In this extract from his forthcoming book - ''Bad Economics from Iceland'' Olafur Margeirsson assesses some of the less credible reasons offered for Iceland's seeming and all too fleeting, economic success.
An imaginative reason for the Icelandic economic miracle was the nation’s Viking heritage.
The argument was that the Icelandic people were the descendants of brave Vikings that had dared whenever others had faltered or turned back.
It was in the nature of the Icelandic business people to be aggressive and decisive whenever they faced a difficult decision.
Along with the Viking heritage explanation came the “natural selection” argument: Icelanders were tough people that had been formed by the rough and merciless nature of Iceland, leaving only the strong and hard working behind.
This was the reason why Icelandic business people could make a deal work that others would not even dare to try to: Icelanders dared to buy whatever others did not think would be possible to make a profit out of and we were willing, because it was in our blood and genes, to put in the effort for it to work out.
Furthermore, Icelanders were a small nation, all equal, classless and laid back in communication from the bottom of the organisation to the CEO. This made communication between the bottom workers and the executives extremely smooth and efficient within the Icelandic companies so no dead time was wasted whenever information or vigorous analysis was needed on any business ideas and projects. This gave the hard working Icelandic business people that dared when others faltered a further head start, leaving other international investors in the dust.
You may think this last paragraph is a joke but rest assured it is not.
The President of Iceland, Olafur Grimsson, said, in a speech to the Walbrook Club in May 2005 at the height of the Icelandic self-delusional economic mania, that it was “our business culture, our approach, our way of thinking and our behavioural patterns, rooted in our traditions and national identity, [that] played a crucial role” in the success of Icelandic companies at home and especially abroad. The President went so far as to list “a dozen or so elements” that he believed had contributed more than anything else to the achievements of Icelandic businessmen abroad.
“A strong work ethic,..., focus on the results rather than the process,..., Icelanders are risk takers,..., absence of bureaucracy in Iceland and a lack of tolerance for bureaucratic methods,..., a strong element of personal trust, almost in the classical sense of “my word is my bond”,..., the formation of small groups of operators who work closely and strategically together, creating a fast-moving network of key decision makers who can close a deal quicker than those who are used to working within larger and more bureaucratic corporate structures,..., old-fashioned entrepreneurship where the boss himself or herself stands in the front line, taking responsibility,..., the heritage of discovery and exploration, fostered by the medieval Viking sagas... a tradition that gives honour to those who venture into unknown lands, who dare to journey to foreign fields, interpreting modern business ventures as an extension of the Viking spirit,..., the importance of personal reputation... partly rooted in the medieval Edda poems which emphasise that our wealth might wither away but our reputation will stay with us forever,..., the Icelandic market, although small, has turned out to be an effective training ground because it is so competitive, perhaps more so than many other European markets; therefore what succeeds in Iceland is likely to succeed everywhere else,..., because of how small the Icelandic nation is [we do not have] motives or big power interests rooted in military, financial or political strength. No one is afraid to work with us... and therefore all doors are thrown wide open when we arrive,..., the strong interaction which characterizes the Icelanders offers opportunities for people from different sectors to launch cooperative ventures without difficulties or major bureaucratic hindrances,..., there is creativity... Admiration for creative people has been transplanted from ancient times into the new global age, and originality has turned out to be a decisive resource in the global market.”
The Prime Minister’s Office was as mistaken as the president had been.
In a report it issued in March 2008, titled “The Image of Iceland”, it said that “in the [Icelandic] nation lives a natural power that has been formed in a coexistence with rough but fruitful nature. Icelanders have qualities that have played an important role in the struggle for existence and are now the foundations for powerful businesses, flourishing culture and progressive community. The power and adaptability of the nation has consequently made Iceland one of the most competitive countries in the world.” At the same time, it is known today that the banks were using every trick in the book to manipulate the market with their shares, including straightforward buying the shares themselves or offering “prime customers” loans to buy the shares, most often with no collateral or the just the shares themselves at risk.
Just seven months after the Prime Minister’s Office issued the report, more than 90% of the banking system was bankrupt, including the three big banks.