Chesterton’s Fence
QUOTE
J.R.R. Tolkien once said…
“He who breaks a thing to find out what it is has left the path of wisdom.”
(English writer and scholar)
CONCEPT
Chesterton’s Fence
Chesterton’s Fence argues that before you remove or change an existing structure—whether a literal fence, a policy, a tradition, or a rule—you must understand *why* it was put there in the first place.
The idea is not to oppose change, but to resist uninformed change. Many institutions, constraints, or norms may seem obsolete or irrational, but they often exist as solutions to problems that are no longer visible.
Chesterton’s Fence asks us to pause, investigate the hidden logic, and learn from the past before attempting to improve upon it.
STORY
House of … Banks?
In the spring of 2008, Iceland was one of the richest countries in the world per capita—by autumn, its entire banking system had collapsed in one of the most spectacular financial meltdowns in modern history.
For much of the 20th century, Iceland’s economy had been humble and stable, anchored in fishing and cautious financial institutions. Then came liberalization. In the late 1990s and early 2000s, Iceland’s government dismantled long-standing regulations on banks and finance, believing they were outdated relics of a slower era. Banking was privatized. Capital controls were removed. Oversight mechanisms, considered bureaucratic burdens, were weakened or discarded entirely.
Three small Icelandic banks—Kaupthing, Glitnir, and Landsbanki—exploded in size, borrowing heavily from abroad to fund aggressive global investments. From 2003 to 2007, the banking sector grew to over 10 times the size of Iceland’s GDP. The nation, with only 300,000 citizens, was now home to financial institutions behaving like global powerhouses.
To many, it seemed like a miracle. Icelanders enjoyed soaring incomes, global recognition, and luxurious lifestyles. But beneath the surface, it was a house of cards. The old “fences” of cautious regulation—designed to keep a small, exposed economy safe—had been removed with no deep understanding of why they had existed in the first place.
Then came the crash.
In September 2008, as global credit markets froze, Iceland’s banks—bloated with foreign debt and no lender of last resort—crumbled. The currency collapsed. Unemployment and inflation soared. Within weeks, Iceland's financial system effectively ceased to exist.
A later government commission called the crisis “a systematic failure of professional ethics,” but it was also a textbook case of ignoring Chesterton’s Fence. Regulators and politicians had torn down financial safeguards because they seemed unnecessary—never realizing those constraints were quietly preventing catastrophe.
In the aftermath, Iceland rebuilt its economy slowly, reimposing capital controls and restoring regulatory oversight. But the lesson was clear: before discarding inherited limitations, even in the name of progress, you must first ask, *what danger were they built to contain?*
Chesterton’s Fence is not a cry against reform—it’s a demand for understanding before action. Iceland learned this the hard way: sometimes, the structure you tear down is the only thing standing between prosperity and ruin.