In just three years, Iceland went from collapse to revolution and back to growth. What can Spain and Greece learn from the Icelandic experience and its embrace of direct democracy?

Just two or three years after its economy and government collapsed, Iceland is bouncing back with remarkable strength. This week, the small island nation earned praise from foreign investors despite allowing its banks to collapse and refusing to pay back some of its debt — belying the dominant idea among Europe’s ruling class that bank failures and defaults necessarily engender disastrous economic consequences.

Now, in an historically unprecedented move, the government has decided to draft a new constitution with the online input of its citizens — essentially crowdsourcing the creation of Iceland’s real democracy. Rather than just involving voters at the end of the process through a referendum, the Icelanders have an opportunity, through social media, to be directly involved in the writing process. It’s the ultimate affirmation of participatory democracy. It’s Democracy 2.0.

How did Iceland get from there to here? And what are the lessons for Europe’s troubled periphery?

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