As William Ian Miller points out "[p]eople of a communitarian nature. . . have reason to be attracted [to Medieval Iceland]. . . the limited role of lordship, the active participation of large numbers of free people . . . in decision making within and without the homestead. The economy barely knew the existence of markets. Social relations preceded economic relations. The nexus of household, kin, Thing, even enmity, more than the nexus of cash, bound people to each other. The lack of extensive economic differentiation supported a weakly differentiated class system . . . [and material] deprivations were more evenly distributed than they would be once state institutions also had to be maintained." [Bloodtaking and Peacemaking: Feud, Law and Society in Saga Iceland, p. 306]
At this time Iceland "remained entirely rural. There were no towns, not even villages, and early Iceland participated only marginally in the active trade of Viking Age Scandinavia." There was a "diminished level of stratification, which emerged from the first phase of social and economic development, lent an appearance of egalitarianism - social stratification was restrained and political hierarchy limited." [Jesse Byock, Viking Age Iceland, p. 2] That such a society could be classed as "capitalist" or even considered a model for an advanced industrial society is staggering.
Kropotkin in Mutual Aid indicates that Norse society, from which the settlers in Iceland came, had various "mutual aid" institutions, including communal land ownership (based around what he called the "village community") and the thing (see also Kropotkin's The State: Its Historic Role for a discussion of the "village community"). It is reasonable to think that the first settlers in Iceland would have brought such institutions with them and Iceland did indeed have its equivalent of the commune or "village community," the Hreppar, which developed early in the country's history. Like the early local assemblies, it is not much discussed in the Sagas but is mentioned in the law book, the Grágás, and was composed of a minimum of twenty farms and had a five member commission. The Hreppar was self-governing and, among other things, was responsible for seeing that orphans and the poor within the area were fed and housed. The Hreppar also served as a property insurance agency and assisted in case of fire and losses due to diseased livestock.
In addition, as in most pre-capitalist societies, there were "commons", common land available for use by all. During the summer, "common lands and pastures in the highlands, often called almenning, were used by the region's farmers for grazing." This increased the independence of the population from the wealthy as these "public lands offered opportunities for enterprising individuals to increase their store of provisions and to find saleable merchandise." [Jesse Byock, Op. Cit., p. 47 and p. 48]
Thus Icelandic society had a network of solidarity, based upon communal life:
"The status of farmers as free agents was reinforced by the presence of communal units called hreppar (sing. hreppr) . . . these [were] geographically defined associations of landowners. . . the hreppr were self-governing . . . .[and] guided by a five-member steering committee . . . As early as the 900s, the whole country seems to have been divided into hreppar . . . Hreppar provided a blanket of local security, allowing the landowning farmers a measure of independence to participate in the choices of political life . . .In practice this meant that "each commune was a mutual insurance company, or a miniature welfare state. And membership in the commune was not voluntary. Each farmer had to belong to the commune in which his farm was located and to contribute to its needs." [Gissurarson quoted by Birgit T. Runolfsson Solvason, Ordered Anarchy, State and Rent-Seeking: The Icelandic Commonwealth, 930-1262] The Icelandic Commonwealth did not allow farmers not to join its communes and "[o]nce attached to the local hreppr, a farm's affliation could not be changed." However, they did play a key role in keeping the society free as the hreppr "was essentially non-political and addressed subsistence and economic security needs. Its presence freed farmers from depending on an overclass to provide comparable services or corresponding security measures." [Byock, Op. Cit., p. 138]
"Through copoperation among their members, hreppar organised and controlled summer grazing lands, organised communal labour, and provided an immediate local forum for settling disputes. Crucially, they provided fire and livestock insurance for local farmers. . . [They also] saw to the feeding and housing of local orphans, and administered poor relief to people who were recognised as inhabitants of their area. People who could not provide for themselves were assigned to member farms, which took turns in providing for them." [Byock, Op. Cit., pp. 137-8]
Therefore, the Icelandic Commonwealth can hardly be claimed in any significant way as an example of "anarcho"-capitalism in practice. This can also be seen from the early economy, where prices were subject to popular judgement at the skuldaping ("payment-thing") not supply and demand. [Kirsten Hastrup, Culture and History in Medieval Iceland, p. 125] Indeed, with its communal price setting system in local assemblies, the early Icelandic commonwealth was more similar to Guild Socialism (which was based upon guild's negotiating "just prices" for goods and services) than capitalism. Therefore Miller correctly argues that it would be wrong to impose capitalist ideas and assumptions onto Icelandic society:
"Inevitably the attempt was made to add early Iceland to the number of regions that socialised people in nuclear families within simple households. . . what the sources tell us about the shape of Icelandic householding must compel a different conclusion." [Op. Cit., p. 112]
In other words, Kropotkin's analysis of communal society is far closer to the reality of Medieval Iceland than "anarcho"-capitalist attempts to turn it into a some kind of capitalist utopia.
