Categories:
Political Economy
I wonder what it is like for a country to be truly, permanently bankrupt. And a further difficulty lies on the horizon. Circa 2000, fish accounted for 70 percent of the country’s export earnings. Here are many articles on dwindling cod stocks, the number one item sold by Icelandic fishermen.
If Iceland is bankrupt, is it for sale? Could one of us buy it? Charge rent for people to live there, and try to turn around the place so that it operates at a profit?
What’s it like in Iceland? Has Patri Friedman scouted it out yet?
READER COMMENTS
J
Oct 30 2008 at 11:25am
What’s it like in Iceland?
Every ice-age-selected gene of my body screamed: get off this rock immediately. And I was there in August…
It is spectacularly beautiful in a way that you can only appreciate when all of life’s basic necessities are covered. For all but the last few decades, life in Iceland must have been very very hard. Hence the social cohesion.
I am skeptical about the market for immigration. But tourism may be the way to go. It is surely cooler to be the world’s banker than the world’s tour guide. But it beats bankruptcy.
scott clark
Oct 30 2008 at 11:26am
I don’t know. The history of proprietary colonies is working against you. Pennsylvania was not profitable for William Penn, and he was ostensibly the owner and the people their owned him rents. They never paid. Penn tried to reassert a more active government to collect the rents, it was a non-starter. He asked for a special assessment to help him out with his finances in England, no such luck, Bill. Maybe he just wasn’t tough enough?
North Carolina was a proprietary, no profit there for the owners as far as I know, I could be wrong about NC though. Shareholders of the Virginia Corporation probably made out all right, but only because they liquidated the company and took land titles directly in proportion to their shares.
Maybe your better bet would be to have most of the Icelandic population move to the EU or the US, then buyup the abandoned property directly. Democracy is working against you here, no matter how much you own, there will be a lot of people voting against you.
B.H.
Oct 30 2008 at 11:34am
Could we buy it? Make it a 51st state?
Gots lots of clean energy (geothermal and hydro).
Nice looking people. Educated too.
Most of them speak good English.
A member of NATO.
Interesting rock music.
Hot springs could turn into new age spas.
Will be pleasant place when global warming arrives.
Not too long a flight from US Northeast.
Peter St. Onge
Oct 30 2008 at 11:39am
Inre proprietary colonies, if we include dictatorships, they do appear to be profitable, since the top job is vigorously contested.
This profitability may be a matter of rent extraction when citizens are locked in (by eg family ties, emigration restrictions, or slaves in the case of the Caribbean plantation colonies).
This would suggest that that Iceland Inc would lose money in the beginning, loss leading to attract residents, then over time could recoup its losses through higher taxes. Like any start-up.
Of course, once it reaches the recouping of investment stage, perhaps it would increasingly resemble other countries.
Greg
Oct 30 2008 at 11:39am
I feel confident that Iceland could be a good vanity investment for a billionaire. It would make a much better conversation starter than a pro sports team. And it would be a hedge against global warming, although not a good one. Great idea! If I were a private equity executive with billions, I would definitely jump on this.
scott clark
Oct 30 2008 at 12:12pm
Peter St. Onge,
Yea, you have a point. In other dictatorships though, they aren’t buying the country with their own money, as Kling is postulating. They are buying it with future promises about the state of affairs after violent overthrows of the current regime, promises of land, money, and power after the new leader is installed. Others do contest to get to the top, but by cozying up to the current dicatator, waiting for their moment to seize power. I guess it presupposes a mechanism for rent extraction (and one that most people few as legitimate and powerful enough) already in existence.
Its not clear that Icelanders would think Kling has a legitimate claim to those rents just because he paid off their previous government’s debt. In which case, he’d have to fight for them, which means additional expenses that diminish the value. Too risky a play for my money. I’ll leave it to people who have far less to lose.
Alex Tabarrok
Oct 30 2008 at 12:24pm
Anarchy for Iceland!
http://www.daviddfriedman.com/Academic/Iceland/Iceland.html
Alex
ryan yin
Oct 30 2008 at 12:39pm
Scott Clark,
Hmm, buying not with money you have now but promises to repay once new management is installed. Sounds like any leveraged buyout to me.
