Lukas Schweiger, ESFL Chairman, is farthest to the left of those holding the banner.

About 85 people attended the conference of the European Students for Liberty, ESFL, in Reykjavik Saturday 15 November 2014, including about 15 students from abroad. The Conference took place at the University Plaza on the University of Iceland premises. Lukas Schweiger, chairman of the ESFL Executive Board, gave an account of the origin and objectives of ESFL. Libertarian, or classical liberal, students are influenced by the analysis of F. A. Hayek in his “The Intellectuals and Socialism”: ultimately, ideas are conclusive, but they are created by original thinkers, then transmitted by intellectuals, shaping public opinion and conditioning political behaviour. Thus, what is crucial is not to influence individual politicians, but rather to organise a formidable, even if small, group of eloquent and thoughtful intellectuals who can change public opinion and facilitate the task of politicians sympathetic to liberty, while making more difficult the steady attempts by authoritarians to reduce liberty.

Economics Professor Birgir Þór Runólfsson, of the University of Iceland, pointed out that the economic case for government was that it had to produce certain public goods that individuals could not produce and price in their transactions. The clearest examples of public goods were defence and enforcement of law. However, in Iceland a Commonwealth had operated for more than three centuries, as anarcho-capitalist David Friedman had published an early informative paper on, with Professor Runolfsson writing his interesting doctoral dissertation on the institutions of the Commonwealth where many cases were solved in private transactions, such as payments or restitution for men killed in battles, and where the weak had some resources at their disposal, such as family alliances, transferable rights in court cases to stronger allies and the protection of their powerful chieftains. The Icelandic farmers could choose between chieftainships producing protection and legal enforcement of court decisions just as modern consumers can choose between many different insurance companies.

From left: Kokotevics, Schweiger and Gunnarsson.

Helgi Hrafn Gunnarsson, Member of Parliament for the rebel Pirate Party, formed by young people disillusioned with politics and socially liberal, participated in a panel with Serbian Student leader Aleksandar Kokotovic on the legalisation of recreational drugs. Mr. Gunnarsson explained the two arguments for legalising them. First, everybody was entitled to his or her own life and body, and others should not try to interfere with how he or she disposed of it, unless they had to defend themselves against harm inflicted upon them. In the second place the consequences of prohibiting many recreational drugs, some with positive medical effects, were worse than the consequences of allowing them. By criminalising harmless recreational behaviour, their production and distribution was forced underground, strengthening the mafias already engaged in crimes, while tying up the police force in pursuit of people who had only committed victimless crimes.

James W. Lark, Professor of Systems Management at the University of Virgina, described the libertarian movement in the US in which he has participated as the National Chairman of the Libertarian Party. He recognised that many libertarians are active in other parts or not political at all. By nature libertarians were sceptical of government power, whether abused by a majority against a minority or by a minority against a majority. Classical liberals who wanted to improve the world should try to get rich by selling better or cheaper goods and services  to the public than do their competitors. If rich, they could also support the libertarian battle of ideas, fought by a handful of libertarian intellectuals.

Professor Gissurarson giving his paper.

Politics Professor Hannes H. Gissurarson, of the University of Iceland, criticized the message of French philosopher Thomas Piketty who seemed to have replaced American philosopher John Rawls as the main guru of the left. The difference was that Rawls was concerned about poverty, which was indeed a recognizable social evil, whereas wealth had been regarded as a blessing, to be welcomed, if it was not ill-gotten, usually from government monopoly or protectionism. Piketty’s data had been severely criticized, but Professor Gissurarson said that that was not relevant to the main point: during the last few decades the income gap had indeed widened in the West in that the worst-off, or unskilled labour, were competing fiercely with their counterparts in China and India who could offer much lower wages, to the advantage of consumers. At the same time, people with exceptional skills, not easily reproducible: innovators, entrepreneurs, investors, top managers, entertainers, athletes, film stars and celebrities—Steve Jobs, Sam Walton, Warren Buffet, Jack Welch, Oprah Winfrey, Tiger Woods, Angeline Jolie, David Beckham and so on—were suddenly faced with a tenfold market for their services to that of their predecessors. Supply was fixed while demand greatly increased, resulting in much greater remuneration than previously, more rent being captured by the top income group. The common cause of both trends was globalisation. Moreover, Piketty overestimated the stability and certainty of capital held by individuals and underestimated the creative powers of capitalism to deliver economic growth.

