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Financial Crisis and Protest in Iceland, October 2008–January 2009

0 Comments 🕔22.May 2014

This article is part of our Enough! feature on Europe’s exploding social movements.

barricades

by Jón Gunnar Bernburg

In October 2008, after years of phenomenal economic growth, Iceland suffered an unprecedented financial collapse. Triggered by the global bank crisis, the country’s three largest banks (comprising more than 80 percent of Iceland’s banking system) went bankrupt in less than two weeks. The bank crash, which is usually referred to in Iceland as ‘the collapse’ (hrunið), posed serious danger for the country’s economy, threatening state bankruptcy and creating widespread economic harm, as well as confusion and anxiety among the public. The collapse also triggered enormous collective action. Activists and critics organized a series of outdoor and indoor public meetings in Iceland’s capital city, Reykjavík, and eventually, on January 20, 2009, large-scale, South American-style cacerolazo demonstrations (banging pots and pans and other utensils from one’s kitchen) broke out. Protesters gathered on a national symbolic square located in front of Iceland’s parliament, banging utensils from their kitchens, and a minority of frontline protesters engaged in vandalism and symbolic acts of threat and confrontation with riot police, who formed a protective lineup guarding the parliament building. At times, police used clubs and teargas to prevent groups of aggressive protesters from damaging property and bursting into the parliament and other state buildings. The demonstrations went on for several days, creating enormous pressure on the government to meet the key demand of protesters, namely, to resign. The government did so on January 26, six days after the demonstrations broke out, and a new coalition government was formed, announcing elections that spring. The protests thus ‘successfully’ brought down the ruling government of Iceland, a rare occurrence in an affluent democracy.

Studying the protests

The Icelandic demonstrations provide an interesting case for studying how crisis – the global crisis in particular – can trigger popular protest. Iceland was one of the first and hardest-hit victims of the global crisis, and thus the protests (beginning in October 2008) preceded most of the protests that the crisis has since then triggered in other countries (e.g., Greece and Spain). Despite Iceland’s weak protest tradition, public participation in the Icelandic protests was enormous, as was the level of public support. I have studied participation in the January 2009 pots-and-pans demonstrations by surveying a representative sample of adult Icelanders (N = 610).[1] The findings indicate that about one quarter of adults in the Reykjavík area attended these protests, and that a good majority (57 percent) supported the actions of the protesters. Participation in and support for the Icelandic demonstrations of January 2009 thus are comparable to the largest protests that have broken out due to the global crisis, such as the anti-austerity protests in Greece in 2010.[2]

In addition to survey work, I have conducted extensive groundwork to examine how the financial crisis ended up triggering large-scale protest in Iceland and why so many participated in the protests.[3] Guided by social movement theory,[4] my starting point has been to assume that crises and other disruptions can lead to large-scale collective action only through purposive actions of individuals, who often perceive an emerging situation entailing increased prospects for mobilizing others in challenge. Accordingly, I have interviewed protest entrepreneurs as well as common protesters, and conducted discourse analysis of protest speeches and other texts (media articles, social media) and performances by critics and activists and the ruling political leadership in the post-crisis period.

The groundwork has led me to argue that an important reason why the crisis translated into large-scale protest is that it resulted in a perception of political opportunity among left-wing critics and social activists in Iceland. Iceland had, since the early 1990s, been led by a large right-wing political party, the Independence Party. Under its leadership, the authorities had privatized the country’s three largest banks in the early 2000s. The banks had then grown tremendously, especially internationally, stock values had risen exponentially, and foreign capital had flowed into Iceland’s tiny economy (Icelanders number about 320,000), raising Iceland’s currency, the króna, as well as the public’s standard of living. Offering easy loans to the public, the banks had bolstered public consumption, thus increasing the debt of optimistic households and businesses in Iceland. But, the banks’ growth had been financed by borrowing on international financial markets, and by 2007 the banks had accumulated foreign liabilities amounting to more than 10 times the size of the country’s domestic product, creating a systemic risk and making the banks vulnerable to the global bank crisis of 2008. The tiny Icelandic state was unable to bail out the three banks, which had become large international enterprises. The banks all went bankrupt in less than two weeks, in early October of 2008.

Protesters in 2009 in downtown Reykjavik

Protesters in 2009 in downtown Reykjavik

So when the crisis struck Iceland, the public suddenly realized that the banks had been able to take enormous risks on the public’s behalf; accumulating foreign liabilities and posing serious threat to Iceland’s state and tiny economy. Not only was Iceland forced to apply for assistance to the International Monetary Fund due to a serious shortage of foreign currency, but alarming liability claims were made by powerful foreign entities, including the governments of Britain and the Netherlands. That the authorities had in the years leading to the crisis celebrated the growth of the financial sphere, outspokenly dismissing repeated warnings of danger, greatly undermined their credibility and made them highly vulnerable to critique. At the same time, the crisis disrupted the public’s taken-for-granted assumptions about its social reality,[5] shattering its economic expectations[6] as well as trust in societal institutions, thus creating an emotionally charged, shared demand for (credible) explanation (many of my interviewees recall feeling utterly confused and experiencing ‘total chaos’ at the time).

My interviews illustrate how critics and social activists perceived this situation as an opportunity for their voices to be heard and thus to mobilize a challenge against Iceland’s long-standing right-wing political leadership. Their views (and occasional small-scale protests) had had little leverage in the pre-crisis era of economic boom, rising standard of living, and invasion of market logics into culture (e.g., representatives of the new left party in parliament – Left-Green Movement – were often criticized for being ‘against everything’). But, now they had their ‘told-you-so moment’ (as one of my interviewees puts it), and the authorities’ attempt to define the crisis as an ‘international financial storm’ (in the words of the Prime Minister) came to be met with forceful challenge.

