Iceland Is Too Tiny to Be a Poster Child For the Financial Crisis

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


For what it’s worth, there’s been a bit of talk lately about how well Iceland is doing and how everyone should have followed their example in the aftermath of the 2008 financial crisis. Tyler Cowen has a fair-minded response here. In short: Some of what Iceland did was probably good, including devaluing and inflating their currency, and “ring fencing” their good banks from their bad. But most of their actions simply wouldn’t work in most other countries. For starters, Iceland is the size of a small city like Bakersfield. Their actions caused no global repercussions. Second, Iceland mostly forced foreign depositors to take the hit from the crisis, something that wouldn’t work in a country with lots of domestic deposits. Third, its stock market is minuscule. A 90 percent drop didn’t have a big effect on the economy, but it would in a larger country. And finally, capital controls aren’t a serious option for most large countries.

Overall, I agree with Cowen. Sure, maybe we should have treated our bankers more harshly, as Iceland did. But generally speaking, a tiny, isolated island can get away with a lot of things just because they’re so tiny and isolated that big countries have better things to do than try to retaliate. Who really cares about Bakersfield in the Atlantic, after all? They just aren’t much of an example of what could and couldn’t have been done by larger, more systemically important countries in 2008-10.

MOTHER JONES NEEDS YOUR HELP

Straight to the point: Donations have been concerningly slow for our hugely important First $500,000 fundraising campaign. We urgently need your help, and a lot of help, over the next few weeks so we can pay for the one-of-a-kind journalism you get from us.

Learn more in “Less Dreading, More Doing,” where we lay out this wild moment and how we can keep charging hard for you. And please help if you can: $5, $50, or $500—every gift from every person truly matters right now.

payment methods

MOTHER JONES NEEDS YOUR HELP

Straight to the point: Donations have been concerningly slow for our hugely important First $500,000 fundraising campaign. We urgently need your help, and a lot of help, over the next few weeks so we can pay for the one-of-a-kind journalism you get from us.

Learn more in “Less Dreading, More Doing,” where we lay out this wild moment and how we can keep charging hard for you. And please help if you can: $5, $50, or $500—every gift from every person truly matters right now.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate