Iceland's bosses in hot water

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As the collapse of Iceland's economy threatens workers' living standards there, Sarah Ensor reveals how the Icelandic working class met the depression of the 1930s with militant resistance.

The Financial Times described Iceland as a "reasonably large banking system with a small country attached". Yet until the 1990s this was a small economy based on fish and cheap geothermal energy. Between 1940 and the 1970s the former Danish colony halfway between Moscow and Washington built valuable relationships with both states. Standards of living were high and inequality relatively low. Then a new breed of entrepreneurs emerged. The most famous - Jón Ásgeir Jóhannesson, owner of the Baugur investment group - made $400 million from buying and selling breweries in the wreckage of the old USSR. Meanwhile in Iceland, Davið Oddsson, prime minister between 1991 and 2004, led the deregulation of the capital markets, privatisation of state-owned companies and the banking sector. Today he heads Iceland's central bank. Jón Ásgeir bought 45 percent of Landsbanki, using it to borrow massively to buy shares in House of Fraser, Hamleys and the Iceland supermarket chain in Britain. In ten years a few individuals aided by neoliberal ideologues in government turned Iceland into a gigantic hedge fund.

As the crisis gathered speed in October, prime minister Geir Haarde said, "The danger is real that the Icelandic economy could be sucked, along with banks, under the waves and the nation would become bankrupt." Its largest banks have been nationalised, its currency has dived and inflation soared. Despite looking for help from the US, Britain and Europe, only Scandinavia came up with any money, and a very expensive loan was asked of the Russians. Haarde said, "We have not received the kind of support that we were requesting from our friends, so in a situation like that one has to look for new friends." The old friends turned nasty as Gordon Brown used anti-terrorist legislation to freeze the assets of Icelandic banks in Britain and demand investors' money back.

Guðmundur Unnarson, a paint factory worker in Reykjavik, said "People are angry at the government and Björgólfur Guðmundsson, the head of Landsbanki. We are angry about the shareholders being wiped out, which means people like my disabled father have lost 20 percent of their pensions. We are angry about Jón Ásgeir and Jóhannes [his father and joint owner of Bonus supermarkets in Iceland]. That bastard started a panic in the supermarkets when he said the pound was so high he might not be able to import food. Now we are angry at Gordon Brown for attacking Icelandic banks in Britain. If we gambled money in Britain and lost it we wouldn't expect British people to pay it back." Britain and the Netherlands have since had to lend Iceland the money to repay savers.

Militant resistance

Despite the rhetoric that this is a crisis for all Icelanders, the ruling class does not intend to bear the brunt. As Haarde spoke of an "inevitable cut in living standards", the International Monetary Fund (IMF) was already in town. It will prescribe a cure of cuts in wages, public spending and jobs. The trade unions immediately urged pay restraint in the national interest. Trade unions here have a tradition of expecting wages to follow profit but there is another Icelandic tradition of militant resistance. In the 1930s, in the depths of world depression, a small Communist Party led mass campaigns against wage cuts that shook Iceland for the rest of the decade.

Capitalism came late to Iceland. In 1900 this large, wind swept, thinly populated island that touches the Arctic Circle, was made up of farms with small seasonal fishing stations. Even the capital, Reykjavik, was just a collection of farms with one or two merchants. But European capitalists saw another Klondike in the herring-rich waters of the north Atlantic made accessible by the new steam trawlers. For example, in 1900 Siglufjorður was a valley of six farms with 150 inhabitants. By 1916 its herring factories were processing 100,000 barrels of salted fish and employed thousands of workers from across Iceland, Europe and the Baltic states. Foreign workers brought with them experiences of struggle. On one occasion a newly arrived boatload of workers realised that they had been hired to break a strike. They refused to land and joined the blockade of the harbour. Siglufjorður became a centre of combative trade unionism and one of the strongholds of the Communist Party when it finally split from the Social Democratic Party (SDP) in 1930.

By 1932 communists were leading a united campaign against wage cuts and poverty involving trade unionists, the SDP and a mass of ordinary workers. Wages had fallen in rural areas where organisation was weak but in 1930 to 1931 communists organised against violent employers to establish union wage rates. In Reykjavik - now with 28,000 inhabitants - where 25 percent of working men were unemployed, two decisive events meant that for the rest of the 1930s employers and state authorities were on the back foot against a militant workers' movement.