Professor Hannes H. Gissurarson, RNH Academic Director, described the joint project by RNH and AECR, “Europe of the Victims”, at the annual meeting of the European Platform of Memory and Conscience—of which RNH is a member institute—in Brussels 4–5 November 2014. Speakers at RNH meetings and conferences have included Professor Bent Jensen and Professor Niels Erik Rosenfeldt from Denmark, writer Anna Funder from Australia, Professor Stéphane Courtois from France, Member of Estonian Parliament Dr. Mart Nutt, Dr. Pawel Ukielski, Deputy Director of the Museum for the 1944 Warsaw Rising, and Slovenian historian Dr. Andreja Zver. RNH also has organised a photo exhibition in the National Library about the international links of the Icelandic communist movement, and book donations to the National Library, and the publication of an Icelandic translation of We the Living by Ayn Rand, her semi-autobiographical novel about life after the Bolshevik Revolution.

The next events in this joint project of RNH and AECR will be the online republication of books brought out by Icelandic defenders of democracy in the battle of ideas with the communists who were very influential in Icelandic cultural life in the 1940s and 1950s, not least because of generous financing by the Kremlin. Copies in paper will be printed to supplement the online editions. 9 November 2014, on the 25th anniversary of the fall of the Berlin Wall and the collapse of communism, the Black Book of Communism will be published online, the Icelandic translation having been published on paper in 2009.

Other books to be published online include The God That Failed by Arthur Koestler and others, Prisoner of Stalin and Hitler by Margarete Buber-Neumann, Service, Servitude, Escape by Aatami Kuortti, I Chose Freedom by Victor Kravchenko and Out of the Night by Jan Valtin, or Richard Krebs. Icelandic communists fiercely attacked the authors of these books, some of whom had been in Stalin’s prison camps, while others had witnessed communist oppression at first hand. Two famous novels on communism will also be published in the series, Nineteen Eighty Four by George Orwell and Darkness at Noon by Arthur Koestler.

EU Education and Culture Commissioner Tibor Navracsics opens EPMC Brussels office. Photo Peter Rendek.

Also planned is the online publication in a book format of several articles from Icelandic newspapers and magazines. They include a series of articles on communism by renowned philosopher Bertrand Russell, a series of articles on Chinese communism by The Rev. Johann Hannesson, who served as missionary in China, speeches against communism made by distinguished Icelandic men of letters, such as poet Tomas Gudmundsson and writers Gunnar Gunnarsson, Gudmundur G. Hagalin and Kristmann Gudmundsson, and a series of articles on Soviet Russia by Arthur Koestler, hotly contested by the Icelandic communists before the municipal elections of 1946.  Professor Hannes H. Gissurarson who edits this series of books, says that the goal is twofold, to make these informative and interesting books available online to a new generation and to honour the memory of those Icelanders who fought the good fight against Twentieth Century totalitarianism. He writes a preface to each book and adds notes where necessary. Fridbjorn Orri Ketilsson is in charge of the digitisation of the books, and Sigurgeir Orri Sigurgeirsson of their design, while Hafsteinn Arnason provides editorial assistance on the online publishing.

Three European MEPs sponsored the Brussels meeting of the European Platform, László Tökés from Romania, Milan Zver from Slovenia and Sandra Kalniete from Latvia. During the meeting, the new Brussels office of the Platfom, in Rue Bélliard 197, was opened by Mr. Tibor Navracsics, EU Commissioner for Education, Culture, Youth and Sport, and Hungary’s former Foreign Minister. Six new institutions and organizations—from Slovenia, Czech Republic, Hungary, Ukraine and Slovakia—were admitted to the Platform at the council meeting.

Participants in PEMC conference. Dr. Florian Kresse 3rd from left in front row, Director Neela Winkelmann 6th from left. Behind her to the left Dr. Pawel Ukielski and to the right PEMC President Göran Lindblad. Dr. Andreja Zver fourth from right in front row. Photo: Peter Rendek.

The Members of the Platform, at their Brussels meeting, declared their support for the democratic forces in Russia. The Platform is especially concerned about the crackdown on the memory and human rights organization Memorial. Memorial is carrying out critical work researching the victims of the totalitarian Soviet Communist regime. “It is a tragedy,” the Members resolved, “that the present authoritarian leadership in the Kremlin is attempting to silence their voices. The Platform warns that the loss of historical memory endangers peace, prosperity, human rights, democracy and the rule of law and calls upon all Europeans to learn from the totalitarian past and stop the assault on democracy in Europe.”

Gissurarson Slides in Brussels 4 November 2014

Loans to three major business groups 2005-9. Red line is Baugur clan.

