Davíð Oddsson

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Davíð Oddsson

Davíð Oddsson (born 17 January 1948, in Reykjavík, Iceland) is an Icelandic politician and the longest serving Prime Minister of Iceland (1991–2004). He then served as the Minister of Foreign Affairs in Iceland from 2004 to 2005. Previously, he was Mayor of Reykjavík (1982-1991), and at present he is Governor of the Central Bank of Iceland.

Early Years

Oddsson was born in Reykjavík. His father was a medical doctor, and his mother a secretary. His parents were not married, and he was brought up in his maternal grandfather’s home at Selfoss, a small town in the South of Iceland, until the grandfater died; then he moved with his mother and his grandmother to Reykjavik. He took an early interest in acting and attended an acting school for a while. He also attended the gymnasium Menntaskólinn í Reykjavík where he graduated in the spring 1970. There, he became well-known for a masterful interpretation of the leading role (the king) in the play Ubu le roi, set up by the students. He was also inspector scholae, or president of the Student Association. In the autumn of 1970, Oddsson married Ástríður Thorarensen, a nurse; they have one son. The next six years, Oddsson read law at the University of Iceland, working almost full-time as well. He was assistant to the director of a small theatre (now the Borgarleikhúsið) for a while, and produced, with two friends, a popular radio comedy show for two years; he was for a while a political commentator at Morgunblaðið, and the director of publication of Almenna bókafélagið, a conservative publishing house. In 1973, Oddsson translated a book by the Estonian emigre writer Anders Küng on the communist oppression in Estonia. Upon receiving his law degree in 1976, Oddsson became a managing director of the Sjúkrasamlag Reykjavíkur (Reykjavík Public Health Insurance Company). He had been elected to the Municipal Council in Reykjavík in 1974, for the Independence Party.

Mayor of Reykjavík

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Perlan, a revolving restaurant set on water tanks on a Reykjavik hill, and built on the initative of Oddsson

Oddsson was a member of a group of young conservative-libertarians within the Independence Party who felt that the party should support more strongly attempts to extend economic freedom in the heavily regulated Icelandic economy. The group included Þorsteinn Pálsson, Geir H. Haarde, Jón Steinar Gunnlaugsson, Kjartan Gunnarsson, Magnús Gunnarsson, Brynjólfur Bjarnason and Hannes Hólmsteinn Gissurarson, and they published the magazine Eimreiðin in 1972-1975; in the following years they followed with interest what was happening in the United Kingdom under Margaret Thatcher and in the United States under Ronald Reagan; they also read books and articles by and about Milton Friedman, Friedrich Hayek and James M. Buchanan, who all visited Iceland in the early 1980s and whose messages of limited governments, privatisation, and liberalisation of the economy had a wide impact. Oddsson got a chance to further his ideals when, in 1978, the Independence Party, under his leadership, regained the majority in the Reykjavík Municipal Council which it had lost four years earlier to three left-wing parties. Oddsson swiftly reduced the number of Council members from 21 to 15, and merged the largest fishing firm in Reykjavik which belonged to the municipality and had been a huge burden, with a private fishing firm and then sold off the municipality’s assets in the new firm, Grandi, now one of the strongest fishing firms in Iceland. Incidentally, the director of Grandi, Brynjólfur Bjarnason, who oversaw what was Oddsson’s first privatisation, later became the director of the Icelandic Telephone Company which turned out to be Oddsson’s last privatisation in government (2005). As Mayor of Reykjavík, Oddsson took the initiative to build a City Hall, by the Reykjavík pond (there had never been a City Hall in Reykjavík), and a big restaurant, Perlan, revolving over the old water tanks in Öskjuhlíð. The city of Reykjavík in 1986, on its 200th birthday, received a historic, but somewhat derelict building in Viðey, an island close to Reykjavík, and on Oddsson’s initiative, it was completely rebuilt, now serving as a popular conference centre and museum. Despite his libertarian leanings, Oddsson also generoulsy supported the Reykjavík City Theatre, in particular the building of a new theatre house which was opened in 1989. In the nine years when Oddsson was Mayor of Reykjavík, a whole new district, Grafarvogur, was built and also a new city centre around the shopping mall Kringlan. A forceful and uncompromising Mayor of Reykjavík, Oddsson was much-criticized by the left-wing opposition in the Municipal Council.