However, the communal nature of Icelandic society also co-existed (as in most such cultures) with hierarchical institutions, including some with capitalistic elements, namely private property and "private states" around the local godar. The godar were local chiefs who also took the role of religious leaders. As the Encyclopaedia Britannica explains, "a kind of local government was evolved [in Iceland] by which the people of a district who had most dealings together formed groups under the leadership of the most important or influential man in the district" (the godi). The godi "acted as judge and mediator" and "took a lead in communal activities" such as building places of worship. These "local assemblies. . . are heard of before the establishment of the althing" (the national thing). This althing led to co-operation between the local assemblies.
Thus Icelandic society had different elements, one based on the local chiefs and communal organisations. Society was marked by inequalities as "[a]mong the landed there were differences in wealth and prominence. Distinct cleavages existed between landowners and landless people and between free men and slaves." This meant it was "marked by aspects of statelessness and egalitarianism as well as elements of social hierarchy . . . Although Iceland was not a democratic system, proto-democratic tendencies existed." [Byock, Op. Cit., p. 64 and p. 65] The Icelandic social system was designed to reduce the power of the wealthy by enhancing communal institutions:
"The society . . . was based on a system of decentralised self-government . . . The Viking Age settlers began by establishing local things, or assemblies, which had been the major forum for meetings of freemen and aristocrats in the old Scandinavian and Germanic social order. . . They [the Icelanders] excluded overlords with coercive power and expended the mandate of the assembly to fill the full spectrum of the interests of the landed free farmers. The changes transformed a Scandinavian decision-making body that mediated between freemen and overlords into an Icelandic self-contained governmental system without overlords. At the core of Icelandic government was the Althing, a national assembly of freemen." [Byock, Op. Cit., p. 75]
Therefore we see communal self-management in a basic form, plus co-operation between communities as well. These communistic, mutual-aid features exist in many non-capitalist cultures and are often essential for ensuring the people's continued freedom within those cultures ( section B.2.5 on why the wealthy undermine these popular "folk-motes" in favour of centralisation). Usually, the existence of private property (and so inequality) soon led to the destruction of communal forms of self-management (with participation by all male members of the community as in Iceland), which are replaced by the rule of the rich.
While such developments are a commonplace in most "primitive" cultures, the Icelandic case has an unusual feature which explains the interest it provokes in "anarcho"-capitalist circles. This feature was that individuals could seek protection from any godi. As the Encyclopaedia Britannica puts it, "the extent of the godord [chieftancy] was not fixed by territorial boundaries. Those who were dissatisfied with their chief could attach themselves to another godi. . . As a result rivalry arose between the godar [chiefs]; as may be seen from the Icelandic Sagas." This was because, while there were "a central legislature and uniform, country-wide judicial and legal systems," people would seek the protection of any godi, providing payment in return. [Byock, Op. Cit., p. 2] These godi, in effect, would be subject to "market forces," as dissatisfied individuals could affiliate themselves to other godi. This system, however, had an obvious (and fatal) flaw. As the Encyclopaedia Britannica points out:
"The position of the godi could be bought and sold, as well as inherited; consequently, with the passing of time, the godord for large areas of the country became concentrated in the hands of one man or a few men. This was the principal weakness of the old form of government: it led to a struggle of power and was the chief reason for the ending of the commonwealth and for the country's submission to the King of Norway."
