Humanities & Social ScienceIcelanders reject deal to repay British and Dutch:
The outcome of the referendum had not been in doubt since Iceland had recently been offered better repayment terms than those contained in the deal on which residents were voting.Partial referendum results from around a third of the cast votes showed 93 percent opposed the deal and less than 2 percent supported it. The rest cast invalid votes.
But the rejection will still have major repercussions, keeping financial aid on hold and threatening to undermine the center-left government of Prime Minister Johanna Sigurdardottir.
"This has no impact on the life of the government. We need to keep going and finish the (Icesave) debate. We have to get an agreement," Sigurdardottir told public television.
Global capital is really lucky that direct democracy isn't that widespread and that regulatory capture is ubiquitous. On a microeconomic scale we know humans can operate spitefully. I won't go into the evolutionary ideas for why this might be (though W. D. Hamilton wrote a whole paper on the evolution of spite using the inclusive fitness framework), but the inclination is strong enough obviously that you have a whole nation willing to engage on it. How's that for systematic bias in our cognitive faculties?
The big picture problem is that for most of human history. No, for 99% of it, we've operated under zero sum dynamics. That crops up in human behavior, but a variety of historical events and institutions (and I consider science & technology fundamentally institutional products) have converged so that non-zero sum dynamics have produced rapid growth in productivity and post-Malthusian consumerism over the past two centuries. But there is no inevitable reason for why individual rational action should lead to positive sum outcomes; for most of human history it didn't, for there to be some with more others had to have less. I would have to put recent financial innovation by & large into the category of dynamics which recapitulate the dynamics of the Malthusian era, moving wealth from some to others, as opposed to growing the pie (England actually banned the joint-stock corporation during the century leading up to the industrial revolution, so there is debate whether even such primitive capitalist institutions are necessary for the technological breakout).
Note: The consequences of the vote may be somewhat more symbolic than not. See the story linked above.
Comments
There is a other way:
http://thedutchiceland.com/
Posted by: Nick | March 7, 2010 3:02 AM
I've already claimed my piece of Iceland. But what do we do with those pesky Icelanders. Can we deport them to Norway? Or Greenland?
Posted by: Bert | March 7, 2010 6:09 AM
The notion that "iceland" (presumably: "the 300,000 people who live in the geographic entity 'Iceland' ") should have to pay money to the UK government, because - for some unknown and bizarre reason - the UK government decided to freakishly give huge amounts of money to certain people who lost money on risky investments ... is nuts.
The UK government bizarrely and ridiculously gave away a huge amount of money, to people who had been making risky investments.
"Gordon Brown" has a long record of losing huge billions of pounds. A simple example is that, incredibly, he sold billions of pounds of the UK's gold at the EXACT bottom of the market. He managed to lose huge billions of money by doing so.
Perhaps Iceland ("the 300,000 people living in iceland") should also pay for this screw-up on Brown's part?
The whole thing doesn't even parse.
There's no sense in which "Iceland" owes money. Even if (bizarrely) blame the BANKS involved (businesses go broke every single day of the week - that;'s the end of it), how does the "blame" possibly flow to "Iceland"?
Razib is totally correct in pointing out that the last 50 or so years of the "government-banking complex" (under the Fiat money regime led primarily by the "Federal" Reserve group of investors / US Government) has been a reversion to Malthusian fixed-pie theft.
"England actually banned the joint-stock corporation during the century leading up to the industrial revolution.." absolutely.
Posted by: Johnny | March 7, 2010 6:10 AM
Don't worry. There will be another World War and Iceland can get rich again, selling fish to the civilized, fiscally responsible, and starving combatants.
Posted by: decora | March 7, 2010 8:03 AM
One of the things about this recent financial disaster is that it was a technocratic disaster. The Federal Reserve is an appointed group unaccountable to the electorate which was put in place specifically for the purpose of precluding populist interference in finance, and of tying the hands of elected officials by constraining what they're able to do.
