In 2008, Iceland had the third largest banking and economic crash in recorded history. They responded by using the internet to create a new constitution, written by the people and for the people, reinventing the definition of self governance. All of this happened under a cloak of media secrecy in this part of the world. We would not want to give Americans any ideas, after all, about fighting for freedom from tyranny and taxation without representation.

Now Iceland is in a real fight for freedom. Although they are considered a European recovery success story, all is not well. This story is like a socio political fairy tale, with villains and true heroes, with the biggest heroes being the Icelandic general population. But first, a bit of history.

Iceland is a small European country that used to be part of Denmark; an island in the north Atlantic, somewhere between Europe and the Americas. It has a population of about 320,000 people, most of them living around the capital city of Reykjavik. They speak Icelandic, but also English, German and other Nordic languages.

Like the rest of the world, financial deregulation and bad banking practices led to the collapse of the stock market and the largest banks in Iceland. People’s savings and pensions were completely wiped out, and worst of all, they had no idea it was coming.
We have been watching countries all over the world in financial free fall. In the US, the taxpayers bailed out the banks. Some Americans protested with an uprising of the Occupy Movement which was quickly squashed with organized governmental brutality, and all of the protesters were declared terrorists by the US FBI.

The Greek economy has collapsed and there is rioting, as those beautiful azure skies this past winter were filled with smoke at night, from people having to burn their own furniture in order to keep warm.

Spain is in trouble with 60% unemployment among Spanish youth; with a moratorium on evictions because the suicide rate jumped to an alarming statistic, as people were getting booted from their homes for not being able to pay the rent and then killing themselves.

In October of 2008 the Icelandic Prime Minister Geir H. Haarde had to explain to his people that the entire economy had collapsed. The people were in total shock, as Iceland had been enjoying years of prosperity.

As Ian Welsh from Firedoglake reports, “Iceland went down in a particularly ugly fashion. Gordon Brown, the UK’s fantastically unpopular Prime Minister, said that Icelandic banks had threatened to not honor obligations to British account holders, so he declared Iceland a terrorist country and seized the banks assets. This caused the banks to go under and the Icelandic economy to implode to the extent that if Russia hadn’t sent them billions of dollars, they would have literally starved, since they need to import food.” With Iceland being declared a terrorist state, many companies that Iceland relied upon for sustainability, were legally no longer able to do business with them.

The Prime Minister gave an emotional speech during this time, saying, “It is at such times that the Icelandic nation will show what stuff it is made of — its fortitude and prudence in the face of these disasters inspires admiration everywhere. We may for a time be bloodied, but we are unbowed. The problem which faced the Icelandic Government when this chain of events was unleashed was more serious than the problem facing other governments, because of how large the Icelandic banking system was in proportion to the economy. It was, therefore, clear that it was neither sensible nor feasible for the Icelandic state to shoulder the burdens of the entire banking system.”

In 2008, the governing party was the Independence Party, and had been for many years. They are somewhat analogous to the US Tea Party – far right, selling their natural resources, and wanting Christian religion to be a part of lawmaking. It was generally thought that the leadership of this party led Iceland into financial ruin.

There are a lot of stories in the news about how Iceland handled their crisis. Most of them are a bit idealized . Icelandic Prime Minister Geir H. Haarde and a few others were found guilty of crimes, from incompetence to insider trading, leading to this collapse, but it is said that the real people responsible were never actually held to account. Iceland did try first to bail out its banks, until it realized that this was impossible. Iceland followed the advice of the International Monetary Fund, which later praised the Icelandic government for following the IMF’s advice to the letter.

The banks however, taken over by the government for just over a year starting in 2008, have now been re- privatized , and are back to questionable banking practices like tax evasion and market manipulation. Three of them have actually been sold to foreign investors, whose identities are hard to find. Knowing who owns these banks is quite critical to the country and its laws. Fishing is big business in Iceland, and fisheries can only be owned by Icelanders. There are also limited ownership laws over energy companies (Iceland has huge geothermal energy natural resources) and some other industry.

