Scholarly Comments on Academic Economics

Anti-Liberal Narratives About Iceland, 1991–2017

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Abstract

Picking up in 1991, this piece continues a narrative of liberalism in Iceland (Gissurarson 2017), but here the author also takes on anti-liberal narratives about recent times. From 1991–2004, extensive liberal reforms were implemented in Iceland. But left-wing intellectuals, supported by disgruntled financiers, constructed anti-liberal narratives both about the 1991–2004 reforms and the 2008 bank collapse: The reforms were said to have created much more inequality than in other Nordic countries, and the bank collapse was blamed on liberalisation. Neither narrative has a sound basis in fact: Income distribution was in 2004 similar to that in other Nordic countries while poverty remained at a very low level. Also, the liberalisation of the economy did not cause the bank collapse. Newly privatised banks, using Iceland’s good reputation created during the reform era, had extended their credit to levels which they could not sustain in the 2007–2008 financial crunch. But Iceland received large doses of ill treatment from foreign governments and agencies, helping to make Iceland’s crisis special among otherwise similarly over-extended countries. The foundations of the economy were strong all along. Iceland recovered rapidly because she was never really sick.

Response to this article by Stefán Ólafsson: From Political Advocacy to ‘Alternative Facts’: A Comment on Hannes Gissurarson’s Method (EJW, September 2017).