What happened to the Saucepan Revolution?

THE REPUBLIC of Iceland was the first country to feel the political effects of the global financial crisis. The much-celebrated "Saucepan Revolution" of 2009, so named for the clanging of kitchenware at mass protests, was as an inspiration to others taking a stand against the devastating impact of the crisis and the ruling class' demands for austerity.

But just four years later, the parties most closely associated with the deregulation that caused the collapse of the banking system are back in power, after an election victory over the center-left government that came to power in the wake of protests. What happened?

To begin with, it's almost impossible to overstate the effects of the financial crash. Prior to the collapse of the banking sector, Iceland's banks held debts worth more than 10 times the national GDP. With the onset of the global financial catastrophe of 2008, the króna declined dramatically in value. Unemployment and prices skyrocketed. In a country where economic growth had been fueled by speculative banking for years, the banks went belly-up and took the whole country with them.

At the time, the overwhelming sentiment was that the bankers, their government and their method of managing a country like a casino all had to go. The protests began in October and swelled to epic proportions. By January, the government of the Independence Party and its junior partners in the Social Democratic Alliance had stepped down.

Into this breach stepped a caretaker government made up of a new coalition of the Social Democrats and the Left-Green Movement. Despite having played a part in the previous government, the Social Democrats in power with the Left-Greens made a promise to punish the bankers and their friends in the old government for their role in the crisis.

Enthusiastic observers around the world began to point to Iceland as the model to emulate. The most frantic critics openly decried the potential creation of a "Cuba of the North" that would challenge European financial norms. The imposition of capital controls and state ownership of large parts of the financial sector appeared to give some indication of the direction the government would take.

But despite initial appearances, Iceland ended up among the ranks of European nations that bailed out private banks, imposed spending cuts and raised taxes in order to generate revenue to pay off illegitimate debts to foreign governments.

BEFORE THE crash, major tax breaks and other financial incentives had turned Iceland into a global financial haven. As a result, the number of foreigners with deposits in Icelandic banks grew larger than the population of Iceland itself. When the banks collapsed, the governments of the United Kingdom and the Netherlands backed up their own citizens savings and then began shaking Iceland down for the bill.

A plan to cut deep in order to "pay back" that debt was concocted by the former government on the eve of its downfall. Opposition to this plan is what brought the government down in 2009--and it is also what lost the supposed reformers of the left the election last month.

The record of the coalition might be seen as positive from a certain point of view. Indeed, the Social Democrats and Left-Greens have brought growth back to Iceland's economy--but at what cost? Unemployment is 5 percent, which is relatively normal for a stable capitalist economy, but behind this figure lies the fact that Iceland's population has shrunk as much as 3 percent due to emigration out of the country. Moreover, working people are making bitter sacrifices while the super wealthy--the financiers, the bankers and the capitalist class generally--continue living much as they did before.

A rise in tourism and exports is responsible for much of Iceland's return to growth, but this increase is largely due to the super-devaluation of the national currency, which has a direct and negative effect on the daily lives of Icelanders. Iceland may have been able to avoid the complete destruction of its welfare state, but the state did seek to gut as much as possible without cutting social programs entirely.

Even mainstream media outlets like the BBC described the government's economic program as "austerity tailored to international lenders' requirements." Despite returning to growth, unemployment is still higher than it was before the crisis began in 2008. After four years of a nominally left-wing government, one of the major issues in the election was the staggering household debt hanging over the nation.

EVEN BEFORE the recent election took place, the writing was on the wall for the government. In addition to the return of anti-austerity protests, opinion polls conducted a year ago showed support slipping away from the Social Democrats and the Left-Greens. In two separate national referendums, the people voted overwhelmingly to not support a repayment plan for the bogus foreign debt. The Left-Greens, previously Eurosceptics on anti-imperialist grounds, have lately become willing partners in negotiations for Iceland's ascension into the European Union.

Against this backdrop, the center-right parties that made up the previous government campaigned on promises of debt relief, lower taxes and the recovery of some money from foreign creditors. At the same time, they promised to lift capital controls in order to entice foreign investment--a move that would risk capital flight and currency speculation.

They have also announced plans to hold a national referendum on EU membership and the previous government's nearly completed negotiations. This new populist-nationalist image, along with the population's general frustration with the existing government, largely accounts for the undeserved return of Iceland's traditional ruling parties. Like the Social Democrats and Left-Greens before them, the Independence and Progressive Parties have capitalized on people's anger at the systematic prioritization of financial interests over those of the population.

However, there is more to the election than simply the swapping of one set of parties for a previous set. Voter turnout was exceptionally low by Icelandic standards. While 81 percent turnout might seem high compared to many Western nations, it was the lowest in Iceland's 69 years as an independent country.

A significant minority of the vote also went to newer parties. There have been a number of defections from the major parties over the last two years. Rainbow, a new political formation that calls itself socialist, was formed by former Left-Green members of parliament.

This follows an earlier break from the Left-Greens that created Solidarity as well as the creation of another new center-left party called the Pirate Party. Defectors from both the Social Democrats and their rivals in the Progressive Party formed Bright Future, a "green-liberal" party. These new parties received a fair share of the protest vote that brought down the previous coalition. Combined, they now make up 12 percent of Iceland's parliament, the Althing. Smaller parties have also emerged with plans to have an impact in the future. One such formation is a new anticapitalist party called the People's Front of Iceland.

Over the last few years, the people of Iceland have managed to bring down one government, defeat the plans of the new government in two referendums, and have now punished them in another election. The new center-right government will be under the same pressures from global financiers and foreign governments on the one hand and a population fed up with paying off debts to the wealthy on the other.