The Icelandic Parliament’s Special Investigation Commission, SIC, on the 2008 bank collapse correctly identified two factors contributing to the collapse: the rapid expansion of the banks on the one hand and a hidden, or invisible, risk factor embedded in the banking sector on the other hand, consisting of cross-ownership and overestimated equity of the banks’ biggest debtors who also happened to be their chief owners. However, the data presented by the SIC shows that the Baugur Group was in a class of its own in this respect. These were some of the conclusions which Professor Hannes H. Gissurarson presented at a conference on research in the social sciences, held by the Institute for Social Science Research at the University of Iceland, Friday 31 October 2014. Professor Gissurarson submitted that the SIC had not adequately investigated foreign factors in the collapse. The SIC had described a vulnerable situation, more or less correctly. But a downturn need not always become a total collapse. Decisions made abroad had entered this vulnerable situation and become crucial to a collapse: the decision of the US Federal Reserve System not to make dollar swap deals with the Central Bank of Iceland, while it made such deals with all other Western European central banks; the decision of the British Labour government to deny help to British banks owned by Icelanders at the same time as it offered an immense rescue package to all other British banks; and the decision of the Labour government to impose an anti-terrorism law on Icelandic banks and government institutions, for a while, which made impossible all attempts to reorganise the banking sector on lines of what had been done in the Swedish financial crisis of 1991–2.

Alistair Darling

It was interesting, Professor Gissurarson said, to read the account of the international financial crisis by Alistair Darling, then British Chancellor of the Exchequer, Back from the Brink, published in 2011. Iceland was mentioned there several times, but invariably with hostility. Darling suggested for example, incorrectly, that Icelandic representatives were travelling in jumbo jets (Boeing 747) around the world and that Icelandic financiers had become substantial donors to the Conservative Party. Moreover, his descriptions of conversations with Icelandic leaders, including Minister of Business Affairs Bjorgvin G. Sigurdsson, Prime Minister Geir H. Haarde and Finance Minister Arni Mathiesen, were less than accurate. Darling claimed that these men had kept information hidden from him, or that they had not known themselves what was happening in the Icelandic banks. But Darling himself had not had a clue as to what was happening in the Scottish banks at the time, RBS, Royal Bank of Scotland, and HBOS, Halifax Bank of Scotland, both of which had to rescued with gigantic sums. Professor Gissurarson pointed out that already in 2009, the Treasury Committee of the House of Commons had concluded that Darling had not been wholly truthful in his public accounts of the conversation with Finance Minister Mathiesen, shortly before he imposed the anti-terrorism law on Iceland, so, unsurprisingly, in the book Back from the Brink, he offered another account of the conversation (which had been taped unbeknownst to Mr. Darling).

Professor Gissurarson said that Darling’s obvious hostility towards Iceland had to be explained. It was possible that he simply thought that the Icelandic banks had recklessly overexpanded. But the same applied to the Scottish banks which had become very big in proportion to Scotland’s GDP, in fact relatively bigger than the Icelandic banks. Another explanation could be that the lean and mean Icelandic banks were, with their offers of high interest on online accounts, luring customers away from more traditional “High Street” British banks, thus incurring their hostility. A third explanation was that Darling had wanted to demonstrate to the Scottish nation that a country could hardly survive on its own, without help from others. After all, Darling was the leader of the Scottish movement against independence. Professor Gissurarson’s lecture formed a part of the joint project by RNH and AECR, Alliance of European Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”.

Gissurarson Slides 31 October 2014

Gísli Hauksson, RNH chairman, og Ridley, with the Icelandic edition of Ridley’s book. Photo: FOK.

The world is rapidly improving, whether we look at living standards, health, literacy or the reduction of many social evils, such as violent crimes, warfare and contagious diseases. We have also seen a greening of the earth, with ever less land being required for agriculture, while the environment has in most cases being improving (with exceptions like China). There has been some global warming, and it is probably to some extent caused by human activities, but it is by no means clear that it should be of great concern to us. The problem has been vastly exaggerated. This was in short the message English science writer Matt Ridley brought to Iceland 30 October when he gave a talk before a packed audience in the meeting facilities of finance company Gamma at a seminar organised by RNH. AB Publishing has just published Ridley’s Rational Optimist, in Icelandic Heimur batnandi fer, where he describes man’s evolution in the last millennia, and the “catallaxy”, or system of mutually beneficial exchanges enabling people to utilise the knowledge of one another and to generate new knowledge.

One of Iceland’s most distinguished scholars, Economics Professor Thrainn Eggertsson, who also gave a talk at the seminar, writes: “In his book Matt Ridley, writer, scientist, og former Economist senior editor, has rearranged ideas from Adam Smith and Charles Darwin in order to explain why man has done so much better than other animals on earth. How division of labour and exchanges between unrelated individuals have enabled us to utilise the knowledge of millions of people and create goods such as cars, computers and drugs, which none of use could have invented or produced on our own. Ridley also discusses mankind’s strong and dark pessimistic streak and some fashionable doomsday scenarios, formerly linked to religion, but now also to natural sciences. The author uses a wide basis of sources, has a superb command of English, peppered with a rich sense of humour, and he draws on an amazing wealth of knowledge on evolution of life on earth and the history of human beings and on new research in the social and natural sciences.”

