Iceland’s recent general election shows that the country’s neoliberal consensus is over. What happens next?
When the Icelandic parliament assembled in fall of 2010, tens of thousands gathered to throw eggs and rotten tomatoes at the politicians. The MPs were participating in a traditional march between the cathedral and the parliament building that marks the beginning of each legislative setting. Protesters repeated their performance exactly a year later, now with an even larger crowd.
These events marked the midpoint of Iceland’s anti-neoliberal rebellion, which had started in the fall of 2008 at the time of the financial collapse. The mass actions represented a definitive break with the neoliberal consensus the country had sustained since 1984.
Any government will now have to understand — and then accept — this popular revolt if it wants to credibly hold power. Old alliances and structures have collapsed, and new ones must be built.
This October’s elections reflected the changed political atmosphere. On the one hand, the results were inconclusive, failing to produce a clear majority that could form a government. On the other hand, they decisively showed the fate of the sitting government, made up of the centrist Progressive Party (FSF) and the right-wing Independence Party (XD). In 2013, they had received a clear majority of votes — each winning nineteen parliamentary seats out of a total of sixty-three — despite their direct responsibility for a number of bank collapses in 2008.
Between 1991 and 2008, XD enacted a unrelenting series of ultra-neoliberal and right-wing policies that led to the financial crisis. The basis for this neoliberal turn, however, was laid in the eighties, when an earlier Progressive-Independence coalition government held power.
How these parties returned to power in 2013 can only be explained by the events between the financial crisis and that election. Their fate in this October’s election gives us a sense of what might come next.
A Disgraced Left
When the Icelandic banks collapsed on October 6, 2008, a powerful mass movement appeared out of nowhere. By late November, it had become a grave threat to the government.
The movement was organized on several levels and had several centers of operations, which were mostly uncoordinated. All of them coalesced, however, in weekly meetings in the center of Reykjavík. On December 1, protesters convened a meeting at Arnarhóll, after which the more radical wing attacked and occupied the Central Bank of Iceland. A full-scale uprising — which many expected — did not materialize.
The movement, however, successfully removed the sitting government and forced a new general election in April 2009. The Social Democratic Alliance (XS, which had also been in the government at the time of the collapse) and the socialist Left-Greens (VG) formed a government.
They inherited de facto IMF rule, which had been imposed right after the collapse. But the government did not need the IMF’s help in becoming extremely unpopular, extremely quickly.
It embarked on a very dubious mission to enter the European Union against the population’s wishes. To do so, it would have to agree to pay all the debts incurred during the Landsbankinn’s Icesave operation.
Before the crash, the bank had launched online operations in the Netherlands and the United Kingdom to allow foreign investors to take advantage of Iceland’s higher interest rates. Money poured into the Icesave accounts, but the collapse wiped it all out. The British and Dutch governments demanded that Iceland reimburse these customers before it could enter the European Union, and the government agreed to the deal.
Icelanders rightly understood that their government had chosen to take on odious debts. A strong movement against this agreement gathered steam, and it was supported by a sector of the Left-Greens in parliament. They were joined by the Movement (the Hreyfingin), a party formed out of the 2008 protests that had received some 7 percent of the vote and won four parliamentary seats.
The two parties successfully demanded a referendum on the plan, which was overwhelmingly rejected in 2010. A second proposal was rejected with a smaller majority in 2011.
The Icesave maneuver cost the government all its credibility. It floundered through the last two years of its term without trying to restore legitimacy.
In spring 2013, the final nail was put in the coffin: an international court ruled the Icesave agreement illegal and declared the Icelandic government under no obligation to repay the British and Dutch citizens who lost money.
This decision not only electorally decimated the left parties, but took the Independence Party with it. The Progressive Party — which had opposed the Icesave agreement — could portray itself as the redeemer of the protesting masses. It received one of the highest vote counts in its history.
Neither of the discredited parties had any chance of entering government. XD meekly accepted FSF leadership and appeared to take the backseat in a government supposedly in tune with the people’s rebellious spirit.
However, it took very little time for this government to become just as unpopular as the last one. Its scheming, wheeling, and dealing to benefit the Icelandic elite was far too transparent.
The Panama Papers finally blew it out of power. The revelation that the prime minister held off-shore, tax-free accounts contradicted his persona as the representative of the protesting masses. On April 4, thirty thousand people rallied to demand his resignation and new general elections. Both demands were met.
Both post-crisis governments fell apart because they could not create a new social consensus to replace the neoliberal contract shattered by the bank collapses.
Representing Rebellion
The neoliberal consensus began in 1984, as certain discourses — like class conflict, solidarity, or the notion the state was responsible for the well-being of its citizens — were suppressed. By 1990, the Contract of National Reconciliation — an agreement signed by government and labor to ensure economic stability — completed this task.
In Iceland, as elsewhere, parties that were built on the idea of opposing capital with working-class interests also supported the pact. By 2007, the the Social Democrats had entered an extremely right-wing government and watched the crisis unfold.
The neoliberal consensus was sustained by widespread prosperity. But when the economy fell apart in 2008, it left the social peace in tatters. The ban on discussions of class and exploitation evaporated.
Thus, the real issue in the recent elections became who could carry the torch of popular rebellion. In 2013, the Progressive Party was temporarily able to present itself as the party of the social movement. When it failed, the Pirate Party stepped in.
