Democracy in Iceland

Thorvaldur Gylfason 31 March 2021

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Democracy matters because it is an inalienable part of universal human rights and because it is good for growth and perhaps even equality (Acemoğlu et al. 2014a, 2014b). Recent scholarly work provides ominous accounts of creeping fascism within our societies and how it can spread, including Diamond (2019), Levitsky and Ziblatt (2018), Mounk (2018), Page and Gilens (2017), Runciman (2018), Snyder (2018), and Stanley (2018).1 Many other observers choose to look the other way. 

Once again, the Economist Intelligence Unit misses the mark by assigning Iceland a democracy score second only to that of Norway in a group of 167 countries (see Figure 1). Iceland’s score dropped sharply from 2019 to 2020, true, but without demoting Iceland from its second-place finish among the Nordics as well as across the globe. This score is too high, for at least two reasons. 

Figure 1 EIU Nordic Democracy Score, 2006-2020

First, the EIU awards Iceland a top score of 10 for “electoral progress and pluralism” even if votes in rural areas weigh up to twice as much as votes in urban areas, creating a provincial bias in Parliament that has, since 1849, been the source of one of Iceland's greatest political controversies. This bias has led foreign election observers, including the Organization for Security and Co-operation in Europe (OSCE), repeatedly to declare the unequal weight of votes in parliamentary elections in Iceland on such a scale to constitute a violation of human rights

Second, and even more important, the EIU report grants Iceland another top score of 10 for “political culture” without noting that, temporarily humbled by the 2008 financial crash caused by reckless local bankers and politicians, the Icelandic Parliament resolved unanimously in 2010 that “criticism of Iceland's political culture must be taken seriously and [Parliament] stresses the need for lessons to be learned from it.” True, thirty bankers and six others, mostly small fry, were sentenced to a total of 88 years in prison for crimes related to the crash. All the same, Iceland’s political culture remains essentially unchanged.2  

Unlike the EIU, Freedom House and Transparency International get Iceland right. Freedom House lowered Iceland’s democracy score from 100 in 2014 to 94 in 2020, citing the influence of business interests over politics, corruption, and a lack of transparency and media independence. Transparency lowered Iceland’s Corruption Perceptions Index from 97 in 2005 to 75 in 2020, suggesting a significant, gradual deterioration. 

Most recently, in January 2021, Transparency reported that Iceland's “reputation as a corruption-free country took a nosedive as revelations came to light that incriminated the country's governing elite and its national companies. For example, the 2008 financial crisis exposed shady banks, the Panama Papers implicated the country’s former Prime Minister, and the Fishrot files revealed how far the country's biggest fishery would go to extend its business and launder suspicious proceeds. Iceland´s foreign bribery problem is also a big issue. Last month, the OECD published a new report harshly criticizing the country's enforcement efforts.” 

Harsh as it may sound, Transparency’s description quoted above does little more than scratch the surface of the serious issues involved. Along with some other 600 Icelanders, Iceland's current Finance Minister was also exposed in the Panama Papers in 2016 (as was the Minister of Justice, now deceased), a clear sign of Iceland's flawed political culture. Accused of accepting bribes from Iceland as well as of corruption and abuse of power, two Namibian cabinet ministers and four others have been held in police custody in Namibia for more than a year, awaiting a court verdict in April 2021. Three managers of Iceland´s largest fishing firm have been summoned to appear before the Supreme Court of Namibia in April to face accusations of bribery. From late 2019 to late 2020, Iceland was placed on the Financial Action Task Force’s (FATF) Grey List of countries deemed to have insufficient controls against money laundering and the financing of terrorist organisations. Icelandic Supreme Court justices are engaged in petty court fights against one another. A former Member of Parliament recently published a scathing best-seller on Berufsverbot in Iceland, exposing inter alia interference by local vessel-owning oligarchs in academic appointments. I could go on. 

The people of Iceland are aware of all this. Gallup reported in 2012 that 67% of its Icelandic respondents viewed corruption as being “widespread throughout the government in Iceland”, compared with 15% and 14% in Denmark and Sweden. Further, a 2018 poll conducted by the Social Science Research Institute at the University of Iceland showed that 65% of respondents viewed many or nearly all Icelandic politicians as corrupt. 

