Ling Lui

A Hong Kong current affairs journalist interested in travel and addicted to text.

Let the music play—How Iceland rises from the ashes of banking collapse

03 2015 | Issue 3

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I am no expert in economics, but I recall what happened to a country that has gone bankrupt. I was travelling in Iceland in 2010, two years after its declaration of a national bankruptcy. When I withdrew the Icelandic Krona (ISK) from a local ATM, I got a bundle of paper money which values depreciated significantly, falling by 70%. This means that every time if you pay in cash, you gotta count piles of banknotes. It was a pain in the neck that I forgot to exchange the surplus before I left the country, and none of the money changers in Europe would deal in ISK.


I thought that’s the end of economic growth in Iceland, but I was wrong. Instead, this country since then has been betting on its creative industries to rebuild its economy, turning itself to a hot and sassy destination. Every now and then literary, music and art magazines feature what’s new in this island country. Cantopop singer Denise Ho once said that it will be a great honour if she would be selected to play Iceland Airwaves Festival.


All thanks, in part, to Johanna Sigurdardottir, Iceland’s first female premier and the world’s first openly gay head of state. I believe that women who have come out the closet all possess true grit and guts.


Iceland’s economy used to heavily depend on the fishing and banking industries. When the economic crisis unfolded in Iceland in 2008, the stock market there had lost 90% of its value. The collapse of its banking system sank the country into financial meltdown. The year after, left-wing politician Johanna Sigurdardottir became prime minister of Iceland, and the government back then was urging her to apply her Midas touch to the ailing economy. However, Sigurdardottir insisted that developing a creative economy is the way to go. When the government asked her, “Why should we give money to artists?” she refused to go away and stuck to her guns on the issue.


The first thing Sigurdardottir did in her new role as prime minster was to cut state spending sharply and streamline the government’s operation by workforce reduction. Instead, public funds were set aside for cultural initiatives jointly run by private and public sectors and for cultural education. A number of defunct power stations have been transformed into vibrant arts precincts and become an innovation incubator.


Iceland boasts a diverse pool of musical talent. Eighty percent of the country’s teenagers and young adults have learnt certain types of musical instruments or musicology. Homegrown talents like Björk and Sigur Rós are already world-famous. With a small population of 320,000, Iceland may not have a big enough audience out there to support the music industry. During Sigurdardottir’s term of office, initiatives to promote local musical talent to an international audience were introduced. For instance, musicians can apply to the government, the municipality and the state-owned Icelandair for grants, subsidies or travel support. In 2012, 43 Icelandic bands toured abroad under these initiatives.


The first edition of the Iceland Airwaves was held in 1999. Since 2010, Iceland Music Export, a partnership with governmental and private funds, has taken over the role in running the festival. This ensures the acclaimed international event is professionally run and growing in tandem with the local economy. Over the last three years, the festival has attracted thousands of overseas visitors, a whopping 66% jump. The event also accounts for a 46% increase in foreign spending.


Iceland is now a huge music venue. Its festive calendar is filled with events like Aldrei Fór Ég Suður, Eistnaflug, LungA and Extreme Chill, attracting travellers from all over the world to attend. Backpackers pitch their tents on the grassy fields and join the locals to dance and sing. Businesses that benefit from the audience’s spending as well as the music events include hospitality and F&B industries. Iceland has proved that it is rising from the ashes of bankruptcy by harnessing the power of music.


Sigurdardottir supported not only the music industry since the financial upheaval in Iceland, but also the movie and games industries. Today, Iceland has an unemployment rate of 5.7%, lower than Britain and the United States. The cultural and creative industries have become Iceland’s second largest contributor to GDP growth, totaling one billion euros per year.