Clinton was initially unhappy when he found that he was a slave of the bond market, but he got into it as time passed. We should keep in mind that ten years ago economists were worrying about the negative consequences of paying off the deficit (yes, there are some). GWB very effectively put an end to their worries.
By Eisenhower Republican standards it worked pretty well for decades, but people now believe that Greenspan not merely didn't try to deflate the housing bubble, but encouraged it. But most of these people didn't doubt Greenspan when his methods seemed to be working, even though they weren't sure how he did it.
My own opinion is that economics isn't consistent, complete, and well-formed enough to ground technocratic domination or the technocratic override of political decisions.
The mandate of the federal reserve is to promote economic growth and full employment, but they tend to neglect the second part of that. But as of right now, during the period 1990-present they haven't succeeded in the first part either.
Posted by: John Emerson | March 7, 2010 8:44 AM
The referendum wasn't about paying or not paying it was about the interest rates.
Posted by: Jóhann | March 7, 2010 11:33 AM
It's not that Icelanders don't want to pay their due bill, it's that the asking price is one-quarter of the average family take home budget for the next 8 years.
So, what if Washington continues it merry dance of 'let's piss off our major debt-holders'? At worst, the Chinese could call debt due, and collection on their fistfuls of US Treasury Notes. More likely, they will increasingly decline to buy heavily into our debt load in the future. Could you blame them?
Wanna guess how much the average American family would have to cough up each month, and for how long just to pay off the Chinese? Unthinkable, right?
How about the Japanese, Numero Deuce US debt holders? Congress calling Mr. Toyoda chief onto the carpet in Washington may have been fool-hardy in the long run, as the Japanese people and their leaders STRONGLY identify with their Big 5 manufacturing sector leaders. They may also decline to buy US debt in the future.
Maybe we should consider the plight of Iceland in a tad more empathetic tone. Hells Bells, maybe they can sell off a Surtseyian island or two to finance their debt.
Absolute irony from the Wikipedia link, above:
'For public choice theorists, regulatory capture occurs because groups or individuals with a high-stakes interest in the outcome of policy or regulatory decisions can be expected to focus their resources and energies in attempting to gain the policy outcomes they prefer, while members of the public, each with only a tiny individual stake in the outcome will 'ignore it' (by general voter apathy) altogether.'
That sentence may just as well have said...'be ignored altogether', with regard to the Supreme Court blessing of lobby power in Washington.
Posted by: Ringtonic | March 7, 2010 3:21 PM
The Chinese keep buying American bonds to keep the dollar high and the yuan low so they can sell to us. They're not doing it out of generosity or stupidity. If they were to let the exchange rate normalize, their exports would go down and they'd have major problems.
The US does lose political leverage by becoming a debtor, and the present state of affairs can't last forever.
Posted by: John Emerson | March 7, 2010 5:29 PM
The Iceland government did play a role in this, and they have a legal obligation because they underwrote the deregulated Iceland banks. And the People of a nation are responsible for its government's debts.
To me it was the most likely result of the amphetamine-fuelled cargo cult free-marketism everyone was pushing for two decades, but it will take awhile to be sure exactly what happened and there's no assurance, or even likelihood, that the perps will suffer any consequences.
Posted by: John Emerson | March 7, 2010 5:34 PM
If the deposits were legally insured by the Icelandic government, then the Icelandic people should honor their government's obligations.
Posted by: Huxley | March 7, 2010 9:21 PM
The Dutch want to start building nuclear power plants, but are not yet certain what to do with the nuclear waste.
I think there might be a win-win situation here for everyone.
Apart from that I would like to notify everyone that the whole voting session has been scientifically proven to be rigged. The outcome has been flawed due to the fact that all those who favored against, have been found to share exactly the same DNA and should therefor be dismissed.
That train of thought also leads to believe that storing nuclear waste on Iceland could hardly do any (more) harm to anyone living there.
Posted by: IceDave | March 8, 2010 1:55 AM