Just as there are ‘wheels within wheels’ (according to the book of Ezekiel in the Old Testament) there are systems within systems. Little systems nest and overlap within larger systems. The banking collapse revealed a system operating (or failing catastrophically) at a very high level. The sudden and unexpected collapse of the Icelandic economy was one of the most dramatic consequences. The report into how three Icelandic banks failed and brought ruin to their country reveals systemic leadership failure on an astonishing level. Repeated below is a key section of Eirikur Bergmann’s chilling account (‘How Iceland lost its soul’, the Guardian, 13 April, 2010).
‘Newly privatised, each of the three main banks came into ownership of three nouveau-rich families in Iceland. The report graphically explains how the three business blocks then, in a kind of a testosterone-driven pissing contest, used the savings of generations of hard-working Icelanders to storm the global financial market, including the City of London.
'The report also shows that the crash was mainly caused by a systemic error within Iceland. By vigorously enforcing its deregulation policy the lassez-faire government created a monster it couldn't control: the Icelandic Viking-capitalist was born. Any voice of caution and classical wisdom was dismissed as old-fashioned. In an opinion-oppressed political environment the regulation industry was made laughable by the politicians and business elite alike.
'Then the Icelandic business Vikings headed for the high streets around Europe with their pockets full of borrowed money. Fresh out of business school Icelandic CEOs took over established companies in fields they couldn't even pronounce. The fast decision-making and risk-seeking behaviour of this new breed was hailed in the business media around the world, boosting the already overblown egos of these young alpha-males.
'Within one short decade we turned a traditional Nordic welfare state economy into one of deregulated bonanza capitalism. We somehow lost sight of our roots and values, as is evident in the part of the report that deals with ethics. The president of Iceland, Ólafur Ragnar Grímsson – who recently vetoed the Icesave agreement – is portrayed as the main cheerleader of the new business elite.
'When the clouds started to gather on the horizon in early 2006, all criticism against what we had grown accustomed to calling the Icelandic economic miracle, was dismissed as ill-intentioned whining by envious foreigners. Throwing nationalism into the mix of inexperience, the Icelandic government responded by launching a defensive PR campaign in London, New York and Copenhagen.'
One can speculate how this disaster might have been avoided. Most leaders lack a suitable mental framework to help them to see and understand the dynamics of what is happening around, between and even within themselves. Such a framework might have enabled Iceland’s leaders to fit the emerging pieces into a systemic picture as the awful risk unfurled. Without this facility to capture, process and make sense of the unfolding of events, valuable data appears like so much random and unwelcome noise.