Gissurarson and Professor Jensen at the latter’s home 11 August 2017.

RNH Academic Director Professor Hannes H. Gissurarson gave a paper in a workshop on international relations at the Nordic Political Science Association Congress in Odense 8–12 August. The title of his paper was “In Defence of Small States”, where he argued against the doubts expressed after the 2008 Icelandic bank collapse by Professors Anne Sibert and Baldur Thorhallsson that Iceland was large enough to be sustainable as a state. Professor Gissurarson recalled similar doubts expressed by Rousseau, Marx and Engels and by Professor Alfred Cobban, before he turned to Sibert’s argument which was that small states were more costly to maintain than big ones. Gissurarson pointed out that this was not always true: Outlays per capita on public goods such as law and order and external security were actually lower in Iceland and the other Nordic countries than in the US or UK. The reason was that the small states were homogeneous, cohesive, transparent and non-aggressive, with a strong civic culture. The transparency in small states also reduced the likelihood of “hard” corruption such as extortion or bribery, although arguably there was scope there for clientilism and favouritism (which also could be observed, of course, in bigger states such as China, India and Brazil). Indeed, small states tended to be more wealthy than big ones, not least because their economies were open. The economic integration of the last half century had greatly benefited small states and perhaps paradoxically made political integration less necessary.

Professor Gissurarson discussed the “shelter theory” put forward by his colleague at the University of Iceland, Professor Thorhallsson, a former alternate MP for the Social Democrats and leading advocate of EU membership for Iceland. According to Thorhallsson Iceland needed a shelter such as the EU, not least after the US abandoned her. Gissurarson argued however that Icelandic history demonstrated quite the opposite. When the Icelanders thought they had gained a shelter under the Norwegian and later the Danish crown, they had actually been caught in a trap: The crown had isolated them, imposed monopoly trade on the country and worked with local landowners to stifle the development of fisheries. The result had been a series of famines on an island surrounded by fertile fishing grounds. The crown had cared little about Iceland, trying thrice to sell her to King Henry VIII and once to German Hansa merchants. In the 19th century, the Danish government had also seriously considered the idea of handing Iceland over to the Prussians in exchange for Northern Schleswig. When the Swedes had seized Norway in compensation for having to give Finland to the Russians, they had not bothered to include Iceland, even if she was an old Norwegian tributary.

Gissurarson pointed out that shelters were usually places of temporary relief from bad weather or danger. Therefore the concept was hardly applicable to fruitful cultural exchanges between nations of different sizes, or to mutual gains by trade for individuals and enterprises. The core of truth in the “shelter theory” was however that small states, with their limited military power, were vulnerable and needed alliances and even protectors. The military alliance between Iceland and the US in 1941–2006 when the US undertook to defend Iceland and maintained a base there had been successful. Iceland should, Professor Gissurarson submitted, seek to revive the alliance with the US and also to improve and strengthen the ties with her other North Atlantic neighbours, Norway, the UK and Canada. This did not mean that she should not pursue good relations with the EU which was indeed a very important trading partner. But the EU did not have the same military might as the US, and European political integration had probably reached its upper limit. Professor Gissurarson recalled that Jon Sigurdsson, the leader of Iceland’s independence struggle, had wanted to trade with many nations, not only with one.

Gissurarson Slides in Odense

A lively discussion, chaired by Danish Professor Anders Wivel, followed the paper. The commentator, Norwegian Professor Gunnar Fermann, expressed his satisfaction that this important issue was being actively debated in Iceland. He added that he himself shared many of the criticisms directed by Professor Gissurarson against the EU. Sverrir Steinsson, a graduate student who co-write a paper with Professor Thorhallsson on the “shelter theory”, stressed that the theory was independent of political views in Iceland on EU-membership and that perhaps in his critique, Professor Gissurarson had chosen some examples of outliers rather than more relevant data. Other participants wondered how a small state should be defined, whether a big nation supposed to give shelter to a small one would not require something in return, and if the real shelter which Iceland should seek would not be the Nordic community rather than the EU.

