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Iceland moves toward direct democracy

Iceland’s Movements Towards Real Democracy

What’s the big interest in the small island?

In representative ‘democracies’ what is represented is often the interests of the rich. The West’s response to the 2008 financial crash epitomises this; bailouts and austerity benefit the few and impoverish the many.

This oligarchic system, where capitalists’ profits are the driving force, is leading to multiple meltdowns: ecological, economic and social crises.

Iceland provides alternatives. Its people decided not to bailout the banks and the crash encouraged innovations towards democracy: where power is distributed equally, not held mainly by capitalists. Some innovations have been put into practice, others ideas are not realised – yet.

A near financial apocalypse catalysed the islanders’ response. The scale of debts made a bailout impossible. Additionally its small population (320,000) and tenacity of its innovators explain its success moving towards democracy.

Iceland took a direct hit from the financial storm

In October 08, Glintr and Iceland’s two other private banks failed, with accumulated debts peaking at over 10 times the nation’s GDP. The Icelandic Króna dropped 80% against the Euro, during its worst recession, since independence 1948. Bread queues grew with soaring inflation, unemployment nearly doubled, personal savings were wiped out and one in ten had serious loan default. All of this caused repossessions to surge.

Crucially, mass protests coined the Pots and Pans Revolution peacefully removed Prime Minister Geir Haarde, January 2009. The citizens effectively halted plans to socialise the banks’ debt. April 2010 saw new elections.

The banks were nationalised and downsized into domestic retail banks, with any over-sea obligations frozen or cancelled. In June 2010, Iceland’s Supreme Court ruled loans indexed to foreign currencies illegal, due to the diminished value of the Króna.

After winning the April 2010 elections, the ‘centre-left’ coalition reneged on its pledge not to socialise the private banks’ $5 billion debt. But two referendums enabled Icelanders to reject this, both initiated by President Ólafur Ragnar Grímsson. His limited powers include a veto to initiate referendum.

In January 2013, two senior bankers were jailed for fraud. Speaking that month in Davos, the President explains Iceland’s success:

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe.”

The island’s big problems with representative democracy

“After the financial collapse of 2008, there was a very strong feeling that we were at the very end of a regime,” Gudmundur Ásgeirsson says. “Many people thought we don’t need protest the system is collapsing itself, we need to think about what to do next.”

Gudmundur is from the Icelandic Financial Reform Initiative, one of the movements created since the crash.

“When the system is the same for decades it means they are the same power groups and families and they don’t want change.” describes activist Hörður Torfason.

Lawyer Katrín Oddsdóttir asserts, “They have become little mafia, they just think about how they can maintain themselves, get more power and their people into the right positions… If we want to, we can have financial crashes every 5 years and go to hell and back; or we can decide to have fundamental and philosophical change.”

Gudmundur, Hörður and Katrín encapsulate how the crash spurred many Icelanders’ imaginations: another world is necessary. All three are speaking on Miguel Marques’ insightful documentary Pots, Pans and Other Solutions, 2010. The critique of Iceland pinpoints democratic failures applicable beyond Iceland’s shores.

After a London screening of his film, June 2012, I interviewed Miguel and have since followed up with articles focusing on Iceland’s post-crash movements.

In one, I speak to Gunnar Grímsson and Róbert Bjarnason. They formed the Citizens Foundation motivated more by the crash in political trust than the financial one.
Gunnar asserts: “There is a war between the people who own and control the world and the rest of the people that in some cases have no say in anything.”

Another interviewed was with Kristinn Már Ársælsson from the Association for Sustainability and Democracy (ALDA). He identifies how corporations are usurping power:

“In the last couples of decades we have moved a lot of decisions from the democratic into the economic field. We’ve privatised industry, public services and a lot of things.”

Globally, Kristinn Már also points out that the current system is unsustainable: based on a false assertion.

“We expect the economy to grow every year as the main issue. But infinite growth in a finite world is simply impossible. On current levels the West consumes many times beyond the possibility of our planet.”

Author Einar Már Guðmundsson draws attention to how the media often supports the corporate-government position: “At the same time they owned the media. We were in a situation where we were not being told the truth. It was not what they were saying, but what they were not saying.”

Linked to corporate media Daði Ingólfsson, from the Constitutional Society, says a lack of transparency stands in the way of democracy.

“Everything is hidden; it is very difficult to have real numbers about anything. It is difficult to have answers about anything.”

Kristinn Már tells that for many Icelanders the crash in political trust leads to apathy.

“Since the crash in 2008, about 50% of the voters would like to vote for some other party which they haven’t seen, just anything else other than the old political parties or they would turn in an empty vote or would not vote.”

Britain’s austerity steamroller

Compared to Iceland, the financial crisis hit Britain more slowly; with deep cuts still being rolled out. This story resonates across Europe:

  • Iceland differs in three respects:
  • 1 No bailout and speculation stopped through capital controls.
  • 2 Its citizens influenced what happened.
  • 3 Its strategy served the majority.

