The Birth of a System Born to Collapse: Laissez-Faire the Icelandic Way

Abstract

This article looks beyond economic explanations of the financial crisis in Iceland, and focuses on the political preconditions for the crisis. The argument is that liberalization of the economy, privatization of the banking sector and lax regulation, together with looting strategies from investors, explain both the rise and fall of the financial sector in Iceland. By examining the historic development of the Icelandic financial sector from 1991 until 2008, I show how fundamental changes, through liberalization and Europeanization, in the economic system made the crisis possible. Data have been collected from official government documents, newspapers, research papers and published reports.