In Denmark, Professor Gissurarson used the opportunity to pay a visit 11 August to the distinguished historian Professor Bent Jensen who lives near Odense. In 2012, Jensen was the first lecturer to visit Iceland on the invitation of RNH. He has published several books about Stalin, Russia and the Stalinist apologists in the West, as well as a history of Denmark in the Cold War. Gissurarson and Jensen discussed how to remember the 100th anniversary of the Bolshevik Revolution in Russia 7 November 2017. It started the advance of communism which had claimed 100 million lives in the 20th century and still lingers on in North Korea and Cuba. From Denmark Professor Gissurarson went to England and paid a visit 14 August to Lord Mervyn King, former Governor of the Bank of England. Gissurarson interviewed Lord King about the international financial crisis and the 2008 Icelandic bank collapse on which he is preparing a report for the Icelandic Ministry of Finance. Gissurarson’s participation in the NOPSA conference and the meeting with Lord King formed a part of the joint project of RNH and ACRE, the Alliance of Conservatives and Reformists in Europe, on “Europe, Iceland and the Future of Communism”, whereas the meeting with Professor Jensen formed a part of the joint project of RNH and ACRE on “Europe of the Victims”.

Petur Fjeldsted interviewed Hannes on his Odense paper:

Sigurgeirsson: North Korea in the distance.

North Korea is a very strange country, but she should not be treated as a joke, because the oppression there is horrible, said Jonas Sigurgeirsson, managing director of the Public Book Club (Almenna bokafelagid) and of RNH, in an interview with the Icelandic Government Radio Station 15 August 2017. The occasion was the publication in Icelandic of a best-selling book by a young North Korean girl, Yeonmi Park, In Order to Live, which has been published in many translations around the world. The author who is only 24 years, describes her upbringing in North Korea where a famine raged in 1994–8. Her father was imprisoned for illegal trading, and Yeonmi and her mother decided to flee to China. There they fell into the hands of human traffickers, and were abused and forced into arranged marriages. Defying adverse circumstances, they managed to escape to Mongolia and eventually to reach South Korea. Yeonmi Park is now a student at Columbia University in New York and has recently married.

In the radio interview, Sigurgeirsson also gave an account of his trip in May 2017 to South Korea where he attended a meeting of the Mont Pèlerin Society, an international society of liberal scholars, opinion makers and businessmen. One day he and other participants went to, or rather crawled under, North Korea through a tunnel which the North Koreans had dug into South Korea for their spies and agents to sneak in. The difference in living standards between North and South Korea is beyond belief, Sigurgeirsson commented. The publication of Park’s book forms a part of the joint project by RNH and ACRE, the Alliance of Conservatives and Reformists in Europe, on “Europe of the Victims: The Memory of Communism”.

The Public Book Club (Almenna bokafelagid) has published a book by a North Korean refugee, In Order to Live. The author, Yeonmi Park, is only 23 years old, born in October 1993. Shortly after her birth, a famine occurred in her homeland, claiming hundreds of thousands of lives. Struggling for his family’s survival, Park’s father operated on the black market, but he was eventually found out and sent to a slave camp. Her mother was also imprisoned for a while.

In the spring of 2007, Park and her mother decided to flee from North Korea. But the people who helped them over the border turned out to be human traffickers. Upon arrival in China, Park’s mother was raped, and so was Park herself after a while. Both were sold into involuntary marriages. The man who took care of Park was in some ways in love with her, but he treated her badly. The mother and daughter did not give up, however, and in February 2009 they managed to reach Mongolia, having walked in the bitter cold for several days over the Gobi desert. After some uncertainty, they were handed over to the South Korean authorities.

In the autumn of 2014, Park became a hit in an international television programme, 50 million people watching her speech on Youtube in the course of two days. Her book was published in English in 2015. Now pursuing university studies in the US, Park also devotes a lot of effort to make the world aware of human rights violations in North Korea. The publication of the Icelandic translation of the book is supported by RNH as a part of the joint project with ACRE, the Alliance of Conservatives and Reformists in Europe, on “Europe of the Victims: Remembering Communism.” The director of the Public Book Club, Jonas Sigurgeirsson, had the opportunity at the Mont Pelerin Society regional meeting in Seoul in May 2017 of speaking to Park’s English teachers. North Korea is one of the two remaining communist countries in the world, with Cuba. In the night, satellite photographs illustrate well the difference between communism and capitalism:

Dr. Klaus, former President of the Czech Republic, gives his speech.

