Financial crisis in Iceland? Party on!

Iceland’s lesson for Americans

5 minute read
'We'll just have to wear last year's swim suit again this year.'
'We'll just have to wear last year's swim suit again this year.'
My husband and I have traveled to Iceland for 12 years now, which makes us de facto experts on the place among our friends and colleagues. So when that supposedly prosperous little country plunged into economic meltdown in 2008, naturally people came running to us for answers— not only to why the krÓ³na suddenly collapsed but also to ridiculous questions, like: "Is it still safe to travel there?" "Are the shelves in the grocery stores empty?" And "Is it true that people are hoarding gasoline up there?"

From all the media hype, you'd think Iceland had descended into some kind of lawless Wild West of the Arctic. The reality is that for nearly a thousand years, Icelanders have survived volcanic eruptions and excruciatingly cold and dark winters, as well as (up until the end of the 19th Century) famine, disease and geopolitical isolation. So if there's one thing an Icelander can do, it's survive"“ even the largest banking collapse in world history.

Still, I wondered what impact Iceland's financial crisis would have on the daily life of the average citizen.

Condos and cell phones

Over the past booming decade, I'd grown accustomed to seeing blocks and blocks of luxury condos sprouting everywhere like weeds, and hordes of beautiful Icelandic hipsters (oldsters, too) scouring Reykjavík's bars as if there was no tomorrow. It became commonplace to see hulking Icelandic men cruising around on ridiculously pumped-up 44-inch tires, and blond, tousle-topped tweens sporting the latest mobile phones.

A few years ago, when the exchange rate hovered at 65 krӳnur to the dollar, I had also grown accustomed to spending $9 for a pint of average lager and $15 for an ordinary hamburger. Now that my dollar could buy a whopping 125 krӳnur, the consumer side of me hoped that I'd finally be able to afford the much-coveted 66°NORTH designer sportswear without remortgaging my home.

Over Christmas 2008, I had my first chance to observe post-collapse Iceland first hand. To my surprise, the shops and restaurants were full, the holiday lights twinkled from every house and hotel, and the seasonal JÓ³labjÓ³r flowed from every tap. On New Year's Eve, Reykjavík came alive like one big volcanic explosion. From 11:45 p.m. to 12:15 a.m., every square inch of skyline was filled with an amazing display of cascading ribbons, exploding cherry bombs and festive swirly swirls as if the entire nation were sticking out its collective middle digit to the rest of the world.

Where are the empty shops?

How could this be? Where were all the "for sale" signs, empty shops and blank stares commonly associated with a really bad recession? Maybe that hearty Viking gene had kicked in to prop up Icelanders in the worst of times. Surely, I told myself, by Christmas 2009 even those hearty Viking genes would succumb to the fallout of a national bankruptcy, sending the mood and daily living conditions of everyday Icelanders into the dumps.

But there I was in Iceland again just a few weeks ago, sitting in Café Paris in the heart of downtown Reykjavík, and really not much had changed in a year. This fashionable eatery was packed with families, couples and girls out on the town. I even had to jockey for position just to get a table.

To be sure, many of last year's shops and boutiques on Laugavegur, the city's main commercial artery, had disappeared"“ only to be replaced by new ones offering more luxury goods than a minuscule country of 330,000 could ever consume. Dozens of operating cranes remained a staple of the cityscape, all of them working overtime to cover every last patch of virgin lava rock with yet more shopping centers and apartment blocks. Even Yoko Ono's Imagine Peace Tower, an annual homage to her late Beatle husband John Lennon, shone brightly over Reykjavík as if to protect it. Was she paying for the electricity to keep it going?

So what is up with this supposed economic catastrophe in Iceland that everyone has been blathering about?

The view from Zimbabwe

I reached out to my Icelandic buddy, Hilmar, for an explanation.

"Well, the really rich and greedy people in this country lost a lot of money," he said.

But Bernie Madoff hurt plenty of rich people in the U.S., too. What about the everyday Icelander? What happened to him?

Not that much, evidently. Iceland's Gross National Product for 2009 dropped to its level of 2005, which still looks enviable from, say, Zimbabwe. In practical terms, this means that Icelanders have gone from being two-car families to one-car families, and they're buying fewer plasma screen TVs.

"We Icelanders got used to wasting our money," a mutual friend chimed in. "If you wanted the latest model of anything, you'd just throw last year's away. People are holding on to things for two or three years now."

"In a few years," Hil reassured me, "we'll recover from this and be just fine."

Which leaves just one question: Is there any way to bottle that hardy Viking optimism and peddle it to Americans?

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