Letters from Iceland
| Date | 01 April 2010 |
| DOI | 10.1111/j.2041-9066.2010.00009.x |
| Author | Edward Huijbens |
| Published date | 01 April 2010 |
| Subject Matter | Feature |
franchise licence. Iceland’s foremost
political cartoonist Halldór depicted
the Saddamesque fall of Ronald
McDonald against a backdrop of the
Reykjavík skyline.
The roots of the Icelandic bub-
ble, and its collapse, sprouted in the
early 1990s. In 1993, Davíð Oddsson
– who Time recently listed as one of
the 25 people to blame for the fi nan-
cial crisis – became prime minister;
his right-wing Independence Party
was to stay in power for the next 15
years. Acting on advice from Hannes
Hólmsteinn Gissurarson, professor of
political science at the University of
Iceland, Oddsson introduced Rea-
ganite and Thatcherite policies into
Iceland, a decade later than in the
US and Britain.
The step-by-step privatisation of
various state-owned factories and
service companies culminated in the
simultaneous privatisation of two of
Letters from Iceland
The fi rst McDonald’s in Iceland
opened in Reykjavík on 9 Sep-
tember 1993. The Icelandic
economy had long been dominated
by nationwide co-ops but the fast
food giant’s arrival was, for many, a
signal that the resource-rich Nordic
state was fi nally embracing the glo-
bal market. Iceland’s political classes
could barely hide their enthusiasm –
then prime minister, Davíð Oddsson,
was pictured sinking his teeth into
the fi rst McDonald’s hamburger sold
in Iceland.
Sixteen years later, on 1 Novem-
ber 2009, Iceland’s last McDonald’s
franchise holder closed his doors,
citing ‘the rocketing cost of imports’.
As the Icelandic krona plummeted in
the wake of a complete meltdown
of the fi nancial sector the previous
autumn, he was no longer able to
afford the imported products he was
forced to use under the terms of his
Iceland’s financial crisis was precipitated by mass privatisation, deregulation of the banking
sector and soaring personal debt. But the IMF solution has not been as radical as many feared,
write Edward Huijbens and Huginn Freyr Þorsteinsson.
the Icelandic state banks in 2003.
This was followed by the privatisa-
tion of the national phone company
and the deregulation of the energy
sector. Concomitantly tax ‘reforms’
were implemented; these entailed a
massive lowering of corporate tax (it
was also made extremely easy to set
up a private holding around even the
smallest of assets), tax incentives for
investors, lowering of capital income
tax, lowering of income tax and
the abolition of property and high-
income tax. Underlying these gov-
ernment actions was an unwavering
commitment to the neo-liberal dog-
ma of entrepreneurial freedom, self-
regulation of markets, private over
public ownership and, ultimately, the
dissolution of the public realm. All of
which is neatly captured in the title
of a now infamous book by professor
Gissurarson, How Iceland Can Become
the World’s Richest Nation.
A year or so before the collapse,
nearly all public assets in produc-
tion or services had been privatised.
The welfare system was next on
the agenda, along with Iceland’s
abundant natural energy supplies.
The educational sector had already
been opened to privatisation with
private schools at all levels open to
businesses; doctors could outsource
work to their own private practice;
and public utilities in Reykjavík were
only saved from privatisation by a
backlash from the municipalities.
Despite mass privatisation, gov-
ernment spending spiralled up-
wards, mainly due to massive public
investment in the welfare system
and infrastructure, most notably the
building of Europe’s largest earthen
dam at Kárahnjúkar and massive
road improvements. All seemed
On 1 November
2009, the last
McDonald’s
franchise
holder in
Iceland closed,
citing ‘the
rocketing cost
of imports’
© Halldor Baldursson
20 Political Insight
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