Gisli Hauksson, RNH Board Chairman, Hannes H. Gissurarson, RNH Academic Director, and Jonas Sigurgeirsson, RNH Managing Director, attended the regional meeting of the MPS, Mont Pèlerin Society, in Seoul in South Korea 7–10 May 2017. The MPS is an international society of classical liberal and conservative scholars and activists founded in Switzerland in April 1947 by Friedrich A. Hayek, Frank H. Knight, Ludwig von Mises, Karl R. Popper, Milton Friedman and others. The speakers in Seoul included Nobel Laureates Vernon Smith and Lars Peter Hansen and renowned economists Professor Israel Kirzner, a specialist on entrepreneurship, and Professor John B. Taylor, after whom the Taylor Rule in banking and finance is named. Dr. Vaclav Klaus, former President of the Czech Republic, and Hwang Kyo-ahn, acting President of Korea, also addressed the meeting. It so happened that the Korean presidential elections took place 9 May, while the meeting was still going on.

Acting Korean President Hwang gives an address

Many topics were discussed at the meeting, including growth and inequality, welfare and taxation, the international financial system, Korean security and the Korean economy. Discussions are confidential except people may of course reveal what they say themselves. Hannes H. Gissurarson was commentator on three papers on the Korean economy. He agreed with the lecturers that economic growth in Korea had indeed been spectacular. In early 1960s South Korea was a desperately poor country, but in 2016 its economy was the 11th largest in the world. In 1950, GDP per capita (the usual criterion of wealth) was about 1% of the average in the OECD countries. Then the Korean War broke out and raged for three years, with 1,5 million people being killed and 40% of Korea’s industry being destroyed. But in 1970 Korea’s GDP per capita had risen to 14% of the OECD average, and in 2016 to 85%.

Dr. Ed Feulner of the Heritage Foundation giving a luncheon address on his impressions of Korea over the years.

Gissurarson submitted that the Korean success story had been despite government intervention, but not because of it. He pointed out that relatively small states were often successful because they were homogeneous, with a high level of trust and social cohesion. This was doubtlessly an important factor in the success of the Nordic countries which also all respected the rule of law and free trade. Crucially, their economies had been open. Gissurarson added that bilateral free trade agreements such as those the Koreans were seeking were probably sometimes the least worst option, but that what was desirable was to see an international free trade area, without any tariffs or customs whatsoever. Nations harmed themselves by protecting their domestic production from competition. Free trade agreements could also harm third nations: Korea had for example suffered from a free trade agreement between Mexico and the US.

Sigurgeirsson, Gissurarson and Hauksson. To the right is the logo of the meeting: The two Koreas at night.

The Koreans had, Gissurarson submitted, avoided the great mistake made by many ruling elites in emerging countries of neglecting agriculture. While Korean heavy industry certainly received help in the forms of tax exemptions and cheap credit, a land reform was implemented in Korea creating conditions for efficient food production with modern technology. Moreover, economic intervention in the economy was mostly aimed at encouraging export, but not at protecting domestic companies. The road ahead was, as elsewhere, to abolish discrimination between companies as well as economic sectors and to open up the economy to competition from abroad.

In the discussion about whether to compensate domestic companies for the abolition of tariff protection, Gissurarson recalled when he in Iceland in 1984 introduced a central bank governor to Milton Friedman with the words: “Here is a person, Professor Friedman, who would be out of a job if your recommendations were followed in Iceland.” Friedman was quick to reply: “No, he would not be out of a job: He would just have to move to a more productive job.” Gissurarson said that this was the law of the market. When circumstances changed, people had to move to more productive jobs and more productive sectors of the economy. Undeniably, however, this could be problematic and cause political turmoil, as seemed to be the case now in some Western countries.