Alliance with Social Democrats

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Davíð Oddsson with the editors of his 50th birthday festschrift, 17 January 1998, from left: Jón Steinar Gunnlaugsson, later Supreme Court Judge, Þórarinn Eldjárn, one of Iceland’s best-known poets and writers, and Hannes Hólmsteinn Gissurarson, University Professor and Oddsson’s informal adviser

Oddsson’s old friend and ally, Þorsteinn Pálsson, had been elected leader of the Independence Party, and in 1989 Oddsson had been elected deputy leader, or Vice-Chairman of the Party. After Pálsson had to abdicate as Prime Minister in 1988, after falling out with the leaders of his two coalition parties, there was a widespread feeling in the party that its leadership should be changed, and much pressure on Oddsson to stand against Pálsson. This he did in 1991, and became leader of the Independence Party. Under Oddsson’s leadership, in the parliamentary elections of 1991, the Independence Party regained most of the support it had lost in 1987 when it had been severely weakened because of a split in its ranks. In record time, Oddsson formed a coalition government with the social democrats, Alþýðuflokkurinn, whose leader, Jón Baldvin Hannibalsson, became Minister of Foreign Affairs. Oddsson and Hannibalsson jointly decided that Iceland should become the first state to recognise the reinstatement of the sovereignty and independence of the three Baltic countries, Estonia, Latvia and Lithuania, after the fall of communism.

Oddsson’s government inherited a huge government deficit, and a backlog of public malinvestments; much money had been invested, for example, in fish farming, with little result. Inflationary pressures were also building up, and the fish stocks in the Icelandic waters were being depleted. The government deficit was turned into a surplus in 1996, not least because of the close cooperation between Oddsson and Friðrik Sophusson, the Minister of Finance, who had also been a young libertarian. There has been a surplus almost continuously since then, which has been used to reduce the public debt, and also to reform the pension system, which is now almost wholly self-supporting. Monetary constraints were imposed by making the Central Bank largely independent of any political pressures. It also helped the Oddsson government that there was a wide consensus between the labour unions and the employers that the rampant inflation of the 1980s, with huge, but largely meaningless, nominal wage increases, could not go on; therefore, in 1990, the unions and the employers had signed a “National Accord”, whereby wage increased would be moderate, and government would be assisted in bringing down inflation. Since 1991, inflation in Iceland has been on a level with the neighbouring countries.

It has been argued that it helped much to open and liberalise the economy, that Iceland became, in 1994, a member of the European Economic Area (EEA). It should be pointed out, however, that neither privatisation nor cuts in the corporate tax rates (down from 50% to 30%, with the abolition of a special turnover tax) were brought about by the EEA membership. In the first four years of Oddsson’s first government, also some small companies were privatised, with great success. However, the social democrats refused to accept the privatisation of the two commercial banks under government control. Also, they did not want to develop the existing system of individual transferable quotas in the fisheries (ITQs) into more clearly defined individual rights. Instead, they wanted to declare the quotas public property and either rent them to the fishing firms and auction them off. This idea met with much opposition by the owners of the fishing firms many of whom were strong supporters of the Independence Party. Nevertheless, in the first four years of Oddsson’s government there was a widely-perceived shift in the public opinion: people ceased to look to government for remedies for their troubles. Oddsson himself jokes that he managed to empty his waiting room at the Ministry: there were no more government favours to hand out.

Alliance with Progressive Party

Davíð Oddsson at a birthday party 19 Februar 2003 with Kjartan Gunnarsson, the executive director of the Independence Party, and one of Oddsson’s closest friends and advisers

In 1994, the social democrats split, and as a result they suffered a huge loss in the 1995 parliamentary elections. While in theory the coalition government maintained its majority, it only consisted of one seat. Oddsson therefore decided to form a coalition with the Progressive Party which has its power basis mainly in the countryside, supported by farmers and the inhabitants of the small villages scattered around the coastline in Iceland. The leader of the Progressive Party, Halldór Ásgrímsson, became Minister of Foreign Affairs. In the new government, privatisation was continued, on a much greater scale than before. For example, a big and important chain of fish processing plants was sold; semi-public or public investment funds were merged and sold as a private investment bank; most importantly, the two commercial banks under government control were sold in a few stages, and are now wholle private; in 2005, the Icelandic telephone company was also privatised. The two coalition parties worked together to stabilise the legal framework in the fisheries: They accepted the loud demand by many people that a charge would be imposed on the holders of fishing quotas, but at the same time, the quota system has been stabilised and liberalised, to some extent.

