In February this year, Iceland jailed four of its rogue bankers for market manipulation and for defrauding ordinary people. No, the heavens did not fall. Thunder and lightning did not strike. The wrath of God did not descend upon the people of Iceland. On 13 February 2015, Reuters had reported:
Iceland’s Supreme Court has upheld convictions of market manipulation for four former executives of the failed Kaupthing bank in a landmark case that the country’s special prosecutor said showed it was possible to crack down on fraudulent bankers. Hreidar Mar Sigurdsson, Kaupthing’s former chief executive, former chairman Sigurdur Einarsson, former CEO of Kaupthing Luxembourg Magnus Gudmundsson, and Olafur Olafsson, the bank’s second largest shareholder at the time, were all sentenced on Thursday to between four and five and a half years. –
In less than four months since this happened, Mathew Yglesias reported in Vox Business and Finance two days ago that the economy had in the meanwhile done quite well:
Yesterday, Iceland’s prime minister, Sigmundur Gunnlaugsson, announced a plan that will essentially close the books on his country’s approach to handling the financial crisis — an approach that deviated greatly from the preferences of global financial elites and succeeded quite well. Instead of embracing the orthodoxy of bank bailouts, austerity, and low inflation, Iceland did just the opposite. And even though its economy was hammered by the banking crisis perhaps harder than any other in the world, its labor didn’t deteriorate all that much, and it had a great recovery.
For those who have seen the brilliant documentary film Inside Job, which exposed the unscrupulous game played by the bankers and the financial oligarchy in defrauding millions of ordinary people and eventually triggering of the financial crisis in the US and the world at large, the story of Iceland’s descent into the dystopic neoliberal world must still be fresh in their minds. The entire story need not be repeated here. Iceland not only eventually arrested the rogue bankers, it actually prioritized jobs and the result has been remarkable. So, says the Vox report cited above:
There’s no free lunch in life, and no country recovers from a severe recession without some bad things happening. But while most developed countries have gone through years of grindingly high unemployment paired with super-low inflation, Iceland did the reverse. It let the value of its currency tumble, which naturally brought about higher prices. But as a result, the country’s export industries rapidly gained ground in international markets. Unemployment rose, but maxed out at a modest 7.6 percent before falling steadily to a very low level. In the US and Europe, the priority has been on low inflation to protect the asset values of the wealthy. Iceland prioritized jobs, and it worked.
Interesting. There is no free lunch, as neoliberals never tire of repeating, convincing lesser mortals about this immutable law of economics. But who are the ones having a free lunch? It turns out, not the workers working for barely subsistence wages. They are always the big corporations and the banks. And it is time their bluff is called. Someone, somewhere had to show that you can arrest them, try them as criminals and prioritize jobs during a recovery – with nothing short of spectacular results. And Iceland has done that for starters. Meanwhile, our own Government of Achchhe Din has approved, just yesterday, a package of Rs 6000 crores to bail out rogue sugar mill owners who owe Rs 9, 500 crores in Uttar Pradesh alone to the farmers from whom they buy sugarcane. Major resentment had surfaced among Western UP farmers, many of whom had voted for the BJP in the parliament elections, highlighting the fact that many farmers’ suicides in the region were not simply due to crop destruction following on untimely rains but due to crores of unpaid dues by sugar mills. So the Modi Cabinet has now taken this ‘pro-farmer’ step of providing the same defaulting mills soft loans which will have a one-year moratorium on repayment – and to cap it all, they will be interest free – the government will pay the interest. From your money and mine. Talk of a free lunch! Here is Mr Gadkari, talking of how this subsidy will be paid to the mill owners, from a report in the Economic Times:
“Mills that would have cleared more than 50 per cent or 50 per cent of cane dues by June end would be sanctioned interest-free loans. The subsidy burden will be borne by the government for one year and would be funded by the food ministry’s sugar development fund,” Transport Minister Nitin Gadkari said after the Cabinet meeting on Wednesday.
But the Free Lunchers aren’t satisfied! Says Mr Abinash Verma, Director-General Indian Sugar Mills Association, in a report in the Indian Express:
“Why should mills take fresh loans when they are already sitting on huge piles of debt? Even if the Centre were to bear the interest burden, from where are we going to generate the profits to be able to repay the Rs 6,000 crore loans, that too within a year,” said Abinash Verma, director-general, Indian Sugar Mills Association (ISMA). According to Verma, the package does not address the basic problem of surplus sugar stocks and depressed ex-factory prices. “This had resulted in accumulated cane dues of around Rs 21,000 crore for the 2014-15 season (October-September),” he said.
Interesting, once again. So you buy the cane from the farmers, produce the sugar and defer the payment to farmers till your costs and profits are fully recovered! Till then the farmers can only stare in at the tables where free lunches are being provided, all in the name of paying the farmers!