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We Knew the Panama Papers Would Make a Splash. But in Iceland?

It’s no coincidence that the people of this tiny island nation were the first to punish their leader’s financial misdeeds.

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This story was updated as new information became available.

Well, that didn’t take long.


This story was updated as new information became available.

Well, that didn’t take long.

The “Panama Papers” leak — which, just days ago, revealed how world leaders, business tycoons, and celebrities have been using offshore bank accounts to conceal possibly ill-gotten wealth — has claimed its first victim. And he’s not from Moscow, Sao Paolo, or Beijing. He is, of all places, from Reykjavik.

Earlier today, Sigmundur David Gunnlaugsson, the prime minister of Iceland, stepped down as public anger mounted over revelations that, rather than disclosing his stake in an offshore shell company, he had sold it to his wife for $1. (A subsequent email from his press office said that he had not resigned, rather that he had “suggested” that his party’s vice-chairman “take over” the office “for an unspecified period of time.”)

The scandal had been percolating for some time, but the full extent of the prime minister’s dishonesty was revealed for the first time in an interview that aired on Sunday. The spectacle was almost too pathetic to bear: A flustered Gunnlaugsson stammers through an unconvincing protestation of innocence and then literally flees the room as the cameras keep rolling.

The next day, thousands of protesters — a significant fraction of Iceland’s tiny population of 320,000 — took to the streets to demand that he step down. And in the blink of an eye, he was gone.

At first glance, it seems almost comic that the first head to roll was, of all places, in Reykjavik. Why were the Icelanders so angry? Many of the other revelations in the “Panama Papers” are much more damning. Even many of Gunnlaugsson’s critics concede that he hadn’t broken any laws.

But it makes sense that the head of Iceland’s government is the first public figure to face the consequences of the exposé from Panama. By just about any metric you can cite — from violence to life expectancy to control of corruption to press freedom — tiny Iceland is one of the best-governed countries in the world. Most recently, the country’s voter turnout is at 81 percent, and its citizens also report one of the highest levels of life satisfaction in Europe.

The upshot is that Icelanders know what good government looks like and appreciate what it brings them. That’s why they don’t hesitate to demand that their politicians live up to their standards. And those standards are very, very high.

Sunna Kristin Hilmarsdottir, an Icelandic journalist, told me that until she saw the damning interview, she had felt sorry for the embattled prime minister, who kept taking to his blog to try to tell his side of the story. “He was trying to explain himself, and no one was listening to him,” she said.

But once the interview aired, the time for empathy was over. Offshore companies are an especially sensitive issue in Iceland, which suffered a huge financial crisis in 2008 after a coterie of businessmen used them to conceal their shady business dealings. As Hilmarsdottir explained, what made people so mad wasn’t even the money — it was the dishonesty. “Of course it’s not forbidden or unethical to have money abroad if you pay your taxes,” she said. “But it’s the fact that he concealed it, and did it on purpose.”

It was this intolerance for any further chicanery that brought nearly 10 percent of Iceland’s voters onto the streets to call for his ouster. (Gunnlaugsson remains the head of his party, and other politicians were also implicated, so it’s a sure bet the protests aren’t done yet.)

Contrast that with Russia, where it seems most people haven’t even heard that the “Panama Papers” had implicated their president’s friends and political allies in schemes to move $2 billion offshore. The largely state-controlled Russian media has barely reported the story — and when it did, it was only to cast aspersions on Western journalism. But even if the full extent of the revelations were widely known, it’s unlikely that it would have made much difference.

Russians know very well — better than anyone — that their country is veritably choked with corruption. But President Putin’s approval ratings remain sky high. Given the lack of alternate information, many Russians reflexively dismiss any allegations against him, blaming dishonest civil servants, oligarchs, or Western disinformation. Others accept that Putin is himself corrupt, but shrug their shoulders. His rule doesn’t allow for change, and there’s no alternative anyway. So what’s the point?

There’s a danger that a similar resignation will triumph in the democratic world. It’s manifested in those Americans and Europeans who say they don’t vote because “all politicians are the same,” or because “it’s all controlled by the corporations anyway.” Others give way to rage: rage at the foreigners, rage at the intellectuals, rage at the very system of government itself. It’s the dark forces nourished by such emotions that have propelled Donald Trump and his European counterparts to electoral success.

Iceland’s example shows that another response — neither resignation nor rage — is possible. It wasn’t the state or the system that her countrymen were angry at, Hilmarsdottir, the Icelandic journalist, told me. It was the dishonesty and hypocrisy of politicians who had failed to live up to their standards of good governance.

Well-functioning democracy doesn’t make people pure — it just makes it possible to hold them accountable. As Americans and Europeans strive to right their creaking ships of state, they should look to Iceland for an example. That country’s citizens haven’t placed their trust in allegedly infallible leaders or turned against the very idea of good governance. Instead, they have carefully tended to their faith in the idea of a just system of politics, and demanded that their leaders live up to it. It sounds like an oxymoron, but it bears repeating: When done well, government can work. And when good governance is enforced by citizens who believe in it, it can work wonders.

In the photo, people protest against Prime Minister Sigmundur David Gunnlaugsson outside parliament in Reykjavik, Iceland on April 4, 2016.
Photo credit: HALLDOR KOLBEINS/AFP/Getty Images

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