We’ve been in a recession since 2008, and there has been a lot of talk about how we can return to the prosperity of the 1990s. Many proposals involve methods which made sense at one time but have failed to yield the necessary results. So maybe it’s time to look at what has actually worked elsewhere and see if there are any ideas which might be useful for us.
One of the countries which had a much greater economic downturn and is slowly returning to prosperity is Iceland with a total population of 319,000. Actually, to call what Iceland experienced a “greater economic downturn” is an understatement. They had a complete meltdown of their economy. In fact, relative to the size of their economy, they had the largest economic collapse suffered by any country in world history, according to Wikipedia.
Iceland is a small island nation which had a stable economy and was recognized as having exceptionally high quality of life. The economy had a solid foundation based on traditional industries, such as fishing, mining and manufacturing. In the 1990s, Iceland engaged in vigorous free-market programs, which produced strong economic growth. This led to a rapid rise in the standard of living for its citizens and consumer demand fueled further growth.
This all came to an end in 2008. The country’s three largest commercial banks began to teeter on the brink of insolvency when they experienced trouble refinancing short term debt, and there was a run on deposits, according to Wikipedia. Iceland moved quickly to nationalize the three largest banks and received emergency loans from the International Monetary Fund in order to stabilize the economy. But unlike the U.S. with its population of more than 330 million, they didn’t bail out the banks. In fact, they indicted the prime minister and banking officials. Today, home values have almost recovered to what they were in 2008 before the crash, and the national currency has stabilized.
No one is suggesting that everything in Iceland is perfect yet, but consumer confidence is increasing and their economic prospects seem hopeful. Iceland was the first country to experience the type of economic crisis gripping much of the world right now. It’s a small country with a tiny economy, so every aspect of their experience may not apply to larger countries. But there are some important lessons to be learned.
Even the most skeptical observers have begun to acknowledge that Iceland’s turnaround has been nothing short of a miracle. Perhaps we have something to learn from this tiny island nation. In contrast to Iceland, we gave the banks a $700 billion bailout and failed to hold anyone in the banking industry accountable for the mess they created. Now, banks are having record profits and handing out massive bonuses to the very people responsible for the banking crisis. But in Iceland, they were indicted.
Let’s face it. The tradeshow industry isn’t going to return to prosperity until we improve the economy. The economy isn’t going to improve until we get money into the hands of middle class consumers. Today, millions of middle class homeowners in America are still paying on mortgages in excess of the worth of the homes. If they were to receive the type of mortgage relief from the banks that the banks got from these same taxpayers, this money could be used to fuel economic growth through consumer spending.
Middle class consumers are the true “job creators” in our country, despite what many at the top want you to believe. Middle class spending has been the foundation of our economy since the very beginning, and every recovery has had middle class spending at its core. The difference between Iceland’s response to their collapse and ours is they put the needs of the average citizen first when formulating policy. We did the exact opposite. We rewarded the criminals and punished the victims.