A quirk in the national psyche explains why Iceland's problem with alleged corruption runs deepby Sigrun Davidsdottir / April 6, 2016 / Leave a comment
Voters all over the world are angry. The success of anti-establishment politicians like Bernie Sanders, US presidential candidate and self-declared socialist, and Jeremy Corbyn demonstrates this. Many feel little has changed since the 2008 financial crash. But in Iceland, much of what causes anger in other countries has been acted on—bankers have been jailed and the economy has thrived for years. One might expect the national mood to be calm.
But on Monday 22,000 demonstrators gathered in Reykjavík. The “Panama Papers” leak from the database of offshore law firm Mossack Fonseca revealed that the family of Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson had sheltered money offshore. He has stepped down.
The story of political anger in Iceland is a complicated one. Many Icelanders think that if you need a favour, it’s self-evident that you should ask a friend. Before the financial crash, there was always someone to turn to, and that was seen as being quite cute—even cosy. Icelanders were not shy when it came to getting a foot in the door. But nepotism is corruption’s next-door neighbour: Icelanders started to see nepotism among the mega-rich—it was becoming a problem.
The collapse of the three largest Icelandic banks—Glitnir, Landsbanki and Kaupthing—in October 2008 exposed the inner workings of the new business elite who had grown wealthy in tandem with them. Icelanders mostly thought that they didn’t live in a corrupt country. Brown envelopes don’t change hands in Iceland, do they? Until the crash, Iceland was number one on Transparency International’s Corruption Perceptions index.
Rumours and media reports post-crash said otherwise. An April 2010 report by a Special Investigative Commission of independent experts, set up by the Icelandic parliament in December 2008, detailed the reality. Investigations by the Office of the Special Prosecutor, also established in that month, detailed the operations of the banks and their largest shareholders. These are also the people who borrowed the most from them.
Icelanders now know that the banks ran ordinary banking services for the majority of clients and then very special services for the largest shareholders and their business partners. The “favoured clients” could borrow without limit, at no or very limited risk to themselves; the banks shouldered it.
Offshore companies were also an…