The right to be wrong about Iceland (and any small country)
Now that Iceland has been more or less permanently in the eyes of the world for the last five years or so, acres of articles have been written about Iceland and radio and tv transmissions on Iceland could fill days and nights. Around and after the collapse of the banks the media interest was, for good reason, particularly intense. I read, listened and watched a good deal of all this. Almost without an exception there were factual errors and misunderstandings – yes, also in material from famous media and journalists. One of the more memorable ones was when one of the UK broadsheets quoted ‘the MP of Reykjavik,’ thereby transplanting the UK voting system to Iceland. There isn’t one MP for Reykjavik, there are several whereas each UK constituency has only one MP.
I can’t say that these mistakes irritated me much, plenty of erroribus around. Journalists are often in a hurry, deadlines have to be met and editors kept calm. It did however make me more alert to the fact that news reporting from small faraway places may quite often contain errors and misunderstandings. That’s the inequality of size and importance: the more important the country is in the eyes of the world the more likely it is that the news coverage of it abroad is more or less correct: there will more knowledge on it in the news rooms and also among the general audience and readers who will complain of mistakes and errors.
On the whole, these errors in the reporting of Iceland usually didn’t have much influence. But much worse than media mistakes are the errors and misunderstandings coming from ‘experts’ such as foreign economists who now and then take a look at Iceland, fit it into their grand scheme of thinking and then declare that the solution for Iceland is this or that or somehow advance their theories with often the wrong/misunderstood facts about Iceland. These ideas would often find their way into the Icelandic media and be hotly debated – even though they were based on wrong numbers and facts.
Earlier this week the Nobel Prize winner in economics Paul Krugman went to a conference in Luxembourg where he listened to an interesting lecture on Iceland, by two Icelandic social scientists, on the income distribution in Iceland: ‘The Income Inequality in a Bubble Economy.’ The academics, Stefan Olafsson and Arnaldur Solvi Kristjansson, have written on this issue for years. One of their more interesting findings is that the bubble years concentrated wealth with an even smaller segment of society than before. Wealth concentration is one of the things that most clearly divides Iceland from the other Nordic countries where income equality has been much greater than in Iceland.
This prompted Krugman to write a blog where he pointed out the conclusions of Olafsson and Kristjansson but saw a further twist in the tale: Iceland had, according to Krugman, massively devalued its currency and Krugman holds this up as an example to Eurozone countries going through misery and austerity. Here, Krugman gets it dismally wrong, Iceland didn’t devalue, the currency just dropped like a stone. And there’s further a whole string of other wrong conclusions on what Iceland might teach the rest of the world. The Icelandic economist Jon Danielsson, lecturer at the LSE, dissects Krugman on his blog today, concluding that Krugman couldn’t be assigned a higher grade for this piece of writing than an F.
The morale of this story isn’t that Icelandic economists, or Icelanders, are always right. It’s just that when it comes to small countries (or exotic topics) it seems permissible to express opinions without knowing very much – or even anything at all.
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Iceland is an economist’s “lab rat”. Get used to it. Krugman is making a political point that any country should be careful about:
* tying itself to an external currency (the Euro)
* following right wing ideology after a financial crash aka slashing public spending cutting salaries,while retaining a floating currency.
Currently, its one of his “obsessions”
He uses Iceland and some European countries as the example this time, but he could have easily used the Asian economies after their crash 11 years ago, or Scandinavian countries 20 years ago, or many countries during the 1930s
I have been in both Iceland and Ireland several times both before and after the Kreppa and live in a third country that was much less affected. His point is overstated and also ignores many “minor” details. Its an over-broad generalization. However,his central thesis actually holds. Broadly it is about what to do if there is a crash, who suffers the losses and in what proportion, and what is the best option in the medium term.
I think both your article and Jón Daníelsson’s comment suggest you missing the wood by describing the trees.
D_Boone
2 Jul 10 at 10:21 pm
Sigrún, What an excellent blog !
D. Boone, regardless of how many times you have visited Iceland and Ireland, you and the professor got it all wrong. Icelanders are tired of getting used to Noble Laureates and their groupies, who don’t bother to get the facts right. I reckon the Irish are tired of you too.
The left-wing coalition government in Iceland has indeed cut public spending and salaries and increased taxes beyond decent limits. The very same left-wing phenomenon has frantically been trying to get into the EU in order to retrieve the sacred euro. The Icelandic left-wing quest for Europium is financed by the cutting in public spenditure, salary cuttings and cuttings in for instance the hospital system. Because of this Iceland will most likely see a considerable decline in longevity, after being in the lead among the nations whose inhabitants have the highest life expectancies. Because of the wet Euro-dream of the left-wing government in Iceland, many families in Iceland cannot afford do give their children a decent meal. The left-wing dreamers of Iceland with their “right-wing” methods are destroying the welfare-state in Iceland to obtain a status as a Euro-trash nation.
And guess what. The Icelandic public is back in reality-mode and is saying NO to the EU and and to easy Euromoney.
You mention a recession in “Scandinavian Countries 20 years ago“. What recession was that?
D.Boone. You are way off. Your comment is pure nonsense.
Juri
3 Jul 10 at 6:14 am
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