The Futility Monster

He'll pointlessly derive more enjoyment out of your resources than you

The Perils Of Populism

Posted by The Futility Monster on January 6, 2010 @ 11:20

Now who wouldn't get suckered in by such a great rate!

Yesterday we saw possibly the most impressive collection of signatures in the world turned into a rather annoying little stumbling block for the British and the Dutch.

In Iceland, a quarter of the country’s population signed a petition appealing to their President to do something about a bill that had narrowly passed Parliament.

Over here, our government was very pleased at the progress of that bill. Indeed, many people here would consider it only fair. It requires Iceland to pay back several billion pounds to the British and the Dutch governments, who had bailed out failed Icelandic banks when the banking crisis was at its highest. Declaration of interest: I was one of the fools who had money in Icesave. Whoops. But thanks to Alistair Darling, I got it all back. I won’t hear a bad word said about that man!

But of course, the British government wasn’t just doing it out of the goodness of their own heart. They wanted the money paid back eventually. And so they got just a little bit excited when the newly elected centre-left Icelandic government pledged to pay back their debts and come in from the cold, joining the warm embrace of the EU.

It seems, however, that a significant chunk of the Icelandic people don’t want to pay back their debts. They have a point. Why should they pay for the actions of a few disgraceful individuals who have bankrupted their country with their stupid gambles?

In many respects, it’s like the bonus crisis over here multiplied by thousands. Everyone moans about why government owned banks are paying bonuses, but really they’re a mere trifle compared to the size of the companies themselves, and the size of our taxpayer base. Bankers bonuses are small change to the Exchequer.

Meanwhile, tiny little Iceland, population 320,000, has to pay back a much greater sum. That’s gonna be a lot of pain for their people.

And so they got angry. Their President joined them, sensing an opportunity to hog the limelight in a debate that has torn the country apart and turned opinion once more against joining the EU.

That’s a shame. Iceland would have been a fine member of the EU, but I will be amazed if it happens now.

And all because of a referendum. People power at its ultimate. The only expression of direct democracy there is.

It may sound anti-democratic, but sometimes issues are just too complex to be put to a vote. Once you start, where do you stop? Why referendums on some issues and not others?

Referendums, since time immemorial, have only ever been used to get politicians out of a hole, or used by those who are certain to win as a rallying cry to bludgeon the advocates of things that are often unpopular but usually necessary.

And so it has been proven again in Iceland. A populist reaction to an event that the country really has to bite the bullet over – because if they don’t they are going to lose a lot of friends, especially at the IMF who have bailed the whole economy out – culminates in a referendum and a chance to kick the government, boxing them in and leaving them unable to deal with a crisis.

It’s the classic case of principles versus politics. On the one hand, my principles are with the Icelandic people. On the other, if they don’t suffer in the short-term, they will never recover in the long-term.

Referendums are difficult. The idea is good, but the practicalities are hard to overcome.

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2 Responses to “The Perils Of Populism”

  1. Neil Craig said

    Had the Icelandic banks actually given aguarantee in advance to bail out any failing banks? It is not a question I have seen our media ask which suggests the answer is no. If so why should they be more obligated to pay off these debts than our government is to pay the hotel bills of anybody who gets stuck when their travel agent folds?

  2. Well, there was an Icelandic deposit protection scheme which, as far as I’m aware, couldn’t meet any of the obligations placed upon it. When the Icelandic banks were nationalised, that requirement fell to the government. Of course, they could choose not to pay it, and they might then suffer the kind of isolation I hinted at in the article.

    That’s not to say that that obligation is the same size as the eventual amount the Icelandic government will be refunding. After all, the British government compensated many people whose deposits were greater than the maximum under the scheme.

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