It was the existence of these hierarchical elements in Icelandic society that explain its fall from anarchistic to statist society. As Kropotkin argued "from chieftainship sprang on the one hand the State and on the other private property." [Act for Yourselves, p. 85] Kropotkin's insight that chieftainship is a transitional system has been confirmed by anthropologists studying "primitive" societies. They have come to the conclusion that societies made up of chieftainships or chiefdoms are not states: "Chiefdoms are neither stateless nor state societies in the fullest sense of either term: they are on the borderline between the two. Having emerged out of stateless systems, they give the impression of being on their way to centralised states and exhibit characteristics of both." [Y. Cohen quoted by Birgit T. Runolfsson Solvason, Op. Cit.] Since the Commonwealth was made up of chiefdoms, this explains the contradictory nature of the society - it was in the process of transition, from anarchy to statism, from a communal economy to one based on private property.
The political transition within Icelandic society went hand in hand with an economic transition (both tendencies being mutually reinforcing). Initially, when Iceland was settled, large-scale farming based on extended households with kinsmen was the dominant economic mode. This semi-communal mode of production changed as the land was divided up (mostly through inheritance claims) between the 10th and 11th centuries. This new economic system based upon individual possession and artisan production was then slowly displaced by tenant farming, in which the farmer worked for a landlord, starting in the late 11th century. This economic system (based on tenant farming, i.e. capitalistic production) ensured that "great variants of property and power emerged." [Kirsten Hastrup, Culture and History in Medieval Iceland, pp. 172-173]
So significant changes in society started to occur in the eleventh century, as "slavery all but ceased. Tenant farming . . . took [its] place." Iceland was moving from an economy based on possession to one based on private property and so "the renting of land was a widely established practice by the late eleventh century . . . the status of the godar must have been connected with landownership and rents." This lead to increasing oligarchy and so the mid- to late-twelfth century was "characterised by the appearance of a new elite, the big chieftains who are called storgodar . . . [who] struggled from the 1220s to the 1260s to win what had earlier been unobtainable for Icelandic leaders, the prize of overlordship or centralised executive authority." [Byock, Op. Cit., p. 269 and pp. 3-4]
During this evolution in ownership patterns and the concentration of wealth and power into the hands of a few, we should note that the godi's and wealthy landowners' attitude to profit making also changed, with market values starting to replace those associated with honour, kin, and so on. Social relations became replaced by economic relations and the nexus of household, kin and Thing was replaced by the nexus of cash and profit. The rise of capitalistic social relationships in production and values within society was also reflected in exchange, with the local marketplace, with its pricing "subject to popular judgement" being "subsumed under central markets." [Hastrup, Op. Cit., p. 225]
With a form of wage labour (tenant farming) being dominant within society, it is not surprising that great differences in wealth started to appear. Also, as protection did not come free, it is not surprising that a godi tended to become rich also (in Kropotkin's words, "the individual accumulation of wealth and power"). Powerful godi would be useful for wealthy landowners when disputes over land and rent appeared, and wealthy landowners would be useful for a godi looking for income. Concentrations of wealth, in other words, produce concentrations of social and political power (and vice versa) -- "power always follows wealth." [Kropotkin, Mutual Aid, p. 131]
The transformation of possession into property and the resulting rise of hired labour was a key element in the accumulation of wealth and power, and the corresponding decline in liberty among the farmers. Moreover, with hired labour springs dependency -- the worker is now dependent on good relations with their landlord in order to have access to the land they need. With such reductions in the independence of part of Icelandic society, the undermining of self-management in the various Things was also likely as labourers could not vote freely as they could be subject to sanctions from their landlord for voting the "wrong" way ("The courts were less likely to base judgements on the evidence than to adjust decisions to satisfy the honour and resources of powerful individuals." [Byock, Op. Cit., p. 185]).. Thus hierarchy within the economy would spread into the rest of society, and in particular its social institutions, reinforcing the effects of the accumulation of wealth and power.
