Dan Grossman

Dan Grossman, chairman of the board of Atlas Network and member of the board of Students for Liberty, briefly visited Iceland on 11–12 May 2014. He had a luncheon meeting with Gisli Hauksson, chairman of RNH’s board, and a few other people involved in RNH’s activities. Hauksson gave Grossman a brief account of what RNH has been doing in the last two years, including the publication of three Ayn Rand novels, many international conferences on fisheries management and on the financial crisis—two topics of particular relevance to Icelanders—and several lectures by foreign and Icelandic scholars. Hauksson also told Grossman about a few RNH projects in the next few months, including meetings on taxation and income distribution, the index of economic freedom, and Herbert Spencer, the publication of online editions of many out-of-print anti-totalitarian books in Icelandic, including the Icelandic translation of the landmark Black Book on Communism, and the publication in Icelandic of a book by best-selling science writer Matt Ridley on the reasons to be optimistic. RNH is a part of the Atlas Network, whose founder, Sir Anthony Fisher, once came to Iceland and inspired many members of the Icelandic business community reminding them of how important it was to defend economic freedom and to facilitate the work of those few and embattled intellectuals supporting it.

Las Vegas: Wynn Hotel where the APEE meeting took place is left of centre.

Some left-wing commentators assert that the 2008 Icelandic bank collapse was caused by a failed attempt in the preceding years to implement “neoliberalism” in Iceland. Professor Hannes H. Gissurarson rejected that explanation in a lecture at the annual meeting of APEE, Association of Private Enterprise Association, in Las Vegas 14 April 2014. That explanation, according to Gissurarson, was incompatible with two undisputed facts. First, the Icelandic financial market was subject to the same legal and regulatory framework as its counterparts in other member-states of the EEA, European Economic Area, comprised of all the EU countries, Norway, Iceland and Liechtenstein. In the second place, the credit expansion of the Icelandic banks, ultimately leading to their downfall, had only seriously begun in 2004, when in Iceland crony capitalism had replaced market capitalism (or “neoliberalism”). Gissurarson added that ironically, however, there was a grain of truth in the assertion that “neoliberalism” had caused the bank collapse. Iceland had indeed gained a good reputation as a result of the sound economic policies of the 1991–2004 period, when public subsidies to loss-making private enterprises were cancelled, taxes greatly reduced, public companies privatised, pension funds strengthened and the public debt brought down, while inflation fell to the same level as in neighbouring countries. Because of this hard-earned good reputation, in the mid-2000s Icelandic banks and other private enterprises enjoyed high credit ratings, giving them an almost unlimited access to cheap credit from abroad which they used to grow at an astonishing rate, far beyond what the Icelandic state was able to support in a case of crisis. “No good deed goes unpunished,” Professor Gissurarson observed.

In Iceland, two systemic risks were therefore found in addition to the general risk under which banks normally operate in international financial markets. Because of the 2004–8 crony capitalism, many Icelandic companies were debt-ridden and excessively dependent on one another, with extensive cross-ownership. Moreover, the banks’ field of operations, the whole of EEA, was vastly bigger than what turned out to be their field of institutional support, Iceland alone. When the international financial crisis reached its peak in the autumn of 2008, no one came to the assistance of Iceland. The US Federal Reserve System refused to make dollar swap deals with the Icelandic central bank similar to those which it made with the central banks of Norway, Sweden, Denmark and Switzerland. The British government refused to include the Icelandic-owned British banks in its extensive rescue programme. To add insult to injury, it also invoked an anti-terrorism law against one of the banks, as well as, briefly, against the Icelandic Central Bank and the Icelandic Financial Supervisory Authority. On the British Treasury website, the Icelandic bank was placed on the same list as the Al-Qaida, the Talibans and the governments of Iran and Sudan. Thus, in October 2008 Iceland was totally isolated and all hopes of rescuing any part of the banking sector evaporated.

APEE President Professor Joshua Hall.

