Last April, the Icelandic government published a report on the country’s image written by a committee of its leading businessmen. It summarises Iceland’s history thus: ‘For a long time, the nation lived through hardships, but once it achieved freedom and independence it leaped in less than a century from being a developing country to being one of the richest nations in the world.’

Today, personal security is the only growing sector of the economy. Politicians and stock exchange ‘entrepreneurs’ are surrounded by bodyguards. After several years of private ownership and staggering growth, the country’s three major banks collapsed in the space of a week, unable to pay their debts. The state, led by the central bank, renationalised two of them, and the third, Glitnir, was taken over by Iceland’s Financial Supervisory Authority. An emergency law was passed giving the state total control of the financial sector, and the government is wildly casting about for foreign loans to help it compensate people whose money seems simply to have vanished. Some of it had come from British and Dutch savers, who’d been putting money in high-interest-rate Icesave internet accounts since 2006, in a scheme that the manager of Icesave, Sigurjón Arnason, described as ingenious. ‘The only thing I have to do is look each day and see how much money came in,’ he said a while ago: ‘£50 million came in only last Friday!’ Easy come, easy go. When the boss of the central bank, David Oddsson, and the finance minister, Arni Mathiesen, declared after nationalising Icesave that Iceland would not pay these debts – or, in Mathiesen’s version, might perhaps settle some part of them – the UK applied its anti-terrorist laws to freeze the bank’s assets in Britain. Iceland was shocked: we’re not terrorists, we’re Scandinavians! If the króna now seems to be worth half what it was eight months ago, that is only because the central bank has fixed its rate. In fact it’s worth nothing at all. Experts describe the currency as ‘poisonous’: no one will touch it. This is now the position of a neoliberalised country that until April considered itself one of the most affluent on earth.

‘This is not nationalisation,’ the poker-faced prime minister Geir Haarde explained as he nationalised the first of the big three. On the face of it this was a blatant lie. But even if the state is now spending billions buying back recently privatised institutions, don’t be fooled. The government has not changed its policy: these measures are being taken merely to save those who have money, and will probably make things worse for everyone else. One American economist commented that the handling of the situation couldn’t be any worse if ministers had been picked arbitrarily out of the phone book.

The average Icelander owes €30,000. Home-ownership is the rule and people borrow to buy apartments, to attend university, to buy cars, to travel, to have children. The country is caught in a web of international debt. Because it has its own currency, there isn’t much difference between our situation and so-called ‘truck systems’, whereby a labourer buys goods from the company he works for. His work and his consumption are noted in a single book of debits and credits, and the worker sees little or no ‘real’ money for his work. Young people, who took out big loans to pay for overpriced apartments in an inflated market, now find themselves stuck. In a collapsed property market, the flats are impossible to sell, and since the loans are tied to the retail price index, in times of inflation the debt grows.

The result of all this is a very stressed society in which everyone is always running to stand still because they’ve never done enough to pay the bills at the end of the month; and if they’re late with payments, staggering default interest will sooner or later hit them. Then there’s the social taboo that means none of this can ever be spoken about, leading to an explosion of new-age spiritualism and a world-beating rate of anti-depressant consumption. And if the economic situation I’ve described sounds unfair, there’s worse: Icelanders are not allowed, by law, to have family names. Only 14 families – members of the old aristocracy who own and run everything – have surnames; the rest of us bear our father’s name in the old heathen way: Haukur, the son of Helgi and Bryndís, the daughter of Björgvin, the son of Sigurour. In short, Iceland is a ruthless class society.

It turns out that 300,000 people are not enough to support a floating currency on the international markets: 300,000 people, most of whom work far too many hours to be able to take part in politics, are also not enough to support a language in a globalised world. To be fair, the average Icelander’s ability to speak the language of finance is impressive: even the most hippyish high-school student can convincingly discuss currency rates and debate the benefits of short-selling. But for any other purpose my language has become as useless as the currency in my pocket.

‘The ever-present danger of perishing would not permit of a language restricted to gesture. And the first words among them were not love me, but help me,’ Rousseau remarked of the origin of language in the North. There isn’t an Icelandic word for ‘gesture’, which goes a long way towards explaining awkward moments in foreign relations. And that isn’t the only word we lack. ‘Hegemony’ isn’t there. Nor is ‘structure’ (the concept has been translated, but the Icelandic equivalent never seems natural).

We don’t have a word for ‘strategy’ either. The Republic of Iceland declared independence from Denmark in 1944, three years into a US occupation that would last more than sixty years. The US army made us rich during ‘the blessed war’, as older people call it, and then stayed as long as our mid-Atlantic rock remained strategically important to them. That is, until 2006, when the Bush administration thought up better things to do with two fighter-jets. But the US dollar is supported by the threat of military intervention and a large population, whereas the Icelandic króna is mostly supported by cod. After the US left, it took a while for the local economy – and politics – to realise how dire the situation had become. The most shocking moment for the Icelandic authorities came just before the collapse of the banks: at the end of September, the US Federal Reserve announced it would help out the central banks of Sweden, Norway and Denmark with a currency exchange deal – but not Iceland. As the Nordic countries see themselves as one community, the signal was unambiguous: sink, Iceland, sink. The country’s first response was to take offence. Oddsson announced that Russia would lend Iceland the money it needed. Russia did not agree. Iceland is sinking in the manner of the cartoon character who runs off a cliff but then stops in mid-air: only when he looks down and realises he isn’t standing on anything does he fall.

Symptomatically, for the last two years it’s been difficult to read anything other than good news in Iceland. All three of our newspapers are right-wing and pro-market. Until October, Morgunbladid belonged to Björgólfur Gudmundsson, who is the chairman of Landsbanki (and of West Ham United). He is an avid supporter of the party in government, the most flamboyant of the country’s bank owners, and the most popular according to a poll conducted last year by the rival newspaper Fréttabladid, which asked: ‘Who’s the best billionaire in Iceland?’ Fréttabladid belonged to the Baugur Group, which essentially owns the entire retail business in Iceland. Now the two newspapers appear to be merging, and changing hands in the process; journalists can’t keep up. Yet still the good news keeps coming. On Monday, 27 October, the front page of Morgunbladid carried a photograph of a snowy mountain, some sheep and a man on a horse. The back page featured a large picture of flowers and birds. Three days earlier the inhabitants of the rock known as Iceland had asked the IMF for help.

There is such a thing as collective guilt, and I am guilty, by association with this tribe, of having participated in casino-capitalism. Most people believed they were on the right side of the great divide between the haves and the have-nothings, that they had a natural gift for slot machines and poker. Now it turns out that many of those who thought they were playing a good game were fooled. It’s sad that most of us didn’t find the game itself disturbing, only the thought of losing: it appears that we have no sense of justice, but only of advantage and disadvantage. Cruelty doesn’t bother us. That is why Iceland is grieving. We had the chance to be decent people,and we blew it. Someone has now set up a website to which offended Icelanders send in photos of themselves in their homes, holding up a piece of paper on which is written the plea: ‘Do I look like a terrorist?’

At the same time, there is an enormous sense of relief. After a claustrophobic decade, anger and resentment are possible again. It’s official: capitalism is monstrous. Try talking about the benefits of free markets and you will be treated like someone promoting the benefits of rape. Honest resentment opens a space for the hope that one day language might regain some of its critical capacity, that it could even begin to describe social realities again. Or things might go quite differently: perhaps nothing stands in the way of a complete neoliberal victory. Perhaps it’s the end of history, not in a liberal democratic utopia, but in capitalismo puro, a capitalism that bears no relation to freedom: capitalism as mere fact.

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