Notes from the field

Iceland as an outlier

We visited Reykjavik in April 2017 to explore the policies of accountability deployed in Iceland after the financial meltdown in 2008.

Immediately after the ‘Crash’, political elites designed two novel mechanisms to identify the causes and those responsible for the financial meltdown. First, a Special Investigation Commission (SIC), in effect a truth commission, was mandated to shed light on the collapse of the banking sector and to publish a report that would turn past policy failures into policy recommendations. At the same time a decision was taken to investigate and prosecute those individuals seen as responsible for the collapse of the banking sector, leading to the creation of the Office of the Special Prosecutor (OSP).

The Icelandic experience challenges the conventional wisdom that ‘impunity’ prevails after economic crisis. As such, it is worth exploring further the strengths and limitations of these policies, as well as the lessons that can be transferable to other societies facing similar challenges.

The decision to investigate

Iceland’s experience is puzzling for another reason too. As opposed to most other countries where truth recovery mechanisms or prosecutions were used as a political tool by parties of the opposition when in power to score political points against opponents, both the OSP and the SIC were initiatives of the incumbent (Independence Party). This is intriguing because the party was largely seen as responsible for the Crash, and had the potential to reveal inconvenient truths. What’s even more puzzling is that both mechanisms were unanimously with cross-party consensus in the parliament. This begs the question of why political elites in Iceland were so proactive in setting up policies of accountability shortly after the crisis.

According to our participants, some form of dealing with the past was inevitable; it would have been unimaginable to proceed with business as usual. As we show in a recently co-authored article, this sheds light on the role of political culture and how political elites translate political cost. Still, another potential explanation emerged in our interviews, suggesting that the type of the crisis played an important role in enabling the policies. As opposed to other countries where rescuing the banks was central to the IMF bailout programs, the banking sector in Iceland had already vanished. Having the banks dead on the financial morgue facilitated the quality and the scope of forensic investigations.

The Truth Commission & the Special Prosecutor

The publication of the SIC report was a landmark event in Iceland, and it instantly became a best seller. What explains this appeal? It seems that it revealed a truth that remained hidden from the public. Most importantly it created a very simple narrative about a very complex issue on the causes of the crisis. Still, it should be noted that almost certainly most people didn’t read the full 2,400 page-long report…

Our interview with the Special Prosecutor was illuminating. He shed light on the challenges of creating a new investigative mechanism, tasked to investigate very complex financial crimes. In hindsight, the OSP has been very effective, securing the conviction of approximately 30 individuals; given the small population of the country and the harsh sentences they were given, this is an important achievement.

An interesting finding we plan to explore further is the role of technological tools in facilitating these ‘forensic’ investigations. Being in a position to mine massive data from different sources (emails, tax data, bank data, etc.) was key not only in expediting the investigations. Most importantly, it also provided undisputed incriminatory evidence in courts of law, thereby increasing the conviction rates.


Another policy we are exploring as part of the project is public apologies. In Iceland a handful of politicians and bankers apologized for their actions or omissions. We also asked our participants why more politicians did not apologize, and it seems that most believe that an apology is a death sentence for politicians, almost an admission of guilt. We are looking forward to exploring the rationale of the reluctance to apologize in other countries we will visit. Most notably, the majority of our participants felt that there was no sincere apology for the crisis. To this end, we also plan to explore what a meaningful apology would look like.

So what?

So, in what ways did these policies affect the trajectory of post-crisis Iceland? Most participants highlighted important positive lessons, including but not limited to:

  • The report of the SIC established an authoritative account of the crisis, which made it impossible to deny certain facts related to the crisis. Quoting Michael Ignatieff, it delimited the number of permissible lies about the crisis.
  • The prosecutions of very powerful bankers created a public understanding that no one is above the law
  • The Office of the Prosecutor now has the expertise to investigate complex white-collar crimes, which obviously consolidated deterrence and protects the country from future wrongdoing.
  • Also, there is an emerging jurisprudence which offers clear definitions of white-collar crimes, something previously missing from national legislation

Still, some participants, particularly political elites, expressed some concern about the overall impact of these policies. Although they agree that it was inevitable, they had some qualms about the instrumental use of the report of the truth commission. One compared it to the Holy Bible: although nobody has read the actual reports, it created holy truth that it’s now mostly used as a tool to bash to the head of their political opponents to score political points. Also, they had some reservations about the utility of the prosecution of the former Prime Minister, Geir Haarde. Even members of the opposition parties believe that it was a mistake, unnecessarily polarizing the political debates in the country. This touches on a key theme of our project, namely the criminalization of politics and its long-term impact. Something to be explored, in Greece, our next stop…