Iceland managed to ruin its economy and currency using the same esoteric and foolish investment policies that have destroyed most of America's elite financial institutions. The most important lesson we can draw from this is that any nation that allows key industries to fall under monopoly or oligarchy is risking its sovereignty.Alcoa, the biggest aluminum company in the country, encountered two problems peculiar to Iceland when, in 2004, it set about erecting its giant smelting plant. The first was the so-called "hidden people" -- or, to put it more plainly, elves -- in whom some large number of Icelanders, steeped long and thoroughly in their rich folkloric culture, sincerely believe. Before Alcoa could build its smelter it had to defer to a government expert to scour the enclosed plant site and certify that no elves were on or under it. It was a delicate corporate situation, an Alcoa spokesman told me, because they had to pay hard cash to declare the site elf-free but, as he put it, "we couldn't as a company be in a position of acknowledging the existence of hidden people." The other, more serious problem was the Icelandic male: he took more safety risks than aluminum workers in other nations did. "In manufacturing," says the spokesman, "you want people who follow the rules and fall in line. You don't want them to be heroes. You don't want them to try to fix something it's not their job to fix, because they might blow up the place." The Icelandic male had a propensity to try to fix something it wasn't his job to fix.
Back away from the Icelandic economy and you can't help but notice something really strange about it: the people have cultivated themselves to the point where they are unsuited for the work available to them. All these exquisitely schooled, sophisticated people, each and every one of whom feels special, are presented with two mainly horrible ways to earn a living: trawler fishing and aluminum smelting. There are, of course, a few jobs in Iceland that any refined, educated person might like to do. Certifying the nonexistence of elves, for instance. ("This will take at least six months -- it can be very tricky.") But not nearly so many as the place needs, given its talent for turning cod into Ph.D.'s. At the dawn of the 21st century, Icelanders were still waiting for some task more suited to their filigreed minds to turn up inside their economy so they might do it.
Enter investment banking . . .
Smaller nations have little choice in the matter: their resources are limited in both quantity and variety. Consequently, the health of their economies are always going to be dependent on the actions of the Great Powers and international organizations.
Large nations have the option, if they have any sense, of keeping government power and economic power dispersed--note that the two are always linked--so that the mistakes, ambitions, or arrogance of an elite subculture cannot harm the greater polity. The United States failed to heed this sound advice in the case of our financial and automotive industries and in its national government. Our punishment is a collapsing heavy industrial sector, a catastrophic recession, and ten trillion dollars of national debt.