Oddsson’s two governments have been staunch allies of the United States and strongly in support of NATO of which Iceland is a founding member. Oddsson for example supported the actions undertaken by the U.S. and its allies in Afghanistan and Iraq. After the fall of communism, there has been some uncertainty however on whether the American defence force could or should remain in Iceland, having been invited there in 1951, at the height of the Cold War. The Icelandic government believes that the U.S. should continue to commit itself to the defence of Iceland, while it has also made clear its willingness to share in the costs of maintaing the arrangements. Oddsson has not been enthusiastic on joining the European Union (EU), unlike for example the leadership of the social democratic party. A vocal supporter of a free market, Oddsson has publicly expressed doubts about the dirigeste tendencies of the Brussels bureaucracy; he has also pointed out that Iceland, as a prosperous high-income nation would have to contribute much more to the EU than it would get back; again, and more importantly, it would have to cede control of the Icelandic waters, fought for and gained in many “cod wars” of the past with the United Kingdom, to Brussels; while Iceland has a reasonably well-functioning system of fisheries management, there is a consensus that the Common Fisheries Policy (CFP) has not been successful.

The latter Oddsson government (since 1995) has embarked on a course of ambitious tax cuts. It cut the corporate incomes tax down to 18%; it has abolished the net wealth tax; it has lowered the personal incomes tax; and it has lowered the inheritance tax. There is little doubt that the combination of the opening up of the economy, fiscal and monetary stabilisation, the privatisation of many vital companies, and the corporate tax cuts have together created an entrepreneurial climate in Iceland. Since 1995, there has been record economic growth in Iceland, with the real average income of individual households increasing by more than one-third. Icelanders have also been busily investing in other countries, especially the United Kingdom and Denmark.

From Prime Minister to Foreign Minister

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Davíð Oddsson with George W. Bush in the White House in July 2004

In his young days, Oddsson had authored or co-authored several plays for the stage and for television. During his busy days as political leader, he pursued his literary interests as well, and In 1997, he published a collection of short stories, Nokkrir góðir dagar án Guðnýjar, which became a best-seller in Iceland. Oddsson celebrated his 50th birthday at a huge party in the big restaurant Perlan where everybody was invited (the party was paid for by the Independence Party), and his friends published a festchrift of more than 500 pages where many of the most distinguished writers, scholars and politicians of Iceland contributed papers. In the 1999 parliamentary elections, Oddsson’s Independence Party retained strong support, despite the attempt by a former government minister of the Party, Sverrir Hermannsson, to establish a splinter party: the minister had been made director of the National Bank of Iceland and had had to resign because of financial irregularities. In 2002, Oddsson published another collection of short stories, Stolið frá höfundi stafrófsins, which was also well-received.

However, in that same year, 2002, there began a controversy in Iceland about the company Baugur, owned by the successful entrepreneurs Jóhannes Jónsson and his son, Jón Ásgeir Jóhannesson. A gigant on the Icelandic scene, in relative terms, Baugur controlled the majority of the retailing business in Iceland: in parliament, the then-leader of the social democratic party Össur Skarphéðinsson called for a closer supervision on possible monopoly pricing, specifially mentioning this company. Oddsson said he agreed in general. In the summer of 2002, the Icelandic police raided the headquarters of Baugur, after a disgruntled former employee in their American operations had produced what he claimed was evidence of financial irregularities. The two main owners of Baugur did not take kindly to this and accused Oddsson of being behind a campaign against them. They bought a newspaper, Fréttablaðið, which was sent free of charge into every household in Iceland and which strenously opposed Oddsson in the 2003 parliamentary elections, which was bitterly fought, with allegations swirling through the air of corruption, offers of bribes and the abuse of the police. In a speech on 9 February 2003, the main spokesperson of the social democratic party, Mrs Ingibjörg Sólrún Gísladóttir, even suggested that Oddsson might be responsible for the tax investigation of businessman Jón Ólafsson, then owner of a private television station, and also for the police raid on Baugur. Paraphrasing Shakespeare, she asked, are you a friend or not a friend of the Prime Minister, that’s the question.

