbolic figure for the Icelandic protest movement.
The Reykjavik protesters went out in the streets with pans and pots, gathering outside the parliament to make noise and disrupt government meetings. The police was commanded to restore order with pepper spray and tear gas against the people. However, the central-right government was forced to resign after all. In February 2009, a new coalition government was formed from the left-leaning Social Democratic and Green parties, led by Jóhanna Sigurðardóttir. The media labeled the event the “pots-and-pans revolution” or “kitchenware revolution”.
The left coalition was severely criticizing the economic system, yet had no solution how to pay off the foreign depositors whose claims totaled €3.5 billion by then.
The idea that ordinary people should pay for the financial monopolies’ mistakes and that the entire nation would be burdened with additional payments to solve someone else’s private issues – seemed absurd to both the ordinary citizens and to ultimately the state authorities. The latter ultimately took the people’s side. Olafur Ragnar Grimsson refused to ratify the law-proposal that would make the Icelandic citizens responsible for the Icelandic banks debts, and agreed to call a referendum.
At the March 2010 referendum, 93% of the population voted against paying off the foreign debts. The International Monetary Fund immediately froze crediting. The citizens’ social indignation and pressure were persistent and as a result, the government initiated civil and criminal investigations of the people reportedly responsible for the financial crisis. The Interpol issued an international warrant for the former Kaupthing bank president, Sigurd Einarsson. The rest bankers who bankrupted Iceland left the country.
The new government was tasked to create a new constitution. Iceland’s first Constitution was ratified in 1944 when the country gained its independence from Denmark. The Constitution basically replicated that of its parent nation and had not been changed ever since. During the crisis, 21st century Icelanders demanded transparent government and new voting procedures – so that voices from all across the country would have equal weight. They also demanded improvement of the checks-and-balances mechanism in their power-sharing infrastructure. In other words, the people desired such radical changes that it was easier to draft a new Constitution from scratch than alter the old one.
The first attempt to re-write the Constitution was made by the government immediately after it came into power. The work was expected to take at least one year, but the attempt was flawed – the Constitution failed to attain popular legitimacy. The government then came up with a novel idea – the citizens themselves should create the constitution.
The Constitution creation process was set up as follows: in November 2010, a National Assembly was created in which all people could participate. Their task was to brainstorm the public priorities and values that would subsequently constitute the foundation of the new Law. The participants were split into groups to discuss certain issues (for example, human rights). The results of those discussions were then voiced in a larger meeting.
Next, the participants selected 25 citizens – those who would make up the Constitutional Assembly and re-write the Constitution. The emphasis was made that they should be selected out of ordinary citizens, not professional politicians. Anyone could become a candidate once he or she scored a set number of signatures.
Thorvaldur Gylfason, an economist and one of the members of the Constitutional Assembly (later known as the Constitutional Council) said that the Assembly’s primaries were mostly on the Internet and almost no one donated money sway the vote. The radio-stations interviewed the candidates. Gylfason said that the editor of newspaper where he had his column asked him not to write anything during the election season because otherwise his texts could serve as electioneering.
Finally, the voting took place and the 25 members of the Constitutional Council were elected. The opposition, represented by the former government and its administration, did not remain in the shadows. Once some opposition candidates lost the election, they attempted to denounce the results by uncovering some alleged inaccuracy in the procedures. The Supreme Court accepted their complaints, which by and large meant that the election results were invalid. The government then had three options: 1. Holding another series of election (which would have been expensive) 2. Appointing the Constitutional Council members as an act of Parliamentary Committee 3. To give up the project entirely.
Ultimately, the government chose the second option – they appointed the citizens who won the election to the Constitutional Council.
In April 2011, the Council set about its work. It was given four months to re-write the Constitution. Councilors worked full time, and were paid the equivalent of parliamentarians. Each week, the new draft was uploaded onto a website – at its various stages. July 29th 2011, the draft Constitution was presented to the Parliament for final review. Iceland’s current president Olafur Ragnar Grimsson suggested holding a referendum prior to the presidential election as the new Constitution brought some changes to the election process.
The assessment of the Icelandic phenomenon has been mixed. Some, includingRichard Bater, view it as a good example to follow on the world scale, and as a successful experiment in the application of the principles of participatory democracy. Others,such as communications expert Sorin A.Matei, professor at Purdue University, believe that these methods can only work within a small country.
Thorvaldur Gylfason deems the new Icelandic constitution to be a result of crowdsourcing – the creation of the Constitutional Council provoked a mass reaction. Public polls have indicated that the citizens thought highly of the Council’s work. The working group itself was comprised of people who did not belong to any of the political parties and who collaborated on the common task. Additionally, he believes that the Icelandic experience can set a universal example in a very generic form – “Treat people with respect and they will respond in kind. Do unto others as you would have them do unto you”.
As for crowdsourcing, Gylfason admits that the utilization of web-based forms of election and re-writing of the Constitution are only possible in countries where the overwhelming majority of population has access to the Internet. Even in Iceland, 5% of the population (primarily elderly people), couldn’t participate in the general discussion despite their right to vote. Meanwhile, in most Arab states, for example, access to the Internet is significantly lower.
Economic lessons to draw
Paul Krugman, the Nobel prize winner in economics and one supporter of the Icelandic economic strategy, is quite skeptical about methods the United States utilizes to restore its economy. Many economically advanced states saw the solution in pouring state money into economy, which subsequently led to the growth of unemployment. In other words, banks wanted to solve their problems with citizens’ funds. “Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position. But a funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules.”
Iceland hasn’t avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. but when everyone expected utter disaster, it amounts to a policy triumph.” The moral Krugman draws from this story is that the Iceland’s experiment showed that the misfortunes and repercussions of the global financial crisis could have been avoided. There were choices. The strategies currently pursued by other states still have alternatives.