What my colleague described as “old” and “new Iceland” last week is sometimes also referred to as “old” and “new money.”

Old money largely represents the clique of wholesalers who allegedly had a near monopoly on importing goods to Iceland and were in a position to control pricing. I don’t know if that’s true or not—I was too young to remember.

They were also dedicated followers of the Independence Party, which in return acted as their patron. Or so I’ve heard.

To describe the nature of the Independence Party is a little tricky because old and new followers don’t always agree on what the party’s policy is supposed to be. I once described the party as “right-wing” in a news story. I thought it was a fairly neutral description since the party is, unarguably, on the right wing of politics.

However, a traditional Independence Party supporter commented that “right-wing” shed a negative light on the party and recommended I use “conservative” instead. I took his advice. Later, a young supporter of the Independence Party told me that describing the party as “conservative” was “unfair” because it was the only liberalist or free-market capitalist political party in the country.

That left me so confused that I eventually went back to “right-wing.” It seems that while the leader of the Independents, Prime Minister Geir H. Haarde, is old-school (as is the party’s former leader and current Central Bank governor and chairman Davíd Oddsson), younger members of the party like Minister of Education Thorgerdur Katrín Gunnarsdóttir, who is also the party’s vice-chairman, are not as conservative.

While Oddsson and Haarde don’t even want to discuss EU membership for Iceland, Gunnarsdóttir has expressed her opinion that the matter should at least be considered—especially in light of the current situation of Iceland’s economy and the state of the Icelandic króna.

My feeling is, that if the “old boys” within the Independence Party remain unwilling to listen to voices calling for discussions of EU membership and a less conservative approach to capitalism, young followers will turn to other parties—and recent opinion polls indicate that they already are—and the party will lose its position as Iceland’s largest and most powerful political party.

What marked the end of old money was when Iceland joined the European Economic Area (EEA) under the initiative of former Foreign Minister Jón Baldvin Hannibalsson and everyone who wanted to could import goods.

So they did, and offered it at a lower price in budget chain stores like Bónus, established by Jóhannes Jónsson (more commonly known as Jóhannes í Bónus) and his son Jón Ásgeir Jóhannesson, chairman of Baugur Group. People loved them for it. Bónus has been the most popular company in Iceland for years.

Everyone shops at Bónus. Even the owner of the old grocery store on the corner shops at Bónus… which says a lot about the pricing of goods at wholesalers.

Such corner grocery stores always make me nostalgic. One of my earliest memories in life is going with my dad to Rangá, the store for the Sund neighborhood in Reykjavík, and eating kókosbolla, coconut cream puff.

But while these stores certainly offer better service and a friendlier atmosphere than Bónus, cheaper products are hard to resist. If people want the charming corner grocery stores to survive, they have to do their shopping there. It’s as simple as that.

Or the owners of these shops have to offer something special that Bónus doesn’t have. Like one such store in Akureyri, Brynja, which makes the best ice cream ever. The store thrives off that, while it also sells general food products and candies. Banning competition is not the way to go.

Then the banks were privatized and ended up in the hands of representatives of new money. Ambitious young free-market capitalists like Jóhannesson and Björgólfur Thor Björgólfsson invested like crazy, buying companies in Iceland and abroad and their business empires grew beyond belief.

In the beginning they seemed to be doing smart things, but eventually their empires grew out of proportion. The rest we know: The global credit crunch came knocking, loans stopped flowing, the value of their companies came crashing down, the banks collapsed and Iceland is faced with the bankruptcy of new money and free-market capitalism.

So now we should go back to old money? No thanks; I’d rather move forward with fairness and reason as our guiding light.

ESA – eyglo@icelandreview.com