Iceland was lauded prior to 2008 on having clever entrepreneurs who could covert the nation from a remote island reliant on fishing to a major speculator in the realms of international finance. I remember the praise that was heaped on these financial wizards. The Icelanders bought a lot of UK companies and earned respect from overseas observers – although not from me. I was very wary of the alchemy that was being pursued. Conjuring up money and profits by playing the financial system does not fit my definition of sound business.
I like businesses based on innovation and genuinely novel ideas that seek to do something better or more efficiently. These companies deserve to prosper. It might be nothing more than the old and very successful business model built on community values that encourages hard graft from a loyal work force that are valued for who they are and not only the work they do.
The Iceland business model was more smoke and mirrors than hard graft. I was dealing with my parent’s affairs before the crash and was advised to put their savings into Icesave to get the best interest rate. It was advice I ignored. In hindsight, the UK government decided to back the deposits in Icesave so perhaps it was safe but it did not take much due diligence to see that this was a dodgy operation. It might have been better to let people learn the lesson that dodgy investments are to be avoided.
The UK government chose to bail out the savers and now seeks recompense from Iceland. An interesting idea has been floated by Gijs Graafland, the director of the Amsterdam-based Planck Foundation, that Iceland could pay back this debt in energy. Iceland straddles the fault line between North American and Eurasian tectonic plates and has good geothermal electric power potential. The power could be generated and passed to the UK through a new 750-mile underwater cable. That would be an innovative and useful idea.