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Iceland's President Warns Alaska On Economic Collapse

June 20, 2011|Michelle Theriault Boots
Courtesy Wikimedia Commons/World Economic Forum.

ANCHORAGE, Alaska — When towering financial institutions fail, an economy that can fall back on fish, energy, clean water and the human need for wild places will survive.

That’s what Iceland learned in the wake of its dramatic 2008 economic collapse, the country’s President Olafur Ragnar Grimsson told leaders in Anchorage on Monday.

Alaska should take note, he said.

“Future prosperity will not be based or sustained…by building big financial sectors,” he said. “It is an economy based on real resources: On energy, ocean, natural resources, as well as the capabilities of people.”

Grimsson addressed the Alaska World Affairs Council in Anchorage as part of a trip to talk about the future of the Arctic at the Arctic Imperative Summit.

A silver-haired, bespectacled scholar and politician, Grimsson hails from the remote western fjords region of Iceland – a land of mountains, ocean and tough winters, and the part of the country “most similar to Alaska,” he said.

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His country’s spectacular boom and bust is both a cautionary tale and a call to action for natural-resource rich northern communities, Grimsson said.

For a thousand years the people of Iceland fished and farmed, eking out a living from the land.

Then, in the late 1990s and early 2000s, they got rich by riding a global wave of investment and speculation. People stopped catching cod and started trading stocks.  

“Icelandic banks joined this great circus of easy money,” Grimsson said. “To get a loan was the easiest thing ever.”

Then in 2008 the economy blew up like a volcano, smothering Iceland in debt.

Within a week in October of that year, Iceland’s three major banks went belly-up. The country was suddenly broke. Jobs and wealth disappeared overnight, precipitating “the deepest social and political crisis” the country had ever faced, Grimsson said.

The police were dispatched to protect the parliament and prime minister’s office from angry crowds that had gathered in the streets.

 “What I feared most from one day to another,” Grimsson said, “Was not the economic consequences (of the collapse), but how it was destabilizing one of the most stable societies in the world.”

The prime minister and other government and bank officials were replaced. And Iceland, a country with a population of roughly 300,000 people, went back to being defined by its singular nature and dependent on its oceans and land: Now, the economy is again based on fishing, clean energy and tourism, which is booming.

There are ongoing fights over fishing quotas and how to manage a tourism industry that brings visitors outnumbering the country’s entire population by three each year.

But nearly three years later, daily life in Iceland is back to normal.

“If you came to Iceland you would probably not find many signs of a country which has recently sustained a financial crisis,” Grimsson said.

Despite the fact that Alaska is a state and not a nation of its own, it may have a chance to chart its own course, Grimsson said.

Alaska poised to wield increased influence as nations jockey to for power in the Arctic, which he called “the new frontier of the global economy.”

“Alaska is the United States’ place at the table when it comes to northern issues,” he said.

“I think the financial crisis has shown that those countries that base their economies on real foundations, not on financial hype, can in fact prosper much more in the coming years and decades than people thought before."

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