In the midst of the initial weeks of this national crisis and panic, a real hero emerged, and this is what sets this crisis apart from any other story we have heard in the news. An actor and activist named Hörður Torfason took it upon himself to start a revolution, and wrench the governance of his country out of the hands of corruption and ineptitude. He stood outside of Parliament with a microphone and asked passers by, what has happened to our country, and what are we going to do about it. He encouraged his fellow citizens to come up and speak, but that was not enough.
Torfason later said in an interview, “I’m a known artist in my country, so I used my webpage, I sent out emails for others to come. After three days I realized that standing and asking questions wasn’t enough. So I got a car, sound equipment, drove around and announced that I was planning a big demonstration. I called friends of mine, artists and intellectuals. The problem is that media is owned by the rich in our country and controlled by politicians and political parties, so I started these outdoor meetings to share information. It’s an old idea from the Greeks. That’s all I have been doing. I was trying to inform people about what was going on and start a conversation with the politicians.”

Well, he did. This descendant of Vikings started a revolution that took down the Icelandic government. People surrounded Parliament regularly and for months, banging pots and pans, throwing eggs and snowballs, and demanded that the Prime Minister resign. There were clashes with police, pepper spray and arrests – a real modern day revolution.

Later, there was speculation among Icelanders that this revolution was so threatening to the international banking community, that Goldman-Sachs sent special envoys to Iceland in the spring of 2009, to undermine Icelandic banks and try to make them look like the problem was only with, and the fault of, Icelandic banks, and not the world wide problem we all know. Wikileaks published an internal communication from one of the large banks in Iceland, showing the corrupt actions of the Banksters and infuriating the people.

Iceland held a referendum, and the people decided it would pay back the debt to Icelanders, but it would not pay back the debt to foreigners who had invested in the fallen online banking system. Icelanders decided that they were not part of the decision making to create such debt through the irresponsible actions of Banksters and corporate gamblers, and they were not going to share all of the responsibility. They are however, still paying back a substantial debt, which has caused great economic hardship among households.

In 2009, a new election was held due to direct pressure of the people, who declared that the financial crisis was caused by the incompetence of the Independence Party and their prime minister. For the first time in 18 years, the IP lost the majority, and a new coalition was formed with Iceland’s other political parties; The Social Democratic Alliance,the Left-Green Movement, the Progressive Party , and the new Citizens’ Movement. Jóhanna Sigurðardóttir , Iceland’s longest-serving member of Parliament and said to be part of the old guard that led to the deregulation that led to the collapse, became Iceland’s first female Prime Minister and the world’s first openly lesbian head of government. Iceland’s Commerce Minister resigned, but not before firing the director of the Financial Supervisory Authority, saying that he wanted to take some responsibility for this crisis.

How often do you hear that from a politician?

In 2010 the Icelandic government, through a process of election, chose 25 ordinary citizens from the general population to form a Constitutional Council, in order to rewrite the country’s constitution. This was despite attempts by the Supreme Court to interfere in this process. There were an equal number of women and men, and people chosen from different economic backgrounds, as long as they each had 30 people who would be named to stand up for them. This elected assembly creates a form of direct democracy within the republic. It allows the people to have more power in what the Parliament decides. It creates a structured avenue for the people to make their voices heard and protest rulings they do not approve of by allowing them to order a general referendum. One of the guidelines for this new constitution, was that it was to be written in a clear language that everyone could understand.

Like the Vikings who braved the open ocean in search for new lands, the people of Iceland navigated the internet in the most unprecedented way to create a crowd-sourced constitution, using social media like Youtube, Twitter and Facebook as it had never been used before. There was a public website and the Council held weekly podcasts, sharing the latest updates of what turned out to be The People’s Constitution. People from all over Iceland, and all over the world, could message their suggestions to the council for consideration on how Iceland should be governed.

In the summer of 2011 a final draft was completed. A majority of voters agreed this draft should be the basis for a new constitution. This was the will of the people, a rare moment in history for online transparency of government.

At the same time that the People’s Constitution was being drafted via social media, the public was paying more and more attention to the Wikileaks information on bank corruption. The country’s national public service broadcaster, RUV, was prepared to do a news report given the increasing interest in Wikileaks from the general population. The newly privatized banking industry got an injunction to stop RÚV from airing this broadcast. Instead, the broadcaster went on the air and gave the people the Wikileaks website address, simply telling them to look at the site.

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