Gissurarson discussed another example of an unpopular, but ultimately beneficial increase in productivity. This was moving a factory from a high-pay to a low-pay country. In fact, such a move brought about the redistribution of money from the rich to the poor employees—which presumably should be welcomed by humanitarians. Relatively highly paid people lost one opportunity to sell their services which did not make much of a difference to them, whereas poor people in the receiving country gained an opportunity to better their conditions through hard work. The redistribution taking place was also only in the short term, because in the long term those who lost an opportunity were indirectly compensated by economic growth. As the good produced in the factory now became cheaper than before, a profit was created, to be used to lower the price of the good or to become an addition to the profit of the factory, or both. Whichever was the case, the total supply of goods in society increased.

Gissurarson stressed that liberal political leaders had to maintain their support for international free trade. It was still relevant what the Anglo-German politician John Prince Smith observed in the 19th century: If you see a potential customer in someone, your propensity to shoot at him or her diminishes. No less relevant was a comment often attributed to Frédéric Bastiat, but probably first uttered by IBM’s Thomas Watson: If goods cannot cross borders, soldiers will.

Professor Peter Boettke of George Mason University is the President of the Mont Pèlerin Society. The chairman of the programme committee for the Seoul meeting was Professor Pedro Schwartz from Spain, but the three co-chairmen of the local organising committee were Kyu-Jae Jeong, Tae-shin Kwon and Inchul Kim. The next regional meeting will be in Stockholm 2–5 November 2017 about the threat to liberty from increasing populism in the West, followed by a general meeting in the Canary Islands 30 September to 6 October 2018. The participation by the Icelandic guests affiliated with the RNH formed a part in the joint project by RNH and ACRE, the Alliance of Conservatives and Reformists in Europe, on “Europe, Iceland and the Future of Capitalism.”

Session on freedom and entrepreneurship. From left: MPS Treasurer J. R. Clark, Professor Israel Kirzner and Nobel Laureates Lars Peter Hansen and Vernon Smith.

Street riots in Reykjavik after the 2008 bank collapse.

In the 2017 Spring Issue of the magazine Thjodmal, Professor Hannes H. Gissurarson, RNH Academic Director, published a long dissection in English of the book Meltdown Iceland by British journalist Roger Boyes. As the first full-length book on the 2008 Icelandic bank collapse, it shaped the views of many foreigners about this event. According to Boyes himself, who does not speak Icelandic, his most important sources in Iceland were the economists Thorvaldur Gylfason, Gylfi Magnusson and Katrin Olafsdottir. Gissurarson however points out many errors in Boyes’ book, trivial as well as important. For example, Boyes asserts that Landsbanki shareholder Bjorgolfur Gudmundsson’s father was director of an oil company, whereas in fact it was his father-in-law who had that position. The author also asserts that prominent lawyer Jon Steinar Gunnlaugsson became Chief Justice of the Iceland’s Supreme Court, which he never did.

In his paper, Professor Gissurarson analyses how Boyes repeats many myths thrown around by Icelandic journalists, often in imitation of their foreign colleagues, for example about an ‘octopus’ in control of the Icelandic economy until the 1990s. The truth of the matter was that the group referred to only controlled one of the ten biggest companies in Iceland; most other big companies were owned by the state, or by the cooperative movement, or they were marketing organisations for the fisheries. Boyes also tells a story about an encounter between Milton Friedman and Prime Minister David Oddsson whereas in fact they never met. Again, Boyes suggests that the publishers of Oddsson’s two collections of short stories (Olafur Ragnarsson and Petur Mar Olafsson) received political favours from him which Olafsson strongly denies on their behalf and of which no example has been produced.

Acording to Professor Gissurarson, Boyes repeats some misunderstandings of the Icelandic system of quotas in the fisheries, for example that the quota holders received something for nothing from the government. Gissurarson points out the general conclusion of fisheries economics that the only right of which others were deprived by confining fishing to quota holders was the right to harvest fish in the Icelandic waters at zero profit, which is by definition a worthless right. Boyes’ account of the Icesave dispute is also, Gissurarson submits, coloured by the views of the British Labour government which needlessly and brutally invoked an anti-terrorist law against Iceland in the midst of the financial crisis. Many other matters are discussed in the paper by Professor Gissurarson who is at present writing a report on the banking collapse for the Icelandic Ministry of Finance.

Paper in English by Gissurarson on Meltdown Iceland