Conflicts of Interest in Iceland and in General

Suppose you heard about a major leak of data from a Panamanian law firm that specialized in setting up offshore shell companies to help rich clients hide their assets. Would your first thought be, "That's going to cause a political crisis in Iceland"?

And yet that is what is happening. The data from Mossack Fonseca reveal that the Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson, and his wife, Anna Sigurlaug Pálsdóttir, control a shell company called Wintris that owned bonds issued by Icelandic banks. (The money was really hers, but he was for a time listed as half owner of the company.) The most important thing Gunnlaugsson has done in his seven years in politics has been work on Iceland's response to the banking crisis of 2008-2009, which hit Iceland as hard as anywhere in the world. Gunnlaugsson never disclosed his financial interest in the banks. Which certainly sounds like cause for scandal. On the other hand:

While Wintris was shielded from some of this turmoil, it had invested in bonds issued by three Icelandic banks and was owed more than 500m Icelandic króna (£2.8m) when they all collapsed. Only a small fraction of that sum is likely to be recovered.

Revelations from the Panama Papers about Gunnlaugsson and Pálsdóttir’s offshore activities are awkward for Iceland’s prime minister, who has made a name for himself defending the collapse of his country’s financial system against the demands of foreign creditors, whom he has repeatedly characterised as “vultures”.

He has dismissed suggestions that his wife’s ownership of Wintris compromised him as prime minister. On the contrary, he suggested, his consistently tough approach to foreign creditors, including Wintris, demonstrated that his wife’s financial interests had never affected his decision-making.

As the story stands now, it seems that when he voted for Iceland's decision not to bail out foreign investors in its banks, and then defended that position as PM, Gunnlaugsson was acting very much against the interests of his offshore company. Moreover, when Iceland's tax office began investigating whether wealthy Icelanders were using offshore companies to avoid taxes, Gunnlaugsson supported them, even though, he says, he "always assumed" that this would turn up evidence of his and his wife's offshore investments. So far he has not been accused of avoiding taxes, and he insists he never has.

I think it was foolish for Gunnlaugsson to act on the banking crisis without disclosing his investments, but what else has he done wrong? On the contrary, to me he seems to have acted with great integrity in defending the national interest of Iceland as he saw it. Or perhaps his political ambition is greater than his greed, but really that is all we can ever ask of politicians. I can't see anything corrupt about his actions.

This is a point that bears emphasizing. Reformers and agitators routinely assert that nobody with a financial interest in political matters can possibly act in a non-corrupt way. Viz, Hillary takes money from oil and gas executives, therefore she is in the pay of the oil interests and will do their bidding. Or, more broadly, politicians support foreign wars because they are in the pay of the defense companies or the Saudi royal family. One should never discount the power of simple corruption, but in my reading it is not a big part of politics in the U.S., Britain, or other places I know well. Which is not to say that there is no corruption, only that it is much more complex and subtle than cash paid for favors. Nor does it exclude acting against the interests of wealthy backers; the most corrupt American politician of my lifetime was probably Lyndon Johnson, who may also have been the one who did the most for poor people.

People are complex. Politics, which is millions of people acting together, is insanely complex. To evaluate politicians simply according to who gives them money is foolishly simplistic.