Why: Iceland's Strong Economic Recovery after Complete Financial Collapse in 2008

By Martin Zeis for Global Research 

Iceland’s President Olafur Ragnar Grimmson was interviewed over the weekend (26./27.01.2013) at the World Economic Forum in Davos on why Iceland has enjoyed such a strong recovery after it’s complete financial collapse in 2008, while the rest of the Western world struggles with a recovery that has no clothes.

Grimsson gave a famous reply to the financial MSM reporter, stating that Iceland’s recovery was due to the following primary reason:

„… We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing here in Europe. …“

When asked whether Iceland’s policy of letting the banks fail would have worked in the rest of Europe, Grimsson replied:

„… Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and tele-communication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail-out banks is a theory that you allow bankers enjoy for their own profit their success, and then let ordinary people bear their failure through taxes and austerity. 
People in enlightened democracies are not going to accept that in the long run. …“

Whole interview with Grimmson (02:56 min):

This article originally appeared here  

7 Social Principles of PROUT

1st Social Principle of PROUT

In the flow of the social cycle, a class is always dominant.

Originally, no well-knit social system had evolved. So we may call this age the proletarian (shu’dra) era. In those days all people survived by their physical labor. Then came the era of the valiant, which we may term the warrior (ks’attriya) era. This was followed by the age of intellectuals (vipra). Finally comes the commercialist or capitalist (vaeshya) era.

As a result of the rapacity of the capitalist era, when the warriors and intellectuals are relegated to the level of proletariat, proletariat revolution (shu’dra viplava) occurs. As the proletariat has neither a strongly built society nor sufficient intelligence, the administration of post capitalist society goes into the hands of those who lead the proletariat revolution. These people are brave and courageous, and so they establish the advent of the second warrior era. After the successive order of proletariat-warrior-intellectual-capitalist eras comes revolution, and then the second cycle of similar successive order begins. Thus the rotation of the social cycle (samaja cakra) continues.


2nd Social Principle of PROUT

In the nucleus of the social cycle spiritual revolutionaries (sadvipras) control the cycle in order to liberate all.

Spiritual revolutionaries are those moral and spiritual aspirants who want to put an end to exploitation and vice by the application of force. They do not belong to the periphery of this cycle because they will control the social cycle positioned as its driving shaft or nucleus. The social cycle (samaja cakra) must revolve, but if the military in the warrior age or the intellectuals in the intellectual age or the capitalists in the capitalist age degenerate to play the role of exploiters instead of administrators, in that case the inherent characteristics of spiritual revolutionaries shall be to protect the honest and the exploited, and to bring under control the dishonest and rapacious exploiters, through the application of their special force.


3rd Social Principle of PROUT

Evolution is the acceleration of the speed of the social cycle by the application of force.

Spiritual revolutionaries (sadvipras) will initiate and establish the intellectual (vipra) age by bringing under control the warriors (ks’attriyas) as soon as the warriors degenerate into exploiters. Here the advent of the intellectual age, which should have come in natural course, is expedited by force. Such a change of eras may be called evolution (kranti). The difference between evolution and natural change is that in evolution the movement of the social cycle is accelerated by the application of force.


4th Social Principle of PROUT

Revolution is the acceleration of the speed of the social cycle by the application of tremendous force.

Revolution (viplava) is the application of tremendous force within a short time to destroy the formidable control of any era and replace it by the next era.


5th Social Principle of PROUT

Counter-evolution is the application of force to turn the flow of the social cycle in the reverse direction.

If any era reverts to the proceeding one by the application of force, such a change is called counter-evolution (vikranti). For example, the establishment of the warrior (ks’attriya) era after the intellectual (vipra) era is counter-evolution, and is very short-lived. Within a very short time the next era or the one after it again replaces this era. In other words, if the warrior era suddenly supercedes the intellectual era through counter-evolution, then the warrior era will not last long. Within a short time either the intellectual era or, by natural course the capitalist (vaeshya) era, will take its place.


6th Social Principle of PROUT

Reversing the movement of the social cycle by the application of tremendous force is called counter-revolution.

If, within a very short time the social cycle is turned backwards by the application of tremendous force, such a change is called counter-revolution (prativiplava). Counter-revolution is still more short-lived than counter-evolution.


7th Social Principle of PROUT

A complete rotation of the social cycle is called peripheric evolution.

A complete rotation of the social cycle, concluding with the proletariat (shu'dra) revolution, is called peripheric evolution (parikranti).

Guiding Principles of Economic Decentralization

Guiding Principles of Economic Decentralization

PROUT proposes five guiding principles for economic decentralization. These are:

1)  There should be local control of resources. This is especially necessary for those resources that are involved in the production of the basic necessities. Raw materials must be utilized as close to their source as possible for maximum efficiency, sustainability and benefit to the local people.       

2) Production is need-based, driven by consumption rather than profit. Commodities should be produced primarily for the local market to prevent the outflow of capital. The socio-economic unit should be of sufficient size to create stability in the local markets and economy in general.     

3) Production and distribution should be organized mainly through cooperatives. Cooperatives are largely incapable of competing in a centralized, capitalist environment. With a decentralized economy, however, the cooperative system will provide the means to ensure that everyone at the local level has employment and decision making power in the economy. This is a critical component of economic democracy.     

