Friday, 28 October 2011

Lessons from Iceland: Paul Krugman on How to Get out of a Crisis by Not Listening (Much) to the Right

For a long time I had a sticker from the Icelandic social democratic party, brought back by a young friend who'd spent some time in that small, rugged country in the 1980s. It's gone now, cleaned of the fridge by zealous post-fire cleaning.

In Iceland itself, the leftish parties have realigned since my friend's trip, but it's clear that social democratic ideas are alive and well, and have served the country well, after that much larger crisis, the 2008 worldwide financial meltdown. The result, Paul Krugman writes this morning, has meant following a path no other country took, with results that have been much better, it seems, that what's happening Europe.

Krugman writes from Rejkavik that:

"Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position.

"But a funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net.

"....Iceland hasn’t avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable... “Things could have been a lot worse” may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.

"And there’s a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary..."

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