“Inside Job”, the story of the 2008 global financial meltdown and its aftermath, opens with the story of Iceland. Before the crisis it was a small but stable country with a quiet and secure financial sector, but the crisis hit hard, crushing the financial sector and bringing down its government as well. When they started the process of recovery Icelanders decided they needed to do more than just boot out the old politicians, they decided to start from scratch by writing an entirely new constitution. Even more, they decided that it wouldn’t just be written for the people, but by the people in the world’s first “crowd-sourced” constitution…
A country of 319 thousand people and a GDP of about $12 billion, Iceland was a showcase for how unregulated fraud and speculation could crush a country. When their stock market plunged 90 percent, unemployment rose ninefold, inflation shot to more than 18 percent, and the country’s biggest banks all failed. Since then Iceland has been a showcase for how to survive an economic crash, in part because they did exactly the opposite of what the US and Europe did in the same situation. To upside-down homeowners, Iceland offered programs that would wipe out debt over 110% of the property’s value. They subsidized mortgage interest expenses on a means-tested basis, giving the greatest support to people with low income, little home equity, or children. 4 years after the crisis, Iceland is out of the economic woods. They had a growth rate of 2.7 percent in 2012 and are expecting up to 3 percent next year. The unemployment rate is at 6.3% and decreasing, and the budget deficit has sunk from 14 percent in 2008 to about 1.5 percent in 2012.
But aside from economic restructuring, the other fallout from the financial meltdown was a restructuring of government itself. The government resigned in January 2009 but that wasn’t enough for Icelanders who actually charged government officials involved in the crisis, including the Prime Minister himself. When the old government bailed out, a new coalition of the Social Democratic Alliance and the Left-Green Movement stepped in. One of their first decisions was that the Icelandic Constitution, written in 1944 and based on the model of their once-colonial-master, Denmark, needed an overhaul. They assembled a group of 25 citizens into a Constitutional Council to write a new one. The council took ideas from citizens online and wrote a draft finished in January of 2011. When complete, the result was submitted to a (non-binding) online vote. 235,000 voters took part, and 66% said they liked the new constitution and thought it should serve as the basis for the final version.
We thought this story was interesting because it points out how much power citizens can exercise when their government asks them, and how they can rise to the occasion when given the opportunity. Since the vote was non-binding and the Constitutional Council is working on changes based on the online votes, the story is still evolving. But if you’re as interested as we were, here are some links you’ll like…
Icelanders back first ‘crowdsourced constitution’
Voters in Iceland back new constitution, more resource control
Icelanders Approve Crowdsourced Constitution
Iceland’s ‘Facebook’ constitution closer to reality
Iceland Constitutional Referendum: Reactions to Results
Iceland’s crowd-sourced constitution: A brief guide
Icelanders ‘like’ their crowdsourced constitution
Review of Iceland Constitution Submitted in January
Icelanders approve their crowdsourced constitution
The Icelandic constitutional experiment
We can learn from Iceland’s crash – and their recovery