Within a few days of the bank crash in October 2008, activists and critics thus began to organize public meetings, calling on the public to attend them and discuss the situation. Many were attracted to the meetings because they hoped to gain perspective on a fearful and confusing situation. At the meetings, which were often attended by several thousand individuals, speakers blamed the country’s political leaders for the crisis, and many participants carried signs with anti-government slogans. Critics appealed to and amplified pre-existing critiques that had been directed at the ruling political leadership in the years leading to the crisis (but had not moved the public in a period of growing prosperity). Specifically, the message, which would echo in the mass and social media, was that the ruling authorities’ long-standing neo-liberal agenda and its corrupt practices and incompetence had made Iceland so vulnerable to the global crisis. Thus, the crisis was defined not merely as an economic crisis, but as a moral crisis manifesting serious deviations from democratic ideals and an urgent need for remedy.

As it became clear that the ruling government was not going to step down – government leaders insisted on blaming forces outside of government – a moral call for protest emerged, with the manifested aim of forcing the government to step down to make way for democratic reform. The emerging discourse evolved and became action-oriented; protest spokespeople threatened more aggressive protest unless their demands were met. Moreover, the meetings became a public forum for radical activist groups (e.g., ‘anarchists’) to perform acts of contention and civil disobedience, associating the meetings with threats of disorder and contributing to growing anticipation in Iceland about large-scale demonstrations.

My empirical work on individual protest participation underscores the role of this emergent (and strategically constructed) discourse, and the underlying ideologies and interests, in mobilizing individuals to participate in the January 2009 demonstrations. My qualitative interviews with protest participants illustrate a strong alignment with a discourse blaming political corruption and unfettered neo-liberalism for the crisis, and a strongly felt moral distain for the unwillingness of the leadership to resign from power. Moreover, my previously mentioned survey work confirms that protest participants were many times more likely than non-participants to believe in the reality of political corruption in Iceland and to be in alignment with left-wing political ideas and parties, while socio-economic status and personal economic difficulties had very little effect on participation.

In short, the financial collapse in Iceland both undermined government legitimacy and resulted in a collectively felt disruption in taken-for-granted reality. The situation created a strong perception of political opportunity that inspired activists and left-wing critics to mobilize others in a challenge against the country’s long-standing right-wing political leadership. They did so by organizing a forum (public meetings) to challenge the authorities’ attempt to blame the crisis on global forces. The discourse that emerged at the meetings and elsewhere appealed to (and amplified) pre-existing left-wing discontent and critiques of the political leadership, framing the crisis as a democratic crisis, rather than an economic one, and thus constructing a moral calling for reform by means of protest. The public turned out to be highly receptive to these efforts; a large part of it participated in demonstrations, bringing down the country’s ruling government.

Once the protests had brought down the government, mass mobilization vanished and institutional politics took over in Iceland. And, to be sure, while the protests were successful in the sense that the manifested demands were met, their lasting effects on Icelandic politics have disappointed many of those who had hoped for change and democratic reform. New political parties have been formed, but that development has actually led to disintegration on the political left in Iceland. After the 2009 elections following the protests, left-wing parties won big and were able to form a majority government. But now, five crisis-stricken years later, Icelandic voters have reestablished the rule of the ‘old’ right-wing political leadership. Perhaps this underscores the momentary nature of political opportunity as well as the limited ability of a tiny nation to change in a globalized world. At any rate, today it is politics as usual in Iceland.

 

Jón Gunnar Bernburg is a professor of sociology at the University of Iceland. His research has focused on topics across several subfields of sociology, including crime and deviance, social theory, social psychology, medical sociology, and social movements. His current work focuses on the aftermath of the financial crash in Iceland in 2008. His work has published in leading scholarly journals, such as Social Forces, Sociology, and Criminology.

This article is part of our Enough! feature on Europe’s exploding social movements.


[1] Jón Gunnar Bernburg, “Overthrowing the Government: A Case Study in Protest,” in Gambling Debt: Iceland’s Struggle with the New World Order, ed. Gísli Pálsson and Paul Durrenberger (Boulder: University of Colorado Press, forthcoming).

[2] Wolfgang Rudig and Georgios Karyotis, “Beyond the Usual Suspects? New Participants in Anti-Austerity Protests in Greece,” Mobilization 18, no. 3 (2013): 313–30.

[3] Jón Gunnar Bernburg, and Anna Soffía Víkingsdóttir, “Political Opportunity, Framing, and Mobilization in Iceland’s Post-Crisis Protests, October 2008 through January 2009,” (unpublished manuscript).

[4] See Comparative Perspectives on Social Movements: Political Opportunities, Mobilizing Structures, and Cultural Framings, ed. Doug McAdam, John D. McCarthy and Mayer N. Zald, (Cambridge University Press, 1996); and Contention in Context: Political Opportunities and Emergence of Protest, ed. Jeff Goodwin and James M. Jasper (Stanford, CA: Stanford University Press, 2012).

[5] For theory, see David A. Snow et al., “Disrupting the ‘Quotidian’: Reconceptualizing the Relationship Between Breakdown and the Emergence of Collective Action,” Mobilization 3, no. 1 (1998): 1–22.

[6] On shattered expectations and distress in the Icelandic crisis, see Berglind Hólm Ragnarsdóttir, Jón Gunnar Bernburg and Sigrún Ólafsdóttir, “The Global Financial Crisis and Individual Distress: The Role of Subjective Comparisons after the Collapse of the Icelandic Economy,” Sociology 47, no. 4 (August 2013): 755–75.

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