The resulting classification of Icelandic society played a key role in its move from relative equality and anarchy to a class society and statism. As Millar points out:
"as long as the social organisation of the economy did not allow for people to maintain retinues, the basic egalitarian assumptions of the honour system. . . were reflected reasonably well in reality. . . the mentality of hierarchy never fully extricated itself from the egalitarian ethos of a frontier society created and recreated by juridically equal farmers. Much of the egalitarian ethic maintained itself even though it accorded less and less with economic realities. . . by the end of the commonwealth period certain assumptions about class privilege and expectations of deference were already well enough established to have become part of the lexicon of self-congratulation and self-justification." [Op. Cit., pp. 33-4]
This process in turn accelerated the destruction of communal life and the emergence of statism, focused around the godord. In effect, the godi and wealthy farmers became rulers of the country. Political changes simply reflected economic changes from a communalistic, anarchistic society to a statist, propertarian one. Ironically, this process was a natural aspect of the system of competing chiefs recommended by "anarcho"-capitalists:
"In the twelfth and thirteenth centuries Icelandic society experienced changes in the balance of power. As part of the evolution to a more stratified social order, the number of chieftains diminished and the power of the remaining leaders grew. By the thirteenth century six large families had come to monopolise the control and ownership of many of the original chieftaincies." [Byock, Op. Cit., p. 341]
These families were called storgodar and they "gained control over whole regions." This process was not imposed, as "the rise in social complexity was evolutionary rather than revolutionary . . . they simply moved up the ladder." This political change reflected economic processes, for "[a]t the same time other social transformations were at work. In conjunction with the development of the storgadar elite, the most successful among the baendr [farmers] also moved up a rung on the social ladder, being 'big farmers' or Storbaendr" [Op. Cit., p. 342] Unsurprisingly, it was the rich farmers who initiated the final step towards normal statism and by the 1250s the storbaendr and their followers had grown weary of the storgodar and their quarrels. In the end they accepted the King of Norway's offer to become part if his kingdom.
The obvious conclusion is that as long as Iceland was not capitalistic, it was anarchic and as it became more capitalistic, it became more statist.
This process, wherein the concentration of wealth leads to the destruction of communal life and so the anarchistic aspects of a given society, can be seen elsewhere, for example, in the history of the United States after the Revolution or in the degeneration of the free cities of Medieval Europe. Peter Kropotkin, in his classic work Mutual Aid, documents this process in some detail, in many cultures and time periods. However, that this process occurred in a society which is used by "anarcho"-capitalists as an example of their system in action reinforces the anarchist analysis of the statist nature of "anarcho"-capitalism and the deep flaws in its theory, as discussed in section 6.
As Miller argues, "[i]t is not the have-nots, after all, who invented the state. The first steps toward state formation in Iceland were made by churchmen. . . and by the big men content with imitating Norwegian royal style. Early state formation, I would guess, tended to involve redistributions, not from rich to poor, but from poor to rich, from weak to strong." [Op. Cit., p. 306]
The "anarcho"-capitalist argument that Iceland was an example of their ideology working in practice is derived from the work of David Friedman. Friedman is less gun-ho than many of his followers, arguing in The Machinery of Freedom, that Iceland only had some features of an "anarcho"-capitalist society and these provide some evidence in support of his ideology. How a pre-capitalist society can provide any evidence to support an ideology aimed at an advanced industrial and urban economy is hard to say as the institutions of that society cannot be artificially separated from its social base. Ironically, though, it does present some evidence against "anarcho"-capitalism precisely because of the rise of capitalistic elements within it.
Friedman is aware of how the Icelandic Republic degenerated and its causes. He states in a footnote in his 1979 essay "Private Creation and Enforcement of Law: A Historical Case" that the "question of why the system eventually broke down is both interesting and difficult. I believe that two of the proximate causes were increased concentration of wealth, and hence power, and the introduction into Iceland of a foreign ideology -- kingship. The former meant that in many areas all or most of the godord were held by one family and the latter that by the end of the Sturlung period the chieftains were no longer fighting over the traditional quarrels of who owed what to whom, but over who should eventually rule Iceland. The ultimate reasons for those changes are beyond the scope of this paper."
