After banking bust, Iceland turns to free-market innovation
Iceland hopes to "reboot" the country after its banking bust, with leaders founding a Ministry of Ideas whose best recommendations are aired on a popular radio show each Friday morning.
Seeking a new global role for Iceland following the banking bust caused by its stint as a financial superpower, the country's lawmakers on Feb. 16 turned to a new vision: Turn the country into a haven for free speech.Skip to next paragraph
Subscribe Today to the Monitor
Measures before Parliament are aimed at improving transparency laws and luring Internet-based media and data centers from all over the world to use Iceland as a base for investigative journalism. One aim is to counter challenges to media freedom in other countries such as Britain, where laws heavily favor plaintiffs in libel cases.
But Iceland doesn't want the innovation to stop there. Some here want to transform the island nation of 320,000 into a massive, living laboratory.
"Iceland is a perfect market for prototyping more sustainable solutions – for example on democratic processes, the future of currencies, and sustainable energy management," says Guðjón Már Guðjónsson, a young entrepreneur.
A ministry for ideas
He founded the Ministry for Ideas, an open-access think tank that operates as a forum for new ways of leading Iceland out of its current economic plight. He talks of "rebooting" the country and turning both its size and the rock-bottom state of its economy into an advantage.
"Because of our size, the feedback loop is also much faster than you have in markets like the UK, so we are able to deploy, test, and improve systems before they are implemented in larger nations," he says.
The ministry's best ideas are presented each Friday morning on Iceland's most popular radio show. Ideas include using Iceland's electrical grid, one of the most sophisticated in the world, to create a transportation network based on electric cars.
"The business model of the electric car is unknown at the moment," says Mr. Guðjónsson. "Prototyping this in Iceland is a very doable project."
Iceland's mistake: Failing to innovate
Iceland's mistake, agree many, is that it did not carry out its own innovation during the last two decades in which its economy boomed. Instead its banks and investors bought the innovation of others – financed by loans.
Some now sense a unique opportunity to begin anew, taking advantage of the low value of its currency, the króna, to build up genuinely export-oriented businesses. The decline in the króna has already resulted in a miniboom for clothing designed and produced here. Shops in downtown Reykjavik where Prada and Armani once took pride of place now increasingly stock home-produced goods.
"I think we tend to focus on all these big ideas like energy-intensive industry, but I prefer the smaller ones, and design is a perfect example," says Katrín Ólafsdóttir, an economist at Reykjavik University. "Suddenly we have all these little designers doing their own thing, and no one would have expected it."
"Human capital is going to be the engine for growth. Our prospects are in technology, design, and sectors like that," she adds. "I think we have learned our lesson. We wanted to conquer the world through our banking sector, and we know how that went."