After the 2003 elections, Oddsson and the leader of his coalition party, Halldór Ásgrímsson, Minister of Foreign Affairs, agreed that Oddsson should be Prime Minister until 15 September 2004, and that then he would be replaced by Ásgrímsson, and the Independence Party would, for relinquishing the Prime Minister’s post, gain an additional ministry in the government from its partner. In 2004 the Oddsson government became embroiled in controversy, as Oddsson introduced a bill which would have made it impossible for large private companies to own more than 15% in any one media, and under which newspapers and television stations could not be owned by the same companies. Oddsson argued that this was to prevent concentration of the media in the hands a few people, and to enable the media to remain independent and critical not only towards politicans, but also towards financial moguls. His critics maintained, however, that the proposal was directly aimed at Baugur which Oddsson was, they said, obviously regarding as a political enemy. By then, Baugur had bought another newspaper, the television station from Jón Ólafsson and a few radio stations, and controlled more than half of the media market. In a much-softened version, parliament passed the media bill proposed by Oddsson. But then, for the first time in the history of the Icelandic Republic, in the summer of 2004, the president, Ólafur Ragnar Grímsson, refused to sign the bill into law. Oddsson bitterly criticized this, pointing out that the director of the televison station formerly owned by Jón Ólafsson and recently bought by Baugur, Sigurður G. Guðjónsson, had been Grímsson’s campaign manager in his first presidential campaign, in 1996, and that Grímsson’s daughter was employed by Baugur. However, Baugur enjoys considerable goodwill in Iceland because their shops offer lower prices than are to be found elsewhere, while their owners are seen as an embodiment of an Icelandic dream of rags-to-riches; many also agreed that the media bill seemed to be a part of a political duel rather than an attempt to make general law. The conclusion of a long struggle was that Oddsson decided, with the agreement of members of parliament of the two coalition government parties, to withdraw the bill and to postpone reforms of law applying to the media.

During his more than 13 years as Prime Minister, Oddsson became acquainted with, or friend of, many Western leaders. He has occasionally attended the meetings of the Bilderberg Group, and he has read a paper to the Mont Pelerin Society. But he only served as Minister of Foreign Affairs for one year. In the autumn of 2005, Oddsson announced that he would withdraw from politics. He said that he felt that the time had come for a new generation to take over. It may have contributed to Oddsson’s decision, that a year earlier had had a short, but dramatic, bout with cancer, soon after the crisis about the presidential refusal to sign the media bill into law. He was however fully cured and in October 2005, he became the Governor of the Central Bank.

Legacy

In Icelandic terms, Davíð Oddsson’s career is remarkable for its many successes. He was only 34 years old when he became Mayor of Reykjavík, and only 43 years when he became Prime Minister; and he has served as Prime Minister longer than any other Icelandic politician, more than 13 years. From the time Oddsson became Prime Minister, the polls have consistently showed him as the most popular and respected politican in the country; at the same time, however, he has often (but not always) been the least popular politican. One reason for the fact that Oddsson has been a very controversial politician is of course that he has implented radical free-market reforms against bitter opposition. In this way, his role in Icelandic politics is similar to that of Mrs Margaret Thatcher in the United Kingdom. The difference between Oddsson and Thatcher is however, that Oddsson has used a biting wit and great personal charm in his political battles; he has often showed his ability to bring down the house with one innocent, but viciously funny remark. Oddsson has enjoyed very strong support from his own party, and all observers would agree that he is a forceful and courageous leader. His critics talk of his authoritarianism, however, and his disregard of proper democratic procedures. Needless to say, this is hotly denied by his many fervent admirers. There is little doubt, whatever people think about Davíð Oddsson, that he has left a large mark on Icelandic political history and that under his leadership, the Icelandic economy has changed beyound recognition.

Elections

11 March 1991: At the Independence Party Convention, Davíð Oddsson received 733 votes, or 52.8%. Þorsteinn Pálsson received 651 votes, or 46.9%.

References

• May 2000 profile of Davíð Oddsson in the London Spectator, by Kristján Guy Burgess, a left-wing Icelandic journalist
• April 2001 profile of Davíð Oddsson in the Charlemagne column of The Economist

External links

• Article on Icelandic economic miracle by H.H.Gissurarson in Wall Street Journal 2004
• Oddsson’s address on the Icelandic economy at the AEI in Washington DC 14 June 2004
• Oddsson’s paper on Iceland and the EU at Linacre College, Oxford, 27 April 2004
• Comments by Richard Rahn on Oddsson’s paper at Mont Pelerin Society meeting in Iceland
• Summary of media coverage on Oddsson and Baugur in England