Published in WSWS, by Chris Marsden, 29 November 2008.
Iceland is facing a social and economic catastrophe. Its 300,000 people have suffered the worst and most immediate impact of the worldwide financial crisis of any advanced country.
For that reason, the events in Iceland offer a portent of developments that must inevitably unfold in much larger nations and on the international arena.
Iceland’s banking system has collapsed, plunging its entire economy into an accelerating decline. In the space of seven days in October, its three major banks became insolvent and the government was forced to step in and take them over. The Brown Labour government in Britain used anti-terror laws in an effort to force the return of hundreds of millions invested there by individuals, company’s pension schemes, local councils, charities and police forces – much of which will not be retrieved.
The scale of the losses was due to Iceland’s efforts to become a centre for global speculative investments, primarily by linking bank rates to inflation, which exceeded 15 percent. Its banks offered rates often 50 percent higher than available elsewhere …
… Fears of national bankruptcy leading to social and political unrest are not, moreover, confined to small nations. There is serious discussion of a similar fate awaiting the world’s fifth largest economy, the UK.
Patrick Hosking asked in the November 22 edition of Times, “Is Britain simply a bigger version of Iceland? Certainly the City of London is starting to look a bit too much like Reykjavik, but with taller buildings and fewer cod… In essence the domestic banks are largely bust. The Government’s £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.”
Hosking concludes with an ominous warning: “Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down … At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years – long economic Dark Age – complete with mass unemployment and social unrest.”
It is such an understanding of the implications of the unfolding global economic crisis that must now begin to inform and animate a political rebirth of the workers’ movement internationally and its reorientation on a socialist programme for the abolition of the profit system. (full text).