There are many analyses around about the credit crunch and how it originated. One of the best, most insightful and innovative gives an anthropological angle on how one part of the story unfolded. It looks at what happened in Iceland that let a small group of over-confident manly men turn a small country into a major player in world finance so fast that its economy imploded.
Having seen average personal wealth triple between 2003 and 2006, Icelanders now carry on average $330,000 each in personal debt because of the $100 billion loss incurred by their fast growing banks (“the most rapid expansion of a banking system in history”), and many lost more on top of that through foreign currency speculation and the 85 per cent collapse in the stock market.
An overdose of self-confidence, a refusal to admit to problems, a taste for risk, limited knowledge of how international finance worked and less interest in finding out (why bother when it’s working so well for you?), an eye for the main chance and the determination to go for it – these seem to be the key ingredients for Iceland’s economic supernova. All the main players in the brief brilliance and quick disaster were men, behaving aggressively.
The analysis by Michael Lewis in Vanity Fair is sharp, subtle, readable, often very funny, idiosyncratic, well researched and tightly reasoned. It throws the spotlight on how individuals behave as one of the causes of what has happened. We could do with more of the same, so that instead of just carrying on throwing blame at the overpaid, superbly pensioned ex-heroes of finance , we could begin to develop and spread a real understanding of the culture of the finance sector so politicians, commentators and financial regulators don’t fall for the same kind of thing ever again.