Meltdown Iceland | Roger Boyes

Summary of: Meltdown Iceland: Lessons on the World Financial Crisis from a Small Bankrupt Island
By: Roger Boyes

Introduction

In the book ‘Meltdown Iceland,’ Roger Boyes dives into the economic recession of 2008, unfolding how it began in the subpolar Iceland. The author illustrates the country’s rapid push for globalization under leaders like Prime Minister David Oddsson and the fatal decisions that led to its downfall. The summary explores Iceland’s social structure, the forces behind privatization, aggressive bank policies, and the devastating consequences faced by its citizens. By unraveling the events that unfolded in the small island nation, the book offers invaluable lessons on the world financial crisis.

Iceland’s Economic Tragedy

In 2008, Iceland faced an economic recession that started a worldwide trend, becoming the first country to succumb to it. The nation’s small size and lack of resources made it unprepared to fight back. Iceland could have resolved the crisis with only $20 billion, but it didn’t have the money, leading to a devastating national crisis that tore through its citizens, financial institutions, and fundamental Nordic culture. The crisis became apparent when the Prime Minister announced the verge of bankruptcy, stunning the country. The primary reason behind the economic collapse was greed, incompetence, feuding, revenge, and deceit, which caused Icelanders to acquire unsecured loans out of newfound wealth after embracing globalization. Iceland’s default destroyed its credit rating, causing an economic tailspin that linked the country to the financial decline in world markets. Other tax-haven countries, such as Estonia, Latvia, and Lithuania, were also deeply injured.

Iceland’s Privatization Journey

Iceland’s tight-knit society underwent a drastic change during Prime Minister David Oddsson’s administration, where he implemented privatization measures that were well-received by the nation’s powerful mercantile families. His first move was to sell a state fishing business, which began privatization across the country’s various sectors. Oddsson reduced the corporate tax rate, liberalized the currency, and privatized multiple state companies, including investment banks and two other large state banks. This journey towards privatization was marked by power struggles between two groups who challenged each other for control, leading to large political contributions by these banks to avoid regulatory oversight. The book’s message highlights a microcosm of what was happening in complex societies worldwide.

Clash of the Titans

Iceland’s privatization created cultural and political clashes between the newly minted oligarchs (called Orcas) and the nationalistic Octopus group. The Orcas used cronyism and other tactics to buy up companies being privatized. This led to Iceland’s banks accounting for 96% of its GDP with borrowed money propelling their expansion. Meanwhile, a new entrepreneur Jón Ásgeir Jóhannesson, the son of a grocer, challenged Iceland’s then-leader, Oddsson, for power. As the feud between them simmered, parliament passed laws restricting ownership of broadcasting companies under specific conditions that many believed existed specifically to prevent Ásgeir from mounting a political challenge against Oddsson and his Independence Party. With the mechanical workings of capitalism threatened, the privatization plans only half accomplished, and Iceland’s banks growing dangerously fast, Oddsson and his central bankers failed to act.

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