After the Progressive-Independence government fell out of favor in early 2015 — primarily by refusing to fulfill its promised referendum on European Union membership — the Pirate Party benefited. It approached 30 percent support between February 2015 and April 2016. The Greens whittled away some of the Pirate Party’s base, but it stayed around 20 percent in the polls. In the end, the Pirates received only about 15 percent, and the Greens around 16 percent.
The Pirates’ rise in the polls can be attributed, to a large degree, to protest votes; the traditional left and right had lost all credibility, and this upstart party seemed like the only option.
But eight years of protests were also a decisive factor. The size of this movement cannot be overstated: Between 2008 and 2011, the police counted over 1,300 protest meetings of various sizes and shapes — close to one every day. The Pirates appeared as a direct, organized, and electoral representation of these protests, presaging a renewed social contract based on the enormous political activity after the collapse.
An attempt to realize this new consensus materialized two weeks before the election. The Pirates invited three other parties — the Social Democrats, the Greens, and another new party called Bright Future — to create an electoral bloc. Voters would know that if they voted for any of these parties, they would form a government.
The media, controlled by moneyed interests, immediately branded this as an attempt to create another government like the disastrous leftist coalition elected in 2009. Many, especially the corporate-controlled media, viewed the Pirates’ suggestion as a desperate, misguided move on the political chessboard.
A Far Too Successful Party
By October 2016, the establishment was out of tricks. The bloc proposed by the Pirates received 43 percent of the vote, not quite a majority. Its loss is, to some extent, beside the point. In fact, we might even see it as a preferable result; had it received a mandate, the media would have immediately labelled it the new left government and started predicting the economic ruin it would bring. The resulting impasse is far more revealing, uncovering the old system’s complete impotence.
The Independence Party, which earned 29 percent of the vote, now stands alone, naked in its class arrogance. With such a large vote share, it cannot hide behind another party as it wages a class war on behalf of the 1 percent.
The party built on the idea of class struggle — the Social Democrat Alliance —forgot everything about its foundations during the neoliberal consensus. It received around 30 percent of the vote in 2006. Ten years later, it got only 5.7 percent. Throughout Europe, social-democratic parties served as essential props to capital’s power. The Social Democrats’ collapse in Iceland shows the power of the country’s anti-neoliberal revolt.
Meanwhile, a proliferation of new parties are attempting to capture the street movement’s momentum with little success. The Pirate Party hasn’t been able to present a solid social or economic analysis. Instead, it relies on a visceral opposition to the elite, which, on its own, does not equip it to govern. The party’s main plank — a basic income guarantee — reveals a neoliberal influence, as Milton Friedman originally proposed the idea in opposition to generalized social security.
From this perspective, the street rebellion has only created a vaguely anti-establishment party with an equally vague reformist agenda, shot through with half-baked neoliberal ideas.
Two other such parties in parliament — Resurrection and Bright Future — are hollow replicas of the people’s voice, without much conviction or moral power. They are are even more consciously neoliberal than the Pirates, calling for a sanitized neoliberalism that is of course impossible.
That said, their dealings with XD since the election show how far the anti-neoliberal movement has gone. In coalition discussions, these upstart parties tried to force the Independence Party to agree to a major reorganization of the fishery quota system, still a central element in the Icelandic economy. XD’s refusal exposed it as a party for the elite. They also tried (and also failed) to call a vote on European Union membership. These demands — and the parties’ willingness to leave the coalition as a result — highlights how differently political lines are drawn today.
Already it is clear that the Independence Party is unlikely to remain in government. Its only hope is that the Left-Greens — the second largest party in parliament — will turn to it after failing to to establish a center-left government. XD has repeatedly, but so far unsuccessfully, tried to woo the Greens into some kind of all-national government. That the right-wing party’s best partner is now the most left-wing party epitomizes how strange Icelandic politics have become.
The proposed left-wing alliance between the Left-Greens, Bright Future, Resurrection, the Pirate Party, and what’s left of the Social Democratic Alliance doesn’t seem plausible either. But how can three social-democratic parties, one newborn neoliberal party, and one indescribable mess of a party come together to govern?
But they have reached consensus on some major policy changes: strengthening the health and education system and redistributing profits from the fisheries. The question remains whether internal squabbling will prevent this consensus being realized.
Although the previous neoliberal consensus has been decisively shattered, a new one — already present as a mass movement — is struggling to articulate itself as a coherent political project.
Iceland’s circumstances are different enough that this may still come together. Unlike Greece at the time of Syriza’s rise to power, Iceland is not and does not want to join Europe and the eurozone. Further, the broad participation in the anti-neoliberal protests of the past eight years means that nativist or right-wing populist movements have no chance of gaining ground.
These developments have created an atmosphere where five parties on the left and in the middle of the political spectrum could conceivably create an anti-neoliberal alliance despite themselves. At the very least, the neoliberal consensus that existed between 1984 and 2008 has been irrevocably disrupted. A new, reformist hegemony seems likely to take its place in the near future, but it will have to deal with all the pitfalls and dangers of broad coalitions and the burden of governance.
Árni Daníel Júlíusson is a historian in Reykjavík and a member of the board of Attac Iceland.
This article was first published by the Jacobin.
See also Inspired By Iceland… No, really! by Árni Daníel Júlíusson.