Prime Minister's address at Global Positive Forum "Iceland: a positive model in action"
Ladies and gentlemen.
It is a privilege and an honor to be here.
The Positive economy index is based on a welcoming and necessary development in looking at economic growth and prosperity. It differs from 20th century thinking of a continually increasing GDP as a panacea and instead emphasizes the urgency of taking into account the future generations’ well-being.
It revolves around moving from traditional thinking of rational economics to greater social adaptability.
Moving from the accepted thinking of maximizing growth and efficiency to awareness of the dynamic complexities of the world.
I want to mention a few challenges in the beginning. It would not be off the mark to call these times a true paradigm shift. The challenges we face are on most accounts so novel that we have a hard time getting our head around them – let alone finding solutions.
How do we for example deal with the developments in communication and human connections that are already having a huge effect on our political discourse which is taking place ever more within different echo-chambers on the internet? I this increasing polarization not a serious threat to democracy? This is just one of many effects of the so-called 4th industrial revolution and the great technological changes that have followed. It is nearly impossible to imagine any sector of society that hasn’t been or won’t be influenced by these changes.
When it comes to climate issues, we are of course looking at a mammoth of a challenge. In Iceland we watch the retreat of our glaciers every year, while the Nordic countries have suffered unprecedented droughts this past summer.
The world was presented last month with yet another important warning about the dire consequences of climate change. We have 12 years to limit a potential climate change catastrophe from hitting us full force. The cost of dealing with climate change must be recognized – because the cost of NOT dealing with it could be stupendous. Let us not forget, that taking action to fight climate change is actually likely to stimulate the economy - and not stifle it.
Our societies will also very soon have to deal with aging populations, which means with fewer people in the labor market, there will be increased pressure on our health and pension system.
The way nations respond to these challenges will be consequential. I believe our success depends on whether or not our response will guarantee three fundamentals. These are equality, sustainability and democratic principles. Successful societies of the future will be the ones that ensure an equilibrium between these three factors. When I talk about sustainability I emphasise the importance of building a diverse economy, strong social infrastructures and using our resources wisely without over-exploiting them. This begs the question – how can the economy be made to help us reach these goals? We need an economy that can be organized to meet the needs of the next generations. We must stop thinking only of economic growth. Wealth is not an end in itself but a means to generate sustainable and inclusive growth.
Aristotle differentiated between economics (of the household and the local government) and chrematistics (the accumulation of wealth – which he described as an unnatural activity).
During the 20th century, a very important role of economic theory was discarded and forgotten about – namely that the objective of economics was to serve societies. Milton Friedman famously argued that economics as science should be free of value judgments in order to be objective.
Recent works by scholars and academics have been influential in reshaping the way we think about economics; we have seen diversity enter economic thought again and increasing numbers of economists are becoming more critical of the concept of ongoing growth and argue that economics should serve the goals of society; whether these are a diverse economy, ecological sustainability or strong social infrastructure.
Dear guests.
The case of Iceland is a curious one. Is Iceland a possible role model for other countries when it comes to quality of life? Or is it a statistical anomaly? Most likely it is a bit of both. To many, this country is a mystery. How can such a small economy be so well off? Economies of scale don’t really apply here. So, what is it?
In 1918 Iceland was one of the poorest countries in Europe, living in the outskirts of what was considered humanly possible. Today we are one of the richest countries in Europe, a thriving modern welfare state.
Iceland is a microstate, with a population similar to the city of Nice. We have our own currency, symphony orchestra, professional theaters, an opera house, our own language, 60 golf courses, 63 MPs and a men’s football teams just a few minutes from winning the French world champions in a friendly match a month ago.
We have had our ups and downs in our 1150 years history, mostly downs for several centuries after the Viking era but a remarkable success for the past one hundred years. The history of Iceland is one of survival and prosperity. As Iceland was consumed by disastrous eruptions and deadly diseases in the late 18th century, the Danish king considered “closing down” the colony in Iceland and moving the entire population to Denmark.
We Icelanders are not famous for long-term planning. We come from a traditional hunter society; either there is fish to catch and plenty of it or there is none. We are used to great fluctuations in our economy. We are, however, gradually getting better at long-term planning - thinking it might be a good idea to save part of the catch for the difficult years. What is more important is that we are getting better at valuing the environment and understanding what matters for the coming generations.
