North Atlantic Cousins in Crisis - Lessons to be Learned from Past Solutions

The economic crash in Iceland has been in the news for a long time now. Many possible ways out have been proposed with no consensus on what to do. Not known to many is the precedent set by another North Atlantic island in a similar situation 60 years ago. That is when Newfoundland gave up what was left of its independence and joined Canada in an effort to find a permanent shelter from the crash it suffered. By examining both situations and finding the similarities and differences between both, it will be possible to clear up some of the options facing Iceland in the near future and see what long term strategies could be implemented by Iceland based on the varying degrees of success had by Newfoundland in similar situations.

The path which led to Newfoundland’s demise from an independent dominion within the British Empire to a province within Canada is similar to the one currently facing Iceland. Newfoundland was once as independent as Australia, Canada or New Zealand. In 1934, the people realized they could simply not afford to pay off the debts accumulated during World War I and due to corruption over the years and Newfoundland returned under British protection, finding what small and micro states need: a shelter[1][2], because they realized they could not do it on their own. After World War II, the economy had almost doubled thanks to American, British and Canadian bases and Newfoundlanders voted on what to do next. Icelanders, who also got money from the British then American base, chose to become independent. Newfoundland, however, chose to join Canada in 1949. No timeline was established for this union and it now looks like it will be a permanent union, sixty years later. For people in Iceland looking towards the European Union or other possible shelters, this must be a consideration. How long is shelter needed or must it be permanent for places like Iceland and Newfoundland? Examining some of the differences between the cases could offer hints on why things are different now.

Though in both cases the islands had huge burdens which could be extremely difficult to escape, there are some differences which might give Iceland advantages in outcomes over Newfoundland of the 1930s and 40s. For one thing, Iceland is a lot more technologically developed now then Newfoundland was during its struggles: the population is a lot more educated, there is better access to foreign resources and fishing is not the only tool to supply it with income. With such a small population, Iceland may more easily move away from the banking sector that created the crisis towards different income creating areas or develop some of its resources. Though this does not mean that all rivers need to be damned, the hydroelectric and geothermal potential can either be exploited or the technology Icelanders have developed to do so can be exported to other countries around the world. Another difference is that Iceland has its own language. This can influence changes in a few different ways. On one hand, foreigners trying to convince Icelanders to join their cause will not necessarily be able to plead directly to them; most of their material will need to be translated. Icelanders will probably trust fellow Icelanders speaking their language and may be sceptical of outsiders. Having their own language will also help Icelanders in that all material coming in to the country needs to be translated, giving jobs to a few people in this department. Icelanders also fill the bookshelves and CD racks with home grown talent giving a few artists the opportunity to sell their own material as has been happening already for many years. Though language services may not be the biggest industry in the country, it is an industry that Newfoundland did not have when material would come from England, Canada and the United States already in English. Perhaps the most important difference between both cases is that the European Union is not like Canada in a few distinct ways. For one, it is not a state but a grouping of independent states which have chosen to share different parts of their competences and who all have a voice at the table. Canada, for its part, does let all its provinces have a voice at the table but the federal government is the one with the final word on issues concerning everyone and gets all the residual powers. However, as time advances the European Union has been gaining more and more power from its Member States and if Iceland were to join in the near future, the EU would require Iceland to give up certain competences regardless of its desire to keep them or not. These important differences between the cases would indicate that different paths may be followed in both cases, but if Iceland were to join, there may be much to learn from Newfoundland’s case and what as been done, especially recently, to forge a better place within their shelter.

Within every union each member will try to defend their own interests as much as possible. Over the past few years, Newfoundland has been getting better at this by demonstrating strong leadership and finding ways to take as much control as possible of their resources. If Iceland were to join the EU or another shelter, it would be necessary to do this as well to avoid losing all power or sense of independence. The current Premier of Newfoundland is Danny Williams whose approach has been to put his constituents and their interests ahead of those of the rest of Canadians. He has managed to get an overwhelming majority of seats in the Provincial Assembly which gives him weight when negotiating during federal-provincial meetings as he has a clear mandate from his constituents. On the other hand, the current situation in Iceland is not one where someone has a great command of political power with the respect of the majority of people. Though Jóhanna Sigurðardóttir seems to be a good compromise leader, going forward it will be difficult to make decisions without much unity. When Newfoundland joined Canada, it was only with a 52% acceptance rate in the referendum. In the 2007 elections, Danny Williams’ Conservative Party got almost 70% of the vote with 44 of 48 seats and he managed to convince Newfoundlanders not to elect any federal Conservatives because he did not think the Conservatives represented his constituents’ interests. One of the reasons for this is due to the battle over the precious oil resources that the coasts of Newfoundland has. Over the past few years, Premier Williams has been able to negotiate a bigger share of the monies from the oil for Newfoundlanders. Fighting for the resources that are most important is something provinces or small states in the European Union, for example, need to do as demonstrated by Baldur Thorhallsson[3]. The European Union knows that Icelanders will want to protect their fishing and agricultural industries, but they will need to do so within the EU framework if they are to get the shelter they seek. Strong leadership and a stubborn attitude towards any effort to take more resources away will be needed to ensure Icelanders industries remain in Icelandic hands. In Newfoundland, much was taken away but has been pulled back over the recent years with this strong leadership and stubborn attitude.

With all this being said, it will be interesting to see what direction Iceland takes over the next few years to deal with the meltdown of the financial sector and the crisis that has ensued. Looking at what happened to their island neighbour might scare a few, but the different circumstances should provide some reassurance that not all will be lost if ever Iceland chose to join the European Union. With strong leadership and a desire to keep control over resources, Newfoundland has recently managed to secure a better place for itself within the Canadian and world marketplaces and Iceland, if it were to join the EU, could do the same. Of course, those looking towards Newfoundland as an example are more likely to be the ones looking for a case of a North Atlantic island seeking shelter to better its conditions. What about those who think Iceland can make it alone, what examples exist to help their claims of long term success?
[1] Thorhallsson, Baldur (2004) Iceland and European Integration – On the Edge, Routledge: New York, p.163
[2] Keohane, Robert (1969) Lilliputians’ Dilemmas: Small States in International Politics. International Organization 23(2):291-310.
[3] Thorhallsson, Baldur (2000) The Role of Small States in the European Union, Ashgate: Aldershot, England, p. 22