Talk about kicking a country when it is down. Until the credit crisis, Iceland had one of the highest standards of living in the world.
Now, fast-food withdrawal as Iceland collapses
Final confirmation of the terminal status of Iceland's economy came with dire news for the 300,000 poor souls eking out an existence on their pile of volcanic rock on the edge of the Arctic Circle. Not another banking collapse, or bankruptcy for a once-rampant "Viking invader" corporation, or another cap-in-hand visit to the IMF, but a far crueller cut: the fast-food company McDonald's is to pull out of the country, closing its three outlets with no plans to go back.
Talk about kicking a country when it is down. Until the credit crisis, Iceland had one of the highest standards of living in the world, with a per-capita income higher than Switzerland, the US, Britain and the UAE. Now they cannot afford a Big Mac, the economists of the Golden Arches have decided. The Financial Times announced the news in faux sombre tones as further evidence of Iceland's drift "towards the edges of the global economy". So RIP McDonaldsson, alongside the retailer Baugur and the banks Kaupthing and Landsbanki as victims of the financial crisis.
Dig a bit deeper and Ronald's retreat from Reykjavik tells us a lot about the post-recession world and Iceland's peculiar place in it. Apparently McDonald's is facing higher costs around the globe and feels it is unable to pass those costs along to customers feeling the pinch of financial hardship. This problem is exacerbated in Iceland, which has to import most of the ingredients for McDonald's products from Germany. (The country is not renowned for the quality of its cattle grazing and boasts a national dish of singed sheep's head, which must make fast food look like haute cuisine.) To make the Iceland operation profitable would require a 20 per cent hike in prices, making Iceland the most expensive place in the world to order a Big Mac, overtaking Switzerland, where it costs US$5.75 (Dh21.11).
So it is not so much that Icelanders have lost their appetite for McDonald's as that the US company has decided it can no longer turn a profit on its business there. There are only a few countries in Europe that do not display the restaurant chain's famed Golden Arches. Albania and Armenia are among them and Bosnia-Herzegovina lost their McDonald's at the height of the 1990s Balkans conflict. But Ronald can still turn a buck in Belarus, it seems, and even make a financial return in Moldova. The Russians, though looking at a 7.5 per cent shrinkage in their economy this year, are still McDonald's mad.
There is likewise no sign that other European countries badly hit by the crisis - Britain and Ireland, for example - are going to suffer the fate of McDonald's-starved Iceland. Compare this with the fast-food-crazy UAE. There are about 66 McDonald's outlets in the Emirates, equal to one for every 75,000 people or so. (In Iceland, there was one outlet for every 100,000 people.) There is no sign as far as I can tell that Emiratis and expats are losing their appetite for McDonald's products - one look at the bustling counters of the Mall of the Emirates store in Dubai would tell you so.
On a Friday evening you have precisely 10 minutes to grab your meal, eat it and wash it all down with Pepsi before somebody is standing above you, tray in hand and three young children at heel, waiting impatiently for your table. Likewise, the drive-through on Jumeirah Beach Road, where cars are backed for a couple of hundred metres along the main drag as young families await their weekly McTreat.
If the presence of and demand for McDonald's can be taken as an indicator of economic health, the outlook for the UAE is rosy. Those bright chaps at The Economist magazine came up with a splendid wheeze in the 1990s when they invented the "Big Mac Index" as a way of comparing purchasing power across the world, taking into account foreign exchange differences and other local variables. Switzerland and Norway regularly figure at the top end of the scale, with Big Macs priced somewhere above $5.70, while Malaysia and Hong Kong were at the bottom at about $1.70.
On this scale, the UAE comes out roughly in the middle. A call to my local McDonald's yesterday informed me that a Big Mac would set me back Dh11, about $3. Still not cheap enough to tempt me, though. I've got a feeling the Icelanders will not be mourning over the loss of McDonald's for long. Singed sheep's head suddenly sounds much more tempting. @Email:email@example.com