However, from an anarchist point of view, the "foreign" ideology of kingship would be the product of changing socio-economic conditions that were expressed in the increasing concentration of wealth and not its cause. After all, the settlers of Iceland were well aware of the "ideology" of kingship for the 300 years during which the Republic existed. As Byock notes, Iceland "inherited the tradition and the vocabulary of statehood from its European origins . . . On the mainland, kings were enlarging their authority at the expense of the traditional rights of free farmers. The emigrants to Iceland were well aware of this process . . . available evidence does suggest that the early Icelanders knew quite well what they did not want. In particular they were collectively opposed to the centralising aspects of a state." [Op. Cit., p. 64-6] Unless some kind of collective and cultural amnesia occurred, the notion of a "foreign ideology" causing the degeneration is hard to accept. Moreover, only the concentration of wealth allowed would-be Kings the opportunity to develop and act and the creation of boss-worker social relationships on the land made the poor subject to, and familiar with, the concept of authority. Such familiarity would spread into all aspects of life and, combined with the existence of "prosperous" (and so powerful) godi to enforce the appropriate servile responses, ensured the end of the relative equality that fostered Iceland's anarchistic tendencies in the first place.
In addition, as private property is a monopoly of rulership over a given area, the conflict between chieftains for power was, at its most basic, a conflict of who would own Iceland, and so rule it. The attempt to ignore the facts that private property creates rulership (i.e. a monopoly of government over a given area) and that monarchies are privately owned states does Friedman's case no good. In other words, the system of private property has a built in tendency to produce both the ideology and fact of Kingship - the power structures implied by Kingship are reflected in the social relations which are produced by private property.
Friedman is also aware that an "objection [to his system] is that the rich (or powerful) could commit crimes with impunity, since nobody would be able to enforce judgement against them. Where power is sufficiently concentrated this might be true; this was one of the problems which led to the eventual breakdown of the Icelandic legal system in the thirteenth century. But so long as power was reasonably dispersed, as it seem to have been for the first two centuries after the system was established, this was a less serious problem." [Op. Cit.]
Which is quite ironic. Firstly, because the first two centuries of Icelandic society was marked by non-capitalist economic relations (communal pricing and family/individual possession of land). Only when capitalistic social relationships developed (hired labour and property replacing possession and market values replacing social ones) in the 12th century did power become concentrated, leading to the breakdown of the system in the 13th century. Secondly, because Friedman is claiming that "anarcho"-capitalism will only work if there is an approximate equality within society! But this state of affairs is one most "anarcho"-capitalists claim is impossible and undesirable!
They claim there will always be rich and poor. But inequality in wealth will also become inequality of power. When "actually existing" capitalism has become more free market the rich have got richer and the poor poorer. Apparently, according to the "anarcho"-capitalists, in an even "purer" capitalism this process will be reversed! It is ironic that an ideology that denounces egalitarianism as a revolt against nature implicitly requires an egalitarian society in order to work.
In reality, wealth concentration is a fact of life in any system based upon hierarchy and private property. Friedman is aware of the reasons why "anarcho"-capitalism will become rule by the rich but prefers to believe that "pure" capitalism will produce an egalitarian society! In the case of the commonwealth of Iceland this did not happen - the rise in private property was accompanied by a rise in inequality and this lead to the breakdown of the Republic into statism.
In short, Medieval Iceland nicely illustrates David Weick's comments (as quoted in section 6.3) that "when private wealth is uncontrolled, then a police-judicial complex enjoying a clientele of wealthy corporations whose motto is self-interest is hardly an innocuous social force controllable by the possibility of forming or affiliating with competing 'companies.'" This is to say that "free market" justice soon results in rule by the rich, and being able to affiliate with "competing" "defence companies" is insufficient to stop or change that process.
This is simply because any defence-judicial system does not exist in a social vacuum. The concentration of wealth -- a natural process under the "free market" (particularly one marked by private property and wage labour) -- has an impact on the surrounding society. Private property, i.e. monopolisation of the means of production, allows the monopolists to become a ruling elite by exploiting, and so accumulating vastly more wealth than, the workers. This elite then uses its wealth to control the coercive mechanisms of society (military, police, "private security forces," etc.), which it employs to protect its monopoly and thus its ability to accumulate ever more wealth and power. Thus, private property, far from increasing the freedom of the individual, has always been the necessary precondition for the rise of the state and rule by the rich. Medieval Iceland is a classic example of this process at work.