Letting banks fail reversed Iceland’s two-decade inequality surge

Evidence

Finally, consider this bonus to the Icelandic experience of not bailing their banks. After initially falling quite rapidly, real wages have been rising at a brisk pace. This has helped reverse the trend of growing inequality witnessed between 1995 and 2007, when the after-tax Gini coefficient rose from 0.21 to 0.43, mostly because of the high incomes of top earners—a phenomenon seen in all highly financialized societies. By 2010, when capital income had collapsed and the tax code was reformed, the Gini coefficient was pushed back down to 0.245. — Mark Blyth, Austerity, 647

Categorization

• XREF: The Gini doubling 0.21 to 0.43 in financialized societies connects to Piketty’s inequality work and the shared financialization claim across countries. — connects to: Iceland and Ireland offer a natural experiment comparing austerity with bank default — Mark Blyth, Austerity: The History of a Dangerous…, 638; Iceland let its banks fail rather than socializing their debts onto taxpayers — Mark Blyth, Austerity: The History of a Dangerous…, 642; Letting banks fail kept Iceland’s 2012 debt-to-GDP ratio at 99 percent — Mark Blyth, Austerity: The History of a Dangerous…, 644 (+3 more)
• ADDENDUM: Connects to ‘On Sacrifice’ thematic interest in how elite rent-extraction drives inequality and how collapse reverses it.

Broader Connections

• Iceland recovered quickly despite higher taxes after letting its banks fail #corroborates (0.85) — Mark Blyth, Austerity, 645
• Letting banks fail produced better outcomes than bailouts in 2008 #corroborates (0.78) — Mark Blyth, Austerity, 622
• Scandinavian 1990s bailouts removed bankers while bailing out banks #qualifies (0.72) — Yanis Varoufakis, Technofeudalism, 929