My government has a clear vision of how to meet the challenges of our times and what we need to focus on for the future. It will be paramount that we can adapt the foundations of society to a new reality so that prosperity will reach all and not just the few.
A fully funded pension system is a good indicator of better long-term planning, as we continue our journey from traditional fishing nation to a sustainable modern welfare state.
Our economy is also thriving, with good economic growth and trade balance coupled with low inflation and low unemployment. An extremely high labor participation is an Icelandic characteristic. The male employment rate is the highest in the world and in fact the female employment rate is higher than the employment rate of men in other European countries.
We have put increased emphasis on supporting education, innovation and research which we started doing in the years following the economic collapse of 2008. A good and accessible education system is instrumental in ensuring equality and we have seen great progress in Iceland over the last ten/fifteen years with an ever greater number of people finishing formal education. Following the crisis, the government has increased funding for research and innovation. This has produced good results and we are witnessing significant growth in high-tech industry in Iceland.
A focus on creative and critical thinking, literacy and democratic participation, continues to be the foundation of the Icelandic school system. Equal access to education is guaranteed, regardless of where people live and their various circumstances. We also aim to increase investment in innovation and we want to ensure a good tax environment for small and medium sized businesses. This is especially important for the innovation sector, which is essential for a a diverse economy.
It is important to make good use of technology to improve and develop the Nordic model of welfare, increasing quality of life, sustainable growth and job opportunities. We put emphasis on using this new technology to reach the sustainable development goals, to create cleaner and greener solutions for the environment and to improve healthcare systems.
There is a promising opportunity in digitalization of health care and medical services. The distances between homes can be far in Iceland making it difficult to facilitating timely access to medical professionals for all. Telemedicine as well as health technology may prove to be revolutionary for people in Iceland’s rural areas and we are already seeing promising results.
As I already mentioned, we aim to make Iceland carbon-neutral by 2040. Recently, the Icelandic government introduced a new climate action plan to step up our game in fighting against climate change and ensure that we do not over-exploit our natural resources. The strategy consists of 34 initiatives, ranging from a carbon tax food security, from recovering wetlands to setting up a fund to support climate-friendly technologies and innovation, and putting a ban on registering new gasoline or diesel powered vehicles by 2030. Our priorities are clear. We aim to speed up the transformation of transport, from using fossil fuels to electricity and other low- or no-carbon energy sources. We currently use renewable energy for electricity and heating, but we are lagging behind in using clean energy for transport. Thus, we are starting our third renewable revolution in Iceland.
Iceland has something to offer to other nations in the terms of sustainable fisheries. Due to the emphasis that is placed on sustainable utilization of resources and on research and development, Iceland’s fisheries sector occupies a very enviable position internationally. We aim to take steps to make the fisheries sector carbon-neutral, e.g. through increased research on the use of renewable energy sources for the fishing fleet. (example)
We need to organize our taxation system for the future. Ensure that we collect enough for our social system but also that we do it justly and fairly. Equality is a key factor in ensuring prosperity, giving each individual the agency to create their own opportunities.
Technological innovations will certainly impact the labor market – and radical changes might affect people very differently. Maybe we will have to rethink the whole taxing system in just few decades to adjust to a new labor market where we will see greater automation and there the education system will play a vital role, as I mentioned before. And today we have been talking about a very important issue, ethical guidelines to ensure that artificial intelligence will serve all, and not only the few.
Dear guests,
back to the issue of indices. According to an index compiled by Gallup, called an index of negative emotions, the world’s mood is souring quite a bit. When looked at in tandem with another measure on how content people are with their lot in life – it becomes clear that people are on average increasingly unsatisfied with their lives.
Apparently 70% of human behavior is based on emotions, not reason. This is something we should pay attention to when it comes to introducing new policies and measures in today’s context. If the general mood in the world is one of pessimism, we could be in for a rough ride. The loss of hope can be devastating. If people believe, for the wrong reasons, that nothing is improving, that things in general are getting worse, then they may lose confidence in the very measures that can actually work to change things for the better.
So, we must emphasise the positive. We must emphasise what can be done. And we must lead by example. Any sports coach can tell you about the importance of the right mindset - mind over matter. This could be part of Iceland’s secret of success.
It is my firm conviction that Iceland is on the right track with regard to our climate plan as well as building of social infrastructure and creating an environment for a sustainable diverse economy.
It goes without saying that building a more sustainable future for the public good is in our common best interest and this forum is a great encouragement for all of us to work towards that goal.