Friday, March 06, 2009

Two Looks at Iceland

It's not often you get an honest chance to compare two writers in something like real time. Two critics might (often do) review the same book or movie, but they're at least somewhat constrained by the work under review. Last night, I read two travel pieces about the financial disaster in Iceland -- one by Michael Lewis in Vanity Fair and the other by Ian Parker in The New Yorker. (Parker's is only available online to subscribers.) The comparison can't be a perfect one, because The New Yorker is famous for its thorough editing, which includes something approaching a "house voice." Still, it's interesting to see what two writers do with the same story.

Lewis, per usual, is very funny. He makes a piece about a country's financial demise about as entertaining as it can be. And he doesn't hold back his opinion of the absurdity of it all: "An entire nation without immediate experience or even distant memory of high finance had gazed upon the example of Wall Street and said, 'We can do that.' "

And he flashes his usual skill in picking anecdotes and personalities that bring the story vividly to life. In addition to his great paragraph about Björk, there's this:
Still, a society that has been ruined overnight doesn't look much different from how it did the day before, when it believed itself to be richer than ever. The Central Bank of Iceland is a case in point. Almost certainly Iceland will adopt the euro as its currency, and the krona will cease to exist. Without it there is no need for a central bank to maintain the stability of the local currency and control interest rates. Inside the place stews David Oddsson, the architect of Iceland's rise and fall. Back in the 1980s, Oddsson had fallen under the spell of Milton Friedman, the brilliant economist who was able to persuade even those who spent their lives working for the government that government was a waste of life. So Oddsson went on a quest to give Icelandic people their freedom — by which he meant freedom from government controls of any sort. As prime minister he lowered taxes, privatized industry, freed up trade, and, finally, in 2002, privatized the banks. At length, weary of prime-ministering, he got himself appointed governor of the Central Bank — even though he was a poet without banking experience.

After the collapse he holed up in his office inside the bank, declining all requests for interviews. Senior government officials tell me, seriously, that they assume he spends most of his time writing poetry. (In February he would be asked by a new government to leave.)
Parker is a bit less adamant in his judgment of the situation. For instance, he writes (italics mine), ". . . at the heart of Iceland's adventure was a small group of men and a fair amount of interconnectedness; and it's tempting, if not entirely just, to think of them as partners in a single giant national hedge fund."

Lewis is willing to cave in to the temptation. First thing in his piece, he quotes someone from the International Monetary Fund saying, "You have to understand. Iceland is no longer a country. It is a hedge fund."

Lewis paints the picture of an insular, inbred ("geneticists often use them for research") culture that suddenly decided, a few years ago, that after 1,100 years of successfully fishing they should become specialists in high finance. He quotes several people who say, more or less, what one says directly: "They had no idea what they were doing."

What's more, what they did learn they learned by watching an American system that was heading toward free fall.

Parker has room for fun, too, like the detail of a wealthy Icelandic businessman whose office is decorated with "a ten-foot Viking carrying a guitar." Or his writing about the anger that some people felt at foreign hedge-fund managers coming in to short the country's currency and brag about it at local bars, capping it with this quote from a "senior and unsentimental Icelandic financier": "If you're so vulnerable that five idiots from the East Coast, drunk in a bar, can destabilize the currency, then it's not a proper currency."

I recommend both pieces. Obviously.


Anonymous Anonymous said...

I visited Iceland in the summer of 1990 on a class trip. I loved it. At the time, I didn't noticed any hedges but I did see lots of low-lying scrub brush on the tundra that could have been coaxed into a hedge-like thing.

Hedge-funds? Nope, none of those back in '90.

6:54 AM  

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