How constitutional economic principles saved a nation
The promise of bailouts permit bankers to take bad decisions but enjoy a high standard of living while this is paid for by the social constituency through tax and austerity. Instead of bailing out its banks and imposing austerity measures, Iceland let its banks fail, prosecuted bankers and promoted social welfare policies. 85% of U.K. claims, have been repaid and all outstanding payments should be settled within the next 6 months.
Iceland has recovered well and already exceeds its pre-crisis output level.
This is a reposting of an article first posted in 2013.
Like all politicians facing the challenges of demands being made by owners of assets of failed private banks, Ólafur Ragnar Grímsson, President of Iceland, faced pressure from creditors for the government to bail out private banks with government revenue or loans and to compensate deposit holders. Rather than panic under the immense pressure of the extra-constitutional pressures brought about by the IMF, banks and media, Ólafur Grímsson took time to reflect upon and to analyze the issue. In completing his decision analysis he had to take into account the direct pressure from Gordon Brown and Alastair Darling.
President Grímsson did not react in a knee-jerk fashion as Gordon Brown and the US Governments had done. The solution of these so-called "democracies" was to force normal people, including farmers, nurses, doctors, factory workers and fishermen pay for the mistakes made by the management of big banks. He recognized immediately that such a "solution" was completely unconstitutional; the demands of the "financial system" posed a threat to democracy. Indeed, President Grímsson was one of the first politicians to openly express this problem of the undermining of democracy through an unfair imposition of taxes, levies and other forms of financial sequestration on innocent citizens engineered by the IMF and governments in countries who themselves had succumbed to the extra-constitutional pressures from banks.
Ólafur Grímsson refused to sign the IMF and other agreements the British government tried to impose leading to the UK branding Iceland in the same category as Al Quaeda and other terrorist organizations. In face of this disgraceful attempts at intimidation Ólafur Grímsson proposed a referendum so that the people of Iceland could decide whether or not they were willing to pay for the bail out of the private banks. Naturally the people of Iceland, given the opportunity to express their preferences, refused to support such a bail out when the referendum was held. Since then Iceland has recovered while countries who succumbed to the extra-constitutional pressures face increasingly difficult circumstances as exemplified by the current events in the UK and the disgraceful treatment of the people of Cyprus, Greece, Spain and other countries at the hands of the IMF, ECB and European Commission.Who do political parties represent?
The wisdom and actions of President Grímsson relate to his wide experience and fact that he is a highly qualified economist but also to the fact that he has a profound understanding of the necessity of politicians in so-called democracies to remain vigilant of anything that can reverse the refinements of democracies achieved over hundreds of years. Unfortunately the shallow interests of political parties, largely concerned with remaining in power at any price, undermine democracy because such politicians do not refer to the electorate for their support. They survive fundamentally on the basis of extra-constitutional arrangements where they favour special interests and manipulate the electoral through propaganda in the "free press" supported financially by large corporations and banks. Gordon Brown and Alastair Darling panicked in the face of the private banking crisis and imposed upon the people of Britain the obligation to bail out such private organizations. There was no referendum and no attempt to reflect on the example this set for a depreciated democratic accountability and subversion of fundamental constitutional principles of equity and fairness as underlying principles in decision-making.
As we know all British political parties cannot amass more than 1% of the British electorate as members and it is only as a result of the absurd first-past-the-post electoral system that such factional minorities can gain a majority in Parliament while having received no more than 19% of the electorate's support. It is this bizarre version of "democracy" that makes political parties so vulnerable and willing to enter unashamedly into shabby extra-constitutional deals with corporations, banks and the media.Factional minority thuggery
A Labour government holding the support of 19% of the electorate imposed a price on all of the people of Britain to bail out private banks and yet these failed organizations continue to pay their managers excessive bonuses and salaries while the population in general whose tax revenues or jobs or loss of houses are the price of abusive political decisions designed to keep incompetent companies in business. These decisions were not taken to benefit the people of Britain, they were taken to benefit the Labour party's status vis-a-vis the IMF, corporations and banks.
It is so important
The outcome has been a serious undermining of the future of the whole economy and exacerbation of the status of sovereign debt or viability of the economy within the global context. The overall effect of minority factional governments has been a sequence of decisions that constrain the freedoms of the majority because political parties have no interest in majority opinion. They only focus their attention on their own constituency made up of a minimum threshold package representing around 17%-18% of the total electorate. This is why British political parties are usually against referendums.
The last government as a coalition was supported by less than 38% of the electorate and it continued to impose legislation that was not part of the manifestos of either coalition party; they continued to uphold the extra-constitutional arrangements with banks and the media.Time to defend freedom through better constitutional principles
Britain has had to endure outrages from the main political parties acting in the "interests of the nation". Unfortunately, they clearly do not know what the interests of the nation are otherwise they would not act in this way. Their objective is not promoting the freedom of the people of Britain by assisting them achieve their freely-formed objectives.
Britain cannot continue to be run as a corporate entity according to the unchecked decisions of an executive; Britain is supposed to be a democracy. The United Kingdom needs to undergo a transition to rid itself of the current batch of political parties and establish a system whereby responsible and more substantive individuals are selected as representatives of the people. These should not be subjected to political party orientation or impositions of Parliamentary whips. They should be motivated by fundamental constitutional principles and in the service of their constituents. In this way we might achieve the foundation of a Parliament of the will of the people and Parliament that can control the excesses and irrational decisions of any "executive". We have a long way to travel before we can gain the confidence that our politicians have either the understanding, motivation or competence to reflect our preferences. Before this can happen democratic constitutional principles of equity and fairness need to become priorities demanded by the people as foundation of all government decision-making. Political parties in Britain are minority factions and not interested in "majority opinions" and our electoral system sustains a parlour game that gives people the impression they are participating in a democratic process.
The example of Iceland and President Ólafur Ragnar Grímsson's wisdom and steadfastness in the face of disgraceful pressure, including that from a minority factional government of the United Kingdom, is an example of the importance of taking into account constitutional principles when taking economic decisions. Our freedom depends upon this approach to democratic governance.
Hector McNeill is the director of SEEL-Systems Engineering Economics Lab.
Updated: 10th May, 2013; Typos.
Updated: 10th June, 2014; introduced new header.
Reissued (reposted): 7th August, 2015: Title changed from, "How constitutional principles saved a nation"
to "How constitutional economic principles saved a nation"