HOW FAR should we go in demanding that politicians be held to account for the economic mess we’re in? Is the loss of power, seats and prestige sufficient punishment? In our system, apparently so, although some rightly also face embarrassing questions when the postmortems or inquiries report. That’s where accountability tends to stop. When criminal offences are involved the justice system proves itself a lot less adept than that, say, of the US, in pursuing political wrongdoers.
Last week saw a politician go on trial, the first, for his alleged responsibility in the 2008 world financial crisis. Iceland’s former prime minister Geir Haarde appeared at a Reykjavik special court, set up in 1905 to try elected officials, to answer criminal charges that he failed to protect the country from exposure to the banking crash that almost broke it. He could get two years in jail for breach of ministerial responsibility, what the US legal system would call “depraved indifference”.
Haarde complains of “political persecution”, of being made a scapegoat, not least because the indictment has been brought by the divided – 33 to 30 – Icelandic parliament itself, the Althing, now controlled by his political rivals. Some MPs have since had second thoughts as public opinion now seems to be drifting against Haarde’s prosecution, in part because the economy has begun to pick up – GNP growth of 2.5 per cent is expected this year – and the pain recedes.
He denies he could have foreseen what was going to happen, and that there were plenty of others equally responsible. “Nobody predicted that there would be a financial collapse in Iceland” in 2008, he told the court. Sounds familiar. However, Haarde was not just a passive observer of what happened, but a very public, ideological advocate of hands-off deregulation of the banking system. When it collapsed under too much debt from risky loans, it had grown to 10 times the size of the Icelandic economy. And, true, perhaps others, by the same rationale, could also be prosecuted.
The trial reflects a broader attempt to bring those responsible to account and last month the former chief executive and chairman of the biggest of the failed lenders, Kaupthing Bank, were formally indicted on charges of fraud and market manipulation.
But the Haarde case, however righteous a response to popular anger and demands for punishment, has been highly politicised and dangerously so. Probably inevitably. Critics ask why parliament, now controlled by centre-left parties, voted to indict Haarde while rejecting charges against Social Democratic ministers serving in government at the same.
But at the root of the case there is also the question of whether the charge of negligence is dangerously to miss the point if the failure was systemic, and ultimately political. If we are to avoid going down this road again, we must ask ourselves hard questions about whether it was just negligence here too, or a political failure rooted in a blind faith in unregulated banking. It is easy to blame individuals – sometimes it is also right – but it is more important to target the ideas that got us in this mess.