Iceland – Economy – Review of Cenk Uygur on “The Young Turks” – A Selective Reading of the Evidence, But I Agree, Iceland’s Stand Against Austerity is Worthy of Support – 30 June 2012

I was asked to review a clip of Cenk Uygur’s show “The Young Turks” featuring Uygur commenting on Icelandic economic policies.  What appears below is my review:

Anyway, I watched the clip – it’s kind of selective evidence, marshaled in a way to be as complimentary to Iceland as possible while ragging on the US as much as possible. It’s good that Cenk Uygur is doing what he can to play up that Iceland is resisting the austerity agenda, which is certainly true, and I agree that it is working for them to do so. But there’s this one bit in the clip where Uygur notes that the Icelandic economy contracted in 2009 by 6.7%, but then rebounded by 2.9% in 2010 and 2.4% in 2011. Here are the quarterly figures, by the way: . That does show that Iceland is now growing, but Obama’s numbers in the US are around the same or higher: . Unfortunately, this fact would undercut Uygur’s Barack-Obama-is-controlled-by-Wall-Street narrative. (Note how he says Iceland is now growing faster than Europe and “the OECD countries” taken as a whole, but he doesn’t mention the US.)

Incidentally, for the record, Canada’s growth under Harper is not as high either as in the US under Obama or as in Iceland currently: . There is growth, but it’s not much of a boost for the idea that austerity is particularly “expansionary”.

I’m also unclear on how arresting bankers really helped anyone, as fun as it may have been, and as much as it delights Uygur. Putting all the blame on them implies that Icelanders were passive spectators who were hypnotised into doing a bunch of things they really didn’t want to do. That’s pretty clearly not the case. The Landsbanki IceSave scandal, which happened because banks were offering 6% savings accounts to overseas customers, pretty clearly happened under conditions of virtually no regulation of the Icelandic banking industry. That didn’t happen by accident, it happened because the voters were okay with the deregulation agenda because it brought deposit money into Icelandic banks. It seems to me like bankers and politicians were arrested for something the Icelandic people voted to allow. (The deregulation agenda was similarly popular with voters here…you know, get big government off everyone’s back and all that…)

All that said, the President of Iceland, Ólafur Ragnar Grímsson, whose background is with the left-wing People’s Alliance party, has refused to sign austerity legislation passed by the Althing, Iceland’s parliament, and has been instrumental in helping the country stand up to those who can’t seem to process the idea that no one can pay a debt down if their economy has been destroyed. I’m on Grimsson’s side, and I’m hoping Iceland’s resistance will help people in Europe be the next to take a stand against the austerity agenda. They did dismantle the foreign operations of Landsbanki and turned it once again into a purely national bank, and they probably will be able to cover what they owe foreign savers with the proceeds of the disestablishment of the foreign part of the bank.

One last comment and I’ll wrap it up. 🙂 Cenk Uygur mentions Paul Krugman in the clip. Krugman has some theories about Iceland that I find problematic – he thinks one of the reasons Iceland is rebounding while various European countries are having trouble is that Iceland isn’t in the Eurozone and hence can independently, without asking Brussels, increase the money supply. Putting more Icelandic krónur in the hands of local consumers will provide a quick stimulus, but it also devalues the currency, which is bound to have longer-term effects that are unpleasant. Again, my problem with the Krugman and Uygur narrative is that it is selective about what’s important, mostly out of a desire to sock it to Obama. Obama’s economic policies include an emphasis on investing in modernisation – research/development and infrastructure. I have not heard that Iceland has been doing that, and that difference will probably matter.

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