Ethical crises in the international political economy

The Icelandic banking crisis provides a useful example of how the global economic downturn transformed into a domestic crisis and then transformed again into an international conflict. Rather than a strict economic analysis, discussion around the economic causes and potential cures surrounding the Icelandic banking crisis have been framed in terms of ethics. The analysis shows that ethical paradigms based on consequences, in line with Kant's hypothetical imperative, do not align well with categorical imperatives based on duty when considering international political conflicts. It is unclear that any accounting would have the potential to achieve reconciliation.

► In 2008, Iceland experienced the deepest, most rapid financial crisis ever recorded in peacetime.
► Economic crisis was framed in terms of ethics from both the depositors’ side and the Icelandic side.
► Depositors made an argument for restitution in accordance with Kant's categorical imperative.
► Iceland responded with an argument in line with Kant's hypothetical imperative.
► Ethics does not always sit comfortably within models of economic behavior.