In July 1932 the town's council decided that wages would have to be cut despite months of protest. As a concession to popular anger, a "dole-work" programme began in the summer for 200 men. It was mostly pointless quarry work without any thought of building anything, or even repairing existing roads. The men worked for around six hours a day for an hourly rate of 1.36 krona (kr), but only men with the largest families got work most days in the week. Even with work, 8 or 9 kr a day meant slow starvation. Dagsbrún, the Reykjavik General Workers Union and the Seaman's Union presented the council with their demands, which included a scheme for work creation, as well as development and free food, gas and electricity for the unemployed who should then not have to pay tax. The council's majority response was to insist that wage rates were too high and men were unemployed because the unions were preventing them from taking the available jobs at reasonable wages. One very rich councillor - like an aged Marie Antoinette - opined that when he was young and times were hard he had managed by eating catfish instead of cod.

Outside the meeting the police battered people struggling to get in to hear. To add insult to injury the authorities were using the hated Extras, so-called "white troops" - unemployed workers hired as police assistants to attack picket lines. Half starved men demanding a right to live fought back. In the following days workers were jailed for riot, incitement and refusal to answer the court's questions. A Danish King's Decree of 1795 was used against five trade unionists and communists to jail them "at his majesty's pleasure on bread and water". One of the five, Indriða Garibaldardóttir, refused to recognise the court's legality as it was being used by the ruling class as a political weapon against the working class. She pointed to the recent banking scandal when government ministers had investigated and then found themselves not guilty. She refused to eat any king's bread, started a hunger strike and was joined by the other four.

Hundreds joined a protest march and every night there was a mass meeting outside the jail with a further march of 4,000 people. A few days later the authorities, too nervous to hold them any longer, released the five into the seething atmosphere of Reykjavik.

The campaign continued through the summer at union meetings and in the communist and SDP newspapers. Dagsbrún and other unions - including Framsókn, the Reykjavik women workers' union - held a mass meeting and protest march. Speakers from both the SDP and ICP urged workers to go to Gúttó, the Good Templars House where the council was to meet, to block the plan on 9 November. The wage cards were already printed up with the new rate.

Shocked ruling class

By ten in the morning thousands of angry people filled the square and the streets outside Gúttó. SDP councillors spoke against the wage cut and the Conservatives were heckled and jeered. When lunchtime was called Guðjón Benediktsson, the leader of the Communist Unemployed Workers Committee, demanded that the wage cut be thrown out and the councillors stay until they agreed. The police escorted the Tories out with the promise that everyone in the building would be allowed back in after the break. The only woman councillor, Guðrún Jónas, did not come back, nor did the despised Extras who had been deployed in the morning and seen that they were massively outnumbered.

After lunch only a few of the protesters got back into the building before the meeting restarted. A loudspeaker had been set up outside to relay the meeting so people outside could hear when the police attacked the audience "to clear the entrance". The response that followed shocked Iceland's ruling class. In an explosion of anger the protesters chased the councillors out, smashed the windows of government buildings all over town and fought pitched battles against the police. Gúttó, as the symbol of the authorities' class hatred, was wrecked. Hundreds came to a meeting that night to hear that the wage cut had been overturned. At that moment of victory they did not press their demands, but the arrests made after 9 November had to be abandoned a few days later.

The authorities spent the rest of the decade blaming each other for the battle of Gúttó. A united front had "stood up in the hair" of the Conservatives and beaten back a government that then, as now, argued financial crises had a life of their own and were not an inherent characteristic of capitalism itself.

In the boom of the past ten years ordinary Icelanders have struggled with low wages, using their credit cards to make ends meet, and lived with their grown up children who cannot find affordable housing. Like the rest of us, they are being blamed while the rich don't even lose their bonuses.

Last month hundreds protested outside Iceland's central bank. They chanted "Davið out!" at Davið Oddsson, who could be seen watching from the windows above, and they sang the Internationale. In 1932, with an underdeveloped economy and much smaller population, the Icelandic left shook the foundations of the state. They can do it again now to defend living standards in the face of an ideological onslaught that claims that the architects and victims of this crisis are in the same boat.