A lively discussion followed Professor Gissurarson’s lecture, with the audience clearly not being well aware of the treatment of Iceland in the financial crisis. Over 500 people, many of them graduate students, attended the APEE meeting, making it the largest in APEE’s history. In another seminar at the meeting, Professor Carrie B. Kerekes from Florida Gulf Coast University discussed the institutions of the Icelandic Commonwealth lasting from 930 to 1262. Kerekes pointed out that the Icelanders were able to live under the law, but without government, for more than three hundred years. Law in the Icelandic Commonwealth had been privately enforced. Professor John E. Mueller from Ohio State University gave a keynote lecture at the APEE meeting. According to him, US authorities vastly exaggerated the danger from foreign terrorists, spending enormous sums of taxpayers’ money on anti-terrorism measures, without any clear goal or evidence. Niels Veldhuis from the Fraser Institute in Vancouver gave a luncheon talk at the meeting, describing the successful liberalisation of the Canadian economy since the mid-1990s: public expenditure had been cut, and taxes reduced, creating conditions for the subsequent economic growth.

In Las Vegas, Professor Gissurarson used the opportunity to meet with old acquaintances attached to the Institute of Humane Studies, IHS, where he attended seminars and summer schools in the 1980s, including Professor Roger Garrison of Auburn University, Professor Larry White of George Mason University, Dr. Gerald P. O’Driscoll of the Cato Institute, Dr. Nigel Ashford of the IHS, Professor Peter Boettke of George Mason University, and Professor Sanford Ikeda of Purchase College at the State University of New York. Attendees at the meeting also included recent RNH visitors to Iceland, such as Professor Douglas Rasmussen, Dr. Eamonn Butler and Dr. Yaron Brook. Professor Joshua Hall is the next President of APEE, and the next annual meeting will take place in Cancún, Mexico, 2015.

The European dream is turning into a nightmare because of the great mistake of adopting the same currency, the euro, in most of the European Union, even if many member states were totally unprepared for it. This was the conclusion of François Heisbourg, one of Europe’s best known experts on security and international affairs, at an RNH meeting 5 April 2014. Heisbourg pointed out that economic growth in the last few years had been much faster in the US, China, Brazil and India than in the eurozone. Because of the euro, some countries in Southern Europe had not been able to adjust to new economic realities. The euro rate was too high for them, while it was too low for Germany. The idea that the same size would fit all was not only unrealistic; the fact was that it fit none. A generation of young Europeans knew nothing but unemployment. The EU has been established to protect peace on the continent and to provide a framework for the four freedoms — the free movement of people, goods, services and capital between European countries. To save the EU, the euro had to be abandoned. It was the least bad of many options.

Briefly discussing Iceland in his lecture, Heisbourg said that in the 2007–9 financial crisis it had worked well for Iceland to stand outside the eurozone and to be able to stimulate exports by devaluing the currency. However, the British and the Dutch governments would probably not have treated Iceland as brutally as they did, if it had been a member state of the EU. An economist at the Central Bank of Iceland, Stefan Johann Stefansson, protested that if Iceland had been a member state, the EU would have forced it to shoulder much heavier financial obligations than it eventually had to take on. Dr. Asgeir Jonsson, an economist at the University of Iceland, asked Heisbourg if the French were really prepared to adopt the franc, which had before the adoption of the euro been more or less tied to the German Deutsche Mark. Heisbourg agreed that for the French it had been almost a matter of national pride to replace the D-Mark with the euro. But the impact of abandoning the euro would not be significant on the French economy, while it could be very important for the Southern part of Europe.

During his Iceland visit, Heisbourg met Prime Minister Sigmundur David Gunnlaugsson and Foreign Minister Gunnar Bragi Sveinsson, also giving a talk at the foreign affairs committee of the Independence Party. His lecture at the RNH meeting led to much debate. Bjorn Bjarnason, former Minister of Justice, blogged about his message, the daily Morgunbladid published on 5 April a long interview with Heisbourg, and both television channels, RUV and Station Two, talked to him.