Britain’s peak support for the banks was £1.2 trillion. Banks that inflated the subprime mortgage bubble also profited from short-selling the panic and were even paid to author the bailout plan.

On this plan, the public were not consulted; protests are widely ignored and suppressed. While six years later, austerity measures and pro-finance policies mean an extremely inequitable society is stretching further.

One similarity between Britain and Iceland is the lack of alternatives within the old parliamentary parties. Iceland’s ‘centre-left’ coalition’s attempts to socialise the banks’ debts show this clearly, betraying the idea that the ‘left’ acts out of the interests of the majority: labour.

With the exception of one Green MP, there are no country-wide alternatives to the neoliberal consensus in Britain’s Parliament. Unsurprisingly, the Conservatives through austerity are decimating public spending. Any Liberal Democrat’s claims to offer alternatives dissolved on arriving in office, most notably in increasing tuition fees rather than scrapping them. Labour too, is finance friendly and hardly challenges austerity. They continued Thatcher’s financial deregulation project that caused the crisis and implemented the bankers’ welfare.

Another way Britain diverges completely from Iceland is the latter’s decision to jail its bankers.

Britain’s deeper democratic crises

Britain’s failure to penalise the bankers adequately is repeated by allowing other corporate crimes and malpractices. One bank punished for LIBOR rate rigging went on to fix the gold rate the next day, corporate tax evasion is facilitated by sweetheart deals and the government backs arms sales to regimes that commit human rights abuses, as just three examples.

In terms of power, hereditary privilege reigns over a class stratified country where factors such as private schools vastly increase your chances of political power. It is an old – rich and white – boy’s network.

Systemic corruption and lobbying engrain the rich’s privilege. Key Conservative donor Michael Spencer is a notable example, he is chairman of ICAP who were ‘lynchpin’ in LIBOR rigging, yet his firm went unpunished. The British Bankers Association exemplifies this problem too, having successfully lobbied to dilute post-crash banking regulations and stopping caps to bankers’ bonuses. The incestuous nature of corporate-government is illustrated by the fracking industry’s deep ties to politicians. HMRC’s revolving door enabling tax accountants to write loopholes is another case. There are many more.

As a centre of capital, the City of London’s power has global ramifications for democratic soveriegnty. Economically, half the world’s tax havens hub through the city. Ecologically, half the world’s mining firms are based there, alongside capital funding coal, oil, tar sands and Arctic industrialisation. London capitalists also make profits from sweatshops to war profiteering, drug cartels to food speculation. This list is again indicative rather than comprehensive.

British mainstream media’s bias ingratiates malpractice; its few media moguls owners have vested interests in maintaining the status-quo, which undermines democracy. Examples of this media spin include the Sun’s campaign behind fracking, or the abject failure of most of the press to explain how financiers including Goldman Sachs helped cause and then gained from the financial crash.

Corporate media works in tandem with state and corporate secrets that dilute public awareness and thus resistance of malpractices. War crimes in Iraq and Afghanistan; corporate tax evasion sweetheart deals; the subversion of protest groups; Private Finance Initiatives, where public buildings cost six times over the odds; negotiations around The Transatlantic Trade and Investment Partnership: TTIP; are all examples that those in power have tried to keep secret.

We only know about all these malpractices due to whistleblowers, hackers, journalists and particularly Wikileaks.

Largely, all these examples explain why people are apathetic about voting, not to mention cross party corruption such as the expenses scandal.

On a global scale, corporate power over democracy is evident in practices that make no sense for humanity but large profits for a few. This few include global super oligarchs:
85 people have the same wealth as 3,500,000,000.

Iceland moves towards democracy

In Iceland the process of democracy is spreading; more decisions are made collectively, challenging the power of oligarchs. This is what spreading democracy should mean, rather than the neoliberal misappropriation of the term, a euphemism for spreading foreign power often down the barrel of a gun.

There are choices since 2008 beyond the neoliberal consensus within the Alþingi (Parliament). In the last election, 2013, fifteen parties ran – doubling the choice. 22% voted for these new parties that all advocate for a people’s constitution, discussed soon.

In 2013, Iceland’s new Pirate Party was the first globally to win parliamentary seats: 3 in total. It advocates for transparency, privacy and direct democracy.

Interviewing one of its MPs Birgitta Jónsdóttir, this year, shows how she aims for systemic change.

“I think we need to zero the system but before we can do that we need to provide the tools or the hardware. We need to shape direct democracy paths, tools and inspirations to co-create— build strong foundation for freedom of information and expression, transparency and accountability, and of course the right for privacy both off and online.”

A self proclaimed pragmatic anarchist, she adds: “I am a hacker inside the system.”

Formerly as an MP with the Movement (a post crash party that gained four seats in 2009), Birgitta pushed through IMMI: Icelandic Modern Media Initiative legislation that made Iceland transparency haven that protects freedom of speech and press freedom, in 2010.