Aren’t they always funded through rents? If you’re a superior manager, that’s your rent, right?
E. Barandiaran
Oct 30 2008 at 12:41pm
I haven’t read last-week agreement between the Government of Iceland and the IMF. Some people may argue that by accepting IMF’s conditions, the Government has already “sold” the country.
I have a different proposition. Perhaps you can mobilize enough funds to make a loan to the Government of Iceland. Let me call it the Libertarian Loan. The terms and conditions would be structured to be an incentive for both maintaining a “free-market” economy and strengthening it by implementing whatever reforms the Government proposes and the lender accepts (for example, I’d strongly recommend the Government to eliminate the króna).
eccdogg
Oct 30 2008 at 12:58pm
I took Arnolds proposal to be more about buying the managment company that is the government than buying the land that is iceland.
The management company enforces laws, protects the country from invasion, provides infrastructure and some services.
For this it gets a % of GDP. Obiviously you would need to have some contractual obligations binding for both the company and it citizens (a constitution) the citizens would need to put constraints on the investors so that their rights are not trampled and so that they have say in the laws. And the company should have limitations on what types of laws the citizens could pass that would reduce the value of GDP. But who would arbitrate this contract? The UN maybe? A supreme court?
The investor could later IPO Iceland back to its citizens if they were interested and turn decision making authority over to them.
scott clark
Oct 30 2008 at 1:16pm
that’s the trick, isn’t it. Its sounds a lot like a leveraged buyout until you realize you’re talking about the country populated by the descendents of the people written about in the article that Alex Tabarrok linked to.
Nations aren’t enterprises with a clear, identifiable goal, like profit. There just are natural limits to the size of an enterprise. The trouble occurs when people are simultaneously the vendors, customers, employees, and shareholders of the enterprise with no clear satisfactory way to net out any particular individual’s position, so they tend to rely on coercion to cover the gaps. That’s when people start to view the state as up to something fishy (the more violent, the more fishy) and you have to do all these things to defend the legitimacy of the state (which can’t be done, in my opinion).
Tom Hanna
Oct 30 2008 at 4:33pm
Has any libertarian ever bought 301,000 slaves? Would he be buying them just to set them free?
Ed
Oct 30 2008 at 5:11pm
What would you buy it with? U.S. dollars? That would be ironic. Seems cruel to put them through two currency collapses.
Les
Oct 30 2008 at 5:39pm
I think Israel should buy Iceland. Its in a much better neighborhood than the Middle East. And offers much better security, because it is more isolated from other countries than present-day Israel.
Icelanders should benefit by becoming more industrialized and less dependent on fish.
Max Liberty
Oct 30 2008 at 6:45pm
Up until a few months ago, any of us could have bought Iceland. Walk into any mortgage broker and apply for a no-doc jumbo, preferably with ACORN’s help. The paper would have been broken up and rated at far better than the underlying risk. Fast forward a couple months and the banks who bought the paper would teeter on the edge of worthlessness. You and they get bailed out. Thus, the American public would have bought it for you!
Looks like we missed our big opportunity. If only we had known . . . .
Max
Anoneumouse
Oct 31 2008 at 1:26pm
How do you think England got Scotland to join it in union. The Scottish economy had been bankrupted by the ‘Darien Fiasco’
And when it comes to a buyer for Iceland, you need not look any further than our real government in Brussels
dearieme
Oct 31 2008 at 3:13pm
When the Vikings took Iceland they expelled the Celtic monks who lived there. It’s time for Scotland and Ireland to claim it back.
Marginal Cost
Nov 2 2008 at 10:01am
With the Icelandic Krona very low vs. other currencies, now is the time to buy Iceland! To see what you will get for your purchase see these photos of the country. Iceland-photos.blogspot.com
Patri Friedman
Nov 8 2008 at 11:38pm
Even after the devaluation, their GDP is roughly $5B/year. Quite a bit, even for a billionaire.
Let’s start with smaller countries.
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