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From collapse to Constitution

The Case of Iceland

outline

1) Crash

2) Background

3) Process

4) Substance

5) Method

6) Obstacles

1. Crash

• The Iceland crash was a big one, perhaps the biggest

financial crash on record

• Financial losses inflicted on creditors, shareholders, and depositors abroad as well as at home equal about 7 times Iceland’s GDP, a world record
• The three “big” Icelandic banks’ collapse in 2008 would, had they been American, make the list of the 10 largest corporate bankruptcies of all time in the US, a remarkable result in view of Iceland’s population of 320, - Owner of Landsbanki declared $750 million personal bankruptcy, including $500 million he owed to “his” bank

2. background

• Many new constitutions in Europe
• After the collapse of communism in 1989-

91, East and Central Europe adopted about 25 new constitutions, all except Hungary

• Most constitutions are written or revised

following economic or political upheaval because crises often trigger demands for a fresh start or expose flaws to be fixed

• In quiet times, people and politicians most often feel they have other things to think about - Exceptions: Sweden (1974), Canada (1982)

2. background

• Yet, financial crises have not in the past given

rise to new constitutions

• The Great Crash of 1929 was followed by changes in laws, erecting firewalls between commercial banking and investment banking - Glass-Steagall Act of 1933 in US plus SEC in 1934 - Had a constitutional amendment been better?
• Iceland is an exception
• Financial crash of 2008 had deep roots
• This is why the pots-and-pans revolution after the crash demanded, among other things, a new, or at least revised, constitution

2. background

• Iceland’s key constitutional problem is

the absence of effective checks and

balances that have made it possible for

the executive branch to grab too much

power from parliament and the courts

• Two examples

• On their own, two ministers decided to enlist Iceland in the “Coalition of the willing” invading Iraq in 2003 without any consultation with, or even possible recourse for, the parliament
• After Supreme Court in 1998 ruled that the system of fisheries management is discriminatory and unconstitutional, Court reversed its opinion in 2000

2. background

• Iceland’s constitution dates from 1944 when

Iceland separated from occupied Denmark

• Derived from Denmark’s (and Norway’s) constitution, with nationally elected president substituted for hereditary king, the Icelandic constitution was intended to be only provisional
• Hails from 1874, or rather ca. 1850
• Parliament promised to revise it, but has failed to do so since 1944 despite repeated attempts
• It took the crash of 2008 for the government to

give in at last and decide to convene a Constitutional Assembly to do the job

3. process

• Two main reasons for constitution written

by the people rather than by politicians and their lawyers, one local, one universal

• Parliament’s long-standing failure to deliver
• Constitution is meant to limit the powers of parliament and to lay out, e.g., the method by which MPs are elected, tasks that would create conflict of interest if assumed by parliament itself - Karl Popper (1966, p. 128) put the question well: - “How can we organize political institutions so that bad or incompetent rulers can be prevented from doing too much damage?”

3. process

• Civilized campaign – not a campaign, really
• Candidates viewed themselves not as

competitors but rather as advocates of a

common cause

• The 25 elected were doctors, lawyers, priests,

and professors, yes, …

• … but also company board members, a farmer, a

fighter for the rights of handicapped persons,

mathematicians, media people, erstwhile MPs,

a nurse, a philosopher, poets and artists,

political scientists, a theatre director, and a

labor union leader

• Good cross section of society

4. Substance

• People wanted change
  • Conclusions of National Assembly were cohesive and clear
  • Answers given by elected Constitutional Assembly members to media were equally clear
  • Overwhelmingly, they favored
    • Changing the constitution
    • Equal voting rights everywhere in the country
    • Public ownership of natural resources
    • More national referenda
    • Strengthening the right of the public to information
    • Checks on the Minister of Justice’s ability to appoint judges on his or her own
  • Public opinion polls reflected similar sentiments

4. Substance

• Two key provisions concerning human rights
  • Equal voting rights everywhere
  • Public ownership of natural resources
• Other important provisions concerning
  • Transparency and the right to information
  • Environmental protection
    • Reciprocal rights of man and nature
  • Checks and balances, including
    • Appointment of judges and other public officials
    • Independence of state agencies

4. Substance

• Equal voting rights everywhere
  • In Iceland’s electoral system, the number of votes needed to elect an MP for Reykjavík area where 2/ of population reside was 2, 3, and up to 4 times as large as the number of votes needed in rural electoral districts
  • Unequal voting rights constitute a violation of human rights as pointed out by European election supervisors - For over 100 years, representatives of rural areas in parliament have blocked equal voting rights
  • The bill stipulates that voters vote for persons as well as parties, even across party lists, also guaranteeing minimal representation of regions

4. Substance

• Key distinction between ‘property of the nation’

and ‘property of the state’

• State property – office buildings, for example – can be sold or pledged at will by the state - Several countries define natural resources as state property – e.g., China, Kuwait, Russia
• The property of the nation is different in that it “may never be sold or mortgaged” - Present generation shares natural resources belonging to the nation with future generations, and does not have the right to dispose of the resources for its own benefit in the spirit of sustainable development - The use of other people’s assets as collateral is conducive to excessive banking, besides being wrong

4. Substance

• Human rights connection
  • Supreme Court ruled in 1998 that Icelandic system of fisheries management is discriminatory and thereby unconstitutional - In 2000, Supreme Court reversed its opinion under visible pressure from ministers
  • In 2007, UN Committee on Human Rights expressed agreement with 1998 verdict in a binding opinion declaring the inequitable nature of the fisheries management system to constitute a violation of human rights and instructing Iceland to rectify the situation - Government has not yet responded except perfunctorily