She reflects: “IMMI is a new approach where we worked with people from all over the world to legalise the concept of WikiLeaks in a borderless world.”

Birgitta co-produced Collateral Murder, a film of US war crimes in Iraq that originated from Chelsea Manning’s whistle-blowing.

In Reykjavík city, over 150 city council schemes have been implemented by a direct democracy initiative.

Going against the European austerity grain, there are improved cycling and public transport infrastructure; better nutrition in schools; more parks in the suburbs, teaching initiatives such as teaching financial literacy, more transparent local government, adult learning programs and new schemes to benefit the elderly and disabled - to name just some.

To crowd-source ideas, the council uses the new Better Reykjavík online platform, created by the Citizens Movement.

It gave all the mayoral candidates equal digital space and access during the 2010 elections. Jón Gnarr and the Best Party used it most and won the election. A comedian, Jón stood on an anti-cronyism joke ticket. Through this site, 10% of the population created over a thousand initiatives, while 43% of the electorate visited the site. Jón may not take himself seriously, but uses Better Reykjavík and an ethos of transparency to take the people’s participation seriously.

This process illustrates how the internet can facilitate democracy. Its creators Gunnar and Róbert tell me how this can overcome the vicious cycle between voter disempowerment and apathy.

“You need to animate the general public to participate, whichever way you can. Many fragmented voices achieve little but united we can change the world. We need to find the most important ideas for every community and mobilise to support those ideas.”

Crowd-sourcing digital democracy was also used to draft a constitution.

Non-politicians were elected to a citizens’ council, where they sat for four months, listening to proposals, critique and feedback from any citizen that wanted to engage. Again this is made possible today by the internet, which in Iceland widely regarded a human right.

A national referendum voted in favour, but the Parliament rejected its ratification. Reasons for this were many, including politicians not wanting to sign away their own power. Yet the process provides means for people anywhere to shape the laws of their land.

The document itself provides many solutions to undoing capitalists’ corrupting influence. In similarity with IMMI, it looked across the world for the best legislation to uphold human and ecological rights. This included building on the Ecuadorian and Bolivian laws that give nature rights. It also included the right to privacy from state intrusion and the right to an adequate standard of living.

One of the groups that contributed towards this process was ALDA. Its co-founder Kristinn Már explains how ALDA is a trail blazing group.

“A lot the ideas that ALDA is promoting were not in public discussion before the crash and there was no formal body or organization promoting ideas for a participatory democracy, either in politics or the economy.”

ALDA aims to build a roadmap for systemic change. Essentially it recognises that without the ideas of what the alternative paradigm is the general public will not push for a new model. Thus education and awareness are crucial.

ALDA propose transforming the electoral system, so that a third of MPs are randomly selected, a third voted from party lists and a third from independents. This is to blend the benefits of each system and make parliament more representative of the general public.

The unrepresentative nature of Britain’s ‘democracy’ is clear from looking at its list of Prime Ministers, 52 of 53 were male, 19 went to Eton. A recent Princeton University study shows how oligarchic America is. Unsurprisingly, it clarifies how the rich in power act in the rich’s interests. This would be reversed by the random selection of MPs, with additional measures in ALDA’s proposal to balance parliament on gender and other lines.

Citizens’ assemblies are proposed to allow the populace to contribute to core decisions. Inititated by 8% of the electorate or 1/3rd of MPs, these would involve either elected or randomly selected people. These are to be carried out in a transparent process, where a dialogue can occur like the Citizens Constitution Council. The idea is to enable people to participate in crucial decision-making. Fracking is one of the pressing decisions in Britain that warrants a method in which everyone can participate.

ALDA also suggest that each 20 years there should be a new people’s constitution, so the laws can adapt with each generation.

  • Further reading and explanation of ALDA’s proposals are available here. These include:
  • a. Referendums that can be called with a petition of 8% of the population to increase direct democracy.
  • b. Democratising workplaces: with one person one vote.
  • c. Presidents for a year: to minimise the power of this position.
  • d. Random choice of highest ranking judge: to depoliticise judicial appointments
  • e. Totally transparent politics
  • f. Limits to political funding and no corporate donations.

There are alternatives: democracy

Iceland is not alone in experimenting with democracy for the 21st Century, but its ideas per capita are impressive. The country demonstrates how popular social movements combined with direct democracy tools can reclaim power for the people.

Democracy is an ongoing conversation involving all of society and since the crash Icelanders have had more opportunities to participate. It has not had a complete democratic revolution, but it is even more misguided (or misguiding) to suggest its experiments with democracy have failed.

What this work-in-progress shows is that real democracy challenges oligarchy, austerity policies and ultimately capitalism. In places such as Britain hierarchies are more entrenched, but as the powers-that-be are leading the world towards multiple systemic crises, it is all the more pressing to make them the powers-that-were.

Further reading

This piece combines research/ interviews (both published & unpublished) from four articles published on

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