Thursday, May 19, 2011

Parallels Between Iceland and the U.S.?

Reyjavik from our trip last summer.
Many of these condos are completely
empty as far as we could see.
I’m fascinated by this New York Times article. Not because I was in Iceland recently or because the country is an interesting symbol of how tightly (and weirdly) interconnected the world is (e.g. some municipalities in the U.K. lost significant amounts when Iceland’s banks collapsed). No, it fascinates me because I see parallels with the U.S.

On paper, it’s hard to see much in common between the two countries. Iceland is a small and relatively ethnically homogenous island nation of 300,000 with a unique natural environment and history. The United States is the world’s biggest economy, its only (for now) superpower, with 300 million people and incredible diversity (in environment, culture, outlook – you name it). But tell me that these quotes from the article don’t sound familiar:

During the boom years, Iceland became a nation obsessed with banking. “Everyone was working for the banks — from the physicists to the philosophers,” one Icelander told me. I met two women in their mid-20s who said that when they graduated from college, virtually all of their classmates were jockeying to get into finance, and for a brief spell, they both became bankers. I asked one of the women, who trained to be an engineer, if she ever paused to consider whether she really wanted to be a banker. “It was just the coolest,” she recalled giddily. “Everybody was like, Yeah, give me a high-five!”

Sound familiar? Finance has become dominant in the U.S. While the finance sector itself accounts for, depending on how you slice the data, around 10% of the economy, its fingers extend into virtually everything. And it disproportionately attracts smart, capable people. Our top graduates are now working on Wall Street, rather than studying engineering or science, or entering government service (which is still a desirable career for smart people everywhere but here, it seems). And they’re not, for the most part, helping the finance sector fulfill its vital role of matching capital with companies needing investment. (Anyone who thinks that’s the primary role of Wall Street anymore is smoking crack.) They’re developing new ways to manipulate numbers and transfer risk (which doesn’t go away but just slops along until it lands, invariably with a splat, on someone else).

When money was easy, he said, “innovation was at a minimum in the country.” The prevailing sense was that it was a waste of time to invent things yourself when you could just “buy innovation from someone else.” The boom, Gudjonsson concluded, “made us lazy thinkers.”

I don’t think we’re as far gone as this, but we’re on the way. We’ve certainly become “lazy thinkers,” distracted by fluff and triviality, uninformed about the world and even our own country. Even if much of what we buy was actually made somewhere else, it used to be designed here. Not so much anymore. Bush 43 wanted to turn us into an “ownership society.” We seem well on the way, if by that you mean a society in which a handful of people own everything and the rest live on the scraps. Sounds suspiciously like landed gentry to me.

I asked Arnason if, like so many Icelanders, he had taken out large loans from the bank. “I thought there was something wrong with me because I wasn’t taking millions in loans,” he admitted. “Everyone had brand-new cars and built big summer homes and boats. You felt like a loser or something if you didn’t have it. This is the feeling that many regular people felt if they weren’t making trillions, but maybe we weren’t so stupid.”

Just look at the debt loads we’re carrying and the almost non-existent personal savings rate. The problem isn’t just that people buy more than they can afford: as a society, we buy more than we need, at tremendous cost to the environment and to our personal health and wellbeing.

Icelanders seem to understand that they’ve got a problem, and are trying to do something about it. Do we even get it here?

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