Iceland's ongoing revolution.

• Author: Stryker, Deena
• Position: Thinking Economically

An Italian radio program's story about Iceland's ongoing revolution is a stunning example of how little our media tell us about the rest of the world. Americans may remember that at the start of the 2008 financial crisis, Iceland literally went bankrupt. The reasons were mentioned only in passing, and since then, this little-known member of the European Union fell back into oblivion.

As one European country after another fails or risks failing, imperiling the euro with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example. Here's why:

Five years of a pure neoliberal regime had made Iceland (population 320,000, no army) one of the richest countries in the world. In 2003 all the country's banks were privatized, and in an effort to attract foreign investors, they offered on-line banking whose minimal costs allowed them to offer relatively high rates of return. The accounts, called IceSave, attracted many English and Dutch small investors. But as investments grew, so did the banks' foreign debt. In 2003 Iceland's debt was equal to 200 times its GNP, but in 2007 it was 900%. The 2008 world financial crisis was the coup de grace. The three main Icelandic banks, Landbanki, Kaupthing and Glitnir, went belly up and were nationalized, while the kroner lost 85% of its value with respect to the euro. At the end of the year Iceland declared bankruptcy.

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights through a process of direct participatory democracy that eventually led to a new constitution. But only after much pain.

Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a $2,100,000 loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The IMF and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, which had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the government to resign. Elections were brought forward to April 2009, resulting in a leftwing coalition, which condemned the neoliberal economic system but immediately gave in to its demands that Iceland pay off a total of three and a half million euros. This required each Icelandic citizen to pay 100 euros a month (or about $130) for...