Iceland sold something to Russia in turn for some temporary relief from the effects of Milton Friedman's economics. Iceland followed Friedman's advice to a large degree. Now they are in a huge financial hole with no way out but to sell rights to whatever they have that others want. Russia wants a military port and probably other things. So, Iceland has taken billions from Russia so Iceland might slow the bleeding a little if there is any blood left in the body.
Friedman's economics, which is laissez-faire with a monetarist's twist, is bad economics, not because of the twist, though that too is bad, but because laissez-faire is a disaster.
The main competing economic theory is Keynesianism, named after John Maynard Keynes (pronounced Cains). Keynes used fiscal spending to stimulate the economy. He advocated regulation.
Rather than continue tweaking when things didn't work out well, the Friedmanites advocated 1) throwing out the fiscal-spending stimulus idea 2) throwing out regulations as much as possible and 3) using interest rates set by the Federal Reserve to increase and decrease the money supply to control inflation and to stimulate and cool off the economy in anticipation. Friedman's is called the Chicago School of thought.
Here's an interesting quick read on it:
Iceland's Economic Meltdown Is a Big Flashing Warning Sign
By Toby Sanger, AlterNet. Posted October 21, 2008.
Another school is the pure laissez-faire school called the Austrian School. The Austrian School says 1) don't bother with fiscal stimulus or regulations or monetary policy and 2) get back on the gold standard or what they call hard or real money. They want as little government as possible leaving only national defense and some courts.
Then there are the socialists, who want as much regulation as possible and everything to be owned by the state.
There are also the anarchists who want to do away with the state and with capitalism.
The above is an extremely simplistic view. There are many subcategories.
What's happening now with the bailout? The following news is raising eyebrows. People who are undergoing foreclosures and who are being asked to have their tax dollars go to bailing out the Wall Street investment bankers are actually seeing nearly ten percent of the bailout money go to bonuses. The term bonus has always been a double-edged sword. It has had the psychological effect of stimulating the workers, but in the minds of outsiders, it also suggests a special reward. So, are the bonuses considerably lower than usual such that the workers are being paid no special reward? We aren't told. Is that because the right questions aren't being asked, or is it because the mainstream media are corporate and don't want to side against the stock market workers and their corporate banking bosses who still control the money?
Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package
The Guardian, Saturday October 18 2008