At the seminar, Associate Economics Professor Birgir Thor Runolfsson also gave a talk, explaining an example used by Matt Ridley in his book on how to combine sustainability and profitability: the Icelandic system of individual transferable quotas. This system creates incentives and possibilities for owners of fishing capital both to reduce costs over each season and carefully to maintain the long-term value of the resource. While the ITQ system is not a system of fully defined property rights, it shares some of its qualities, having turned out to be surprisingly successful both ecologically and economically. Most world fisheries are operated with huge losses, but in Iceland the fisheries generate reasonable profits, giving some a cause, or rather a pretext, for complaint. After the seminar there was a reception. The seminar formed a part in the joint project by RNH and AECR, Alliance of European Conservatives and Reformists, on “Europe, Iceland and the Future of Capitalism”.

Arnason, Grainger and Gissurarson. Photo: Mbl. Kristinn Ingvarsson.

A resource rent tax in the fisheries is not the best means to achieve the efficient utilisation of the fish stocks, because it will probably always be unacceptable to the fishing sector itself. A system of individual transferable quotas, ITQs, initially allocated on the basis of catch history is much more likely to be accepted. A resource rent tax which aims at expropriating rent created in the fisheries (after the introduction of ITQs) is not efficient, either, because it is the fishing firms which in effect create this rent, and the tax would reduce investment, innovation, research and development. However, a cost recovery charge on the fisheries seems reasonable. These are some of the implication of the research into fisheries economics by Professor Corbett Grainger of the University of Wisconsin which he presented at a well-attended seminar of RNH and the Icelandic Taxpayers’ Association 24 October 2014, chaired by Skafti Hardarson with Dr. Birgir Thor Runolfsson as discussant.

Professor Ragnar Arnason of the University of Iceland analysed some common measurements of income distribution. They were often so inaccurate and misleading, according to Professor Arnason, that it would be nothing short of absurd to base demands for comprehensive taxation changes—for example the imposition of a confiscatory top income tax or a wealth tax—on them. The Gini coefficient—often used, because simple to calculate—sometimes provided the same kind of incomplete information as the description of a horse as being brown in colour; much more was needed fully to understand each situation. There could be one Gini coefficient for various and very different income distributions. Professor Arnason demonstrated how the Gini coefficient would rise, falsely showing more income inequality, if the proportion of university students and pensioners in a given society would increase, simply because people received more education and lived longer. One-year-measurements like the Gini coefficient were difficult to use because the total income over an individual’s life was much more relevant: this income was subject to many abrupt changes; sometimes it was low (when the individual in question was a student or a pensioner), and sometimes high (when he or she was on the top of their earning ability and energy). Professor Arnason referred to the papers in the recent book published by AB on income distribution and taxation (with an English Summary).

Balzac: Capital is fragile

Professor Hannes H. Gissurarson of the University of Iceland criticized some deficiencies in the controversial book by Thomas Piketty, Capital in the 21st Century. Some of Piketty’s numbers on wealth distribution in England and France had turned out to be inaccurate, but possibly his numbers on income distribution in the West were more plausible, showing that the income of the top 10 or 1% had greatly increased in the last few decades relative to the income of the bottom 10%. However, global income distribution had actually become more even. The main common explanation for these three trends was globalisation, Professor Gissurarson stated. Unskilled workers in the West faced competition from China and India; at the same time, individuals with unique and irreproducible abilities (film stars, athletes, innovators, entrepreneurs, supermanagers) had gained access to a much larger international market than before and had thus been able to get a much higher rate of return on their services. Nothing was anyway wrong with an uneven income distribution, if it was distribution by choice: from each as she chooses and to each as she is chosen. Again, it was not as clear as Piketty suggested that the rate of increase of capital was in the long term always greater than economic growth. Capital was not necessarily accumulated by a few individuals over time: it was a much more dispersable, fragile and fickle phenomenon, as Balzac’s novels—frequently quoted by Piketty—indeed showed. Because of ever-improving technology and freer trade, capitalism had the creative power to sustain rapid economic growth.

The seminar formed a part of the joint project by RNH and AECR on “Europe, Iceland and the Future of Capitalism“. It was widely covered in the Icelandic media. Vidskiptabladid and Morgunbladid announced it in advance, and Morgunbladid interviewed the main speakers afterwards and also published an account of the seminar 25 October and 1 November.

Corbett Grainger Slides

Ragnar Arnason Slides

Gissurarson Slides on Piketty