4) There should be local employment in local economic enterprises. This is contingent upon strong local education so that skilled people are available in all fields. Cooperatives can play a role in this process by providing on-going educational opportunities for their members as well as opportunities for implementing this knowledge. This also ensures that very talented people can be properly utilized and will not succumb to "brain drain," moving to more developed and affluent areas as is happening all over the world today. Many of the most skilled and talented move from rural areas to urban ones, and from the developing nations to the developed.     

5) As far as possible, commodities pertaining to the basic necessities which are not locally produced, should be removed from the local markets. It is essential to the development of local production that this rule be applied. Initially, people may have to accept lower quality goods, higher prices, or less availability, but with proper development in accordance with the desires of a population, good results can be achieved by retaining capital within an economic unit. If there is enthusiasm and pride in locally produced goods, this process will proceed very well. 

Trade

Under PROUT, the issue of trade must be carefully considered. Guidelines should exist so that trade is beneficial to all parties concerned and to the economy as a whole. In an economic democracy, resources are considered the property of the people of that socio-economic unit. Furthermore, one of the maxims of economic decentralization is that refinement and manufacturing should take place as close to the source of raw materials as possible. Hence, the export of raw materials is considered inappropriate in such an economic framework. An exporting socio-economic unit would lose valuable opportunities for the creation of new jobs and economic vitality. Often, economies which depend upon the export of raw materials are economically underdeveloped and have a low standard of living. Depending upon the nature of the raw materials, the importing socio-economic unit might run the risk of overemphasis on industry; or if food is involved, it may harm the socio-economic unit’s ability to become agriculturally self-sufficient. Generally, such kind of trade is not conducive to economic decentralization or to a balanced economy.

However, when a socio-economic unit has insufficient raw materials to meet the minimum requirements of its populace, the importation of raw materials may be allowed. It should be carefully verified that the imported raw materials are indeed surplus to the socio-economic unit of origin.
 
Once a local economy is able to meet the basic needs of its people, finished goods which are not and cannot easily be produced should be allowed to enter an economic unit. Care should be taken, however, that they do not undermine the market for local goods. It is good if such kind of trade takes place through barter.
 
As an infrastructure develops for the exchange of manufactured goods, the free trade of surplus, finished goods between fully self-sufficient socio-economic units should be encouraged. This will help to facilitate prosperity and socio-economic parity amongst units. As this occurs, socio-economic units may begin to merge. This is a positive development if decentralized production and economic democracy are not jeopardized. One final and important point should be made in this matter. In order to avoid the emergence of a class of rich traders and middlemen, transactions between socio-economic units should be conducted only through producer and consumer cooperatives.
 
It should be clear how this approach differs from the capitalistic notion of freedom of trade. In quest of higher profit margins, capitalists seek cheap raw materials and cheap labor while targeting markets for finished goods which can give high returns. This is beneficial neither to the people living near the raw materials (who do not reap the benefits of ownership and may simply be employed in low wage mining, agricultural, or other jobs) nor to the populace of the more affluent market, for employment opportunities decrease as industry moves to cheap labor areas. And it is only marginally better for the areas which provide the labor for manufacturing because labor conditions, wages, and benefits will be as low as the capitalists can get away with. It may or may not stimulate much local economic growth or raise the standard of living. Furthermore, tremendous energy is wasted in shipping goods and raw materials between the sites of origin, sites of manufacturing, and the final markets.  
 

Decentralization and Self-sufficiency

According to PROUT, economic planning has to begin at the grassroots level in order to make use of and develop the experience and expertise of the local population. This implies that the optimal form of an economy is a decentralized one, rather than the centralized form which is present in both capitalist and socialist countries.

Decentralization is preferred as it is the system which best allows local people to retain power over their own economic destiny. And as previously discussed, decentralization is a crucial ingredient for economic democracy.

In order for decentralization to exist successfully, there must be a cooperative economic structure. In such a structure the profit motive would be replaced by the desire to produce goods to meet the needs of the local people. The desire for profit is often at odds with this idea of production for consumption. Capitalists start industries only where favorable conditions for production and sales exist. They therefore often ignore the real needs of a population insofar as profits are often made at the expense of local people and the local eco-systems. Under the cooperative economic structure, self-supporting economic units will be the norm. Such units must be nurtured and strengthened. This requires a decentralized approach to industry as well as agriculture. Self-sufficiency does not mean only the local production of food - the industrial sector is highly important as well, and cannot be neglected. Hence PROUT advocates the existence of a full range of industries, mostly on a small scale, for every socio-economic unit.



The treadle pump, such as this man uses in Nepal, costs around $20 US, and can increase a farmer's production by $100 US per year. With this technology, many families in Asia and Africa have increased their income. In Bangladesh, their production and sales are now sustainable without any external aid (but not in Nepal or many other countries in which they are used to great benefit). Because treadle pumps would help a local community become agriculturally self-sufficient, PROUT would not prohibit farmers (or, preferably, farming cooperatives) from importing them. It would want them to do so via barter, however — and would discourage the export of surplus yields in exchange for any goods that could be produced locally.