Iceland’s revenge

At the height of the credit boom, three Icelandic banks built up a huge trade by offering higher interest rates on deposits in Britain especially, but also in some other European countries, notably the Netherlands. At one time these banks had liabilities much larger than Iceland’s GNP. Their owners bought football clubs and the like. Iceland has a legally ambiguous relationship to the European Union and it wasn’t clear which regulatory bodies were responsible for supervising these activities.

When the crash of September 2008 occurred, the British government used emergency anti-terrorist legislation to seize the banks’ assets. Many local government authorities were compromised by having taken advantage of the higher interest rates. The Icelandic economy went into freefall, but the people accepted draconian austerity measures as a way back to solvency. Then the British and Dutch governments, backed by the IMF, insisted that Iceland’s taxpayers should meet the full cost of the defaulting banks’ liabilities.

This would have loaded a debt of some 30,000 euros on each household and would have killed off any hope of economic recovery. The Icelanders (who are descended from Vikings and not so long ago defeated the British in a war over the cod fisheries) revolted and refused to pay up, pointing out not unreasonably that they had not licenced these banks to operate with dodgy finances abroad, but the British government regulators had.

Then last week the Eyjafjallajokull volcano erupted spilling a cloud of ashes several miles high into the atmosphere which then migrated inexorably east, with the earth’s rotation, towards Britain and Northern Europe. At the same time the Obama government charged Goldman Sachs with fraud. Anyone needing a natural symbol for the economic catastrophe unleashed on the world by the unprincipled behaviour of the banks soon found one in the Icelandic volcano cloud that immediately shut down air traffic in much of Europe.

This happened once before in Indonesia during the 1960s, but our reliance on air transport was much less then and Indonesia is not Northern Europe. I was in Turin for a workshop late last week and had chosen to travel by train from my home in Paris; so I was not directly affected. But I soon ran into plenty of people who were, notably the Brits who had to get across the Channel, while the Eurostar trains and ferries were soon booked up. Many people were stranded at airports. The trains saw a 50% increase in passengers overnight.

We are used to the inconveniences of air travel — the bag that gets lost, the delays for fog or technical trouble, occasionally the need to stay in an airport hotel overnight. Strikes make it worse. For a while 9/11 paralysed transatlantic flights, but not on the scale of this disruption. Gradually it became clearer that this was not a temporary weather condition like a thunderstorm. The last time this volcano sent out a cloud of ashes, it lasted for eighteen months! Starting from irritation over missing a meeting, the public mood quickly shifted to anxiety about the immediate and medium-term future of air travel as we know it.

A Financial Times journalist offered this reflection on his own inconvenience:

“After a while it began to occur to me that my gathering gloom might have less to do with missing my family and several appointments, than with the unfamiliar sensation of being thwarted. Wealth and privilege has made babies of us all. Of course I should be able to get anywhere in the world in 24 hours! There is always a flight out. There is no logistical problem that cannot be solved with a mixture of ingenuity and money. Yet the volcano seemed strangely indifferent to the fact that I have a large credit limit on my Visa card. Its effects are surprisingly democratic.”

My conference in Barcelona this week was cancelled. I had arranged for a small family holiday and visit to friends. No more. In the process we learned even more about the scale of the disruption and the unpleasant alternatives facing us, including the likelihood that we would lose the cost of my family’s air tickets. But we were safe at home and a lot of people were really suffering by now.

The cracks in the relationship between the government authorities and the air companies soon surfaced. The latter have been losing a lot of money and were not in robust financial shape to start with. They immediately started lobbying for a GM-style bailout and of course drew attention to the treatment the banks had received. They accused the air transport regulators of operating a blanket ban on flights without scientific evidence. They ran test flights and claimed that the negative effects of the volcanic ash were exagegrated. One plane however had a stalled engine in a test flight…

The British government threatened to use the Royal Navy to get stranded passengers across the Channel. Governments everywhere instructed the airlines, when limited flights were resumed, to clear their airports first and bring their own nationals home second. The recriminations over high-handed political interference have only just begun. There is a general election in Britain in two weeks. The stakes are high. Already Gordon Brown has leapt into the Goldman affair with denunciations. The political class is running scared on this one and ought to be.

The two levels of public discourse are intertwined. Lat night the British government opened the airports, using manufacturers’ advice as a pretext. A spokesman for the pilots’ union said that this involved appalling risk. I don’t know what is happening in France and Spain today, but my ex-host warned me against flying this week in case the conditions of the volcanic cloud changed again. This story is not just a 48-hour news wonder.

It is astonishing how many fundamental questions about our society and its relationship to the material environment have been highlighted by the volcao incident. Suddenly we realise that our habit of jumping onto a plane to go anywhere we want has limits. Trains are much less vulnerable and are ecologically sounder than road transport. Virtual communications do not bring any such risk of disruption (but maybe others instead). Some specialist fruits, vegetables and flowers have disappeared temporarily from the market. Kenyan farmers operating just in time for European supermarkets, have been devastated.

Surely this crisis will feed into public awareness of the issues raised by global warming and the vulnerability of our societies to the potentially adverse material consequences of our interdependent actions. It is what Mauss would have called a “total social fact”, illuminating everything at once and in ways that do not improve our confidence in the status quo.

I have long since given up the artificial division between “fieldwork” and “writing up”. My anthropology is a 24/7 year-round project, absorbing and processing whatver happens to me and the world wherever I am. Maybe it is akin to journalism. There are other ways than blogs of reaching out to an audience and I use most of them. But without this blog, I doubt if I would have written about an event that I do believe has enormous anthropological significance.

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Category: Economy