Iceland, debt and Laxness, the Nobel Prize Winner

The news that Britain’s local authorities may have lost up to a £1 billion in the collapse of Iceland’s banks beggars belief. The competence of their highly paid chief executives must surely be challenged, and powers to borrow on international capital markets curtailed.

If only they had read ‘The Coming First World Debt Crisis’, which as far back as 2006, detailed the magnitude of Iceland’s foreign debts, and warned that the country was likely soon to be bankrupted.  But perhaps Iceland was only getting revenge on Britain for past banking practices…..as outlined in a novel by the Icelandic Nobel Prize-winning novelist Halldor Laxness.

Some years ago my partner devoured Halldor Laxness’s novel “Independent People” for which Laxness won the Nobel Prize for Literature in 1955. He could not put the book down and periodically tried to convince me of Laxness’s originality by reading excerpts from the novel out loud. His efforts failed dismally.  This is a tough, and to my ears, hardly endearing tale of the brutal life of an impoverished, if independent Icelandic sheep farmer. (Cue: Icelandic sheep pictured above.)

The peasant of the novel is Bjartur, who for most of his life refuses to give to or take from anyone and lives in great poverty – “independent” and debt-free. The First World War brings prosperity to Iceland’s sheep farmers, with high prices for sheep exports. These revenues finally tempt Bjartur to borrow to build a new house that replaces his leaky old croft. At war end, sheep prices fall dramatically and suddenly – and Icelandic farmers are left with a huge burden of debt.

Here is an excerpt: (p.445-446 of the Random House edition)….  Please note the ties that bound Iceland debtors to the hard-hearted bankers of the English finance system then.

“People take more upon themselves than they can manage if they aim higher. True, it had been quite usual in the old days for the people to owe the merchant money and to be refused credit when the debt had grown too big. It had likewise been nothing uncommon for people thus denied sustenance to dies of starvation, but such a fate, surely, was infinitely preferable to being ensnared by the banks, as people are nowadays, for at least they had lived like independent men, at least they had died of hunger like free people.

“The mistake lies in assuming that the helping hand proferred by the banks is as reliable as it is seductive, when in actual fact the banks may be relied upon only by those few exceptionally great men who can afford to owe anything from one to five millions.  So about the same time as Bjartur sold his better cow to raise money for wages and paid a thousand crowns off the loan and six hundred as interest by making inroads on his stock of sheep, the Fell King sold his farm to a speculator for the amount of the mortgages with which it was encumbered and fled to live in a hovel in the town, yes, and thought himself lucky to escape.

“The National Bank had passed into Ingolfur Arnarson’s control and had become a Statebank on the basis of a huge government loan from England; remissions of and concessions on loans were out of the question now, unless it was a matter of millions, and the farmers’ produce had fallen disastrously in price.

“Yes, the bottom fell out of everything, the autumn that Bjartur’s house was one year old”.

It seems I was wrong. This indeed is a tale for our times.