The new post-crash constitution, approved by 67% of the voters in a 2012 national referendum called by Parliament, aims to stem corruption by strengthening civil service and judicial appointments, among other things. The new constitution remains, however, to be ratified by a Parliament still beholden to oligarchs who, with their political clients in Parliament, object especially to the constitutional provision that declares that “Iceland’s natural resources which are not in private ownership are the common and perpetual property of the nation” and that “government authorities may grant permits for the use or utilisation of resources or other limited public goods against full consideration and for a reasonable period of time”. This provision, which was approved by 83% of the voters in the 2012 referendum, answers the call of the United Nations Committee on Human Rights (UNCHR), which issued a binding opinion in 2007 declaring the discriminatory allocation of catch quotas in Iceland to constitute a violation of human rights and instructed Iceland to remove the violation from its system of fisheries management and to compensate the plaintiffs. Even if the Icelandic government promised the UNCHR a new constitution with a non-discriminatory natural resource provision, it has failed to keep its word. 

The provision stipulating equal weight of votes won the support of 67% of the voters in the referendum. The upcoming 2021 parliamentary election, like the ones in 2016 and 2017, will be held in breach of the express will of the people that all votes “shall have equal weight”. 

Despite all this, Iceland’s long-term prospects seem bright provided that Parliament musters the courage to confront the oligarchs and respect the will of the people by ratifying the new constitution designed to reverse the retreat of Iceland's age-old democracy. If not, Iceland risks becoming a failed state, a label that some sharp-eyed observers have recently wondered whether to attach to the United States (including New York Times columnist Paul Krugman) and also the United Kingdom, even if no reasonable observer would consider such a designation applicable to Denmark, Finland, Norway, or Sweden – not by a long shot. 

References

Acemoğlu, D, S Naidu, P Restrepo and J Robinson (2014a), “Can democracy help with inequality?”, VoxEU.org, 7 February. 

Acemoğlu, D, S Naidu, J Robinson and P Restrepo (2014b), “Democracy causes economic development?”, VoxEU.org, 19 May. 

Acemoğlu, D, G De Feo, G De Luca and G Russo (2020), “Revisiting the rise of Italian fascism”, VoxEU.org, 28 October. 

Cagé, J, A Dagorret, P Grosjean and S Jha (2012), “Heroes and villains: How networks of influential individuals helped destroy one of the world’s most durable democracies and legitimise a racist, authoritarian state”, VoxEU.org, 17 January.

Diamond, L (2019), Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency, London: Penguin Press.

Gylfason, T (2019), “Ten Years After: Iceland´s Unfinished Business”, in R Z Aliber and G Zoega (eds), The 2008 Global Financial Crisis in Retrospect, London: Palgrave Macmillan.

Gylfason, T (2020), “Reversing the retreat of democracy: The case of Iceland", VoxEU.org, 19 February. 

Gylfason, T (2021), “From truth to reconciliation: Lessons from Iceland", VoxEU.org, 6 February 2021

Levitsky, S and D Ziblatt (2018), How Democracies Die, New York, NY: Crown Publishing Group. 

Mounk, Y (2018), The People V. Democracy: Why Our Freedom Is in Danger & How to Save It, Cambridge, MA: Harvard University Press.

Page, B I and M Gilens (2017), Democracy in America?, Chicago, IL: University of Chicago Press.

Runciman, D (2018), How Democracy Ends, New York, NY: Basic Books.

Snyder, T (2018), Road to Unfreedom, New York, NY: Tim Duggan Books. 

Stanley, J (2018), How Fascism Works, New York, NY: Random House.

Endnotes

1 See also Acemoğlu et al. (2014a, 2014b) and Cagé et al. (2021). 

2 For more, see Gylfason (2019, 2020, 2021).

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Topics:  Europe's nations and regions Politics and economics

Professor of Economics, University of Iceland; Research Fellow, CESifo and CEPR Research Fellow

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