The writer, the witch, and the board head.

At a low table in Vigdís' kitchen, whose windows overlook the valley of southern Reykjavík, she talks about concern over next year's government stipends. Some writers have already started courting private donors, apparently; Vigdís has not. She says: "I always thought, 'Well, if someone wants to read me, he will find me.' " She also says: "I think we have to open our mind much more to the community of others, everybody, and stop rowing our boats alone, like the Vikings. … This beautiful little island—and it is beautiful—is just a picture of the world."

But what, exactly, is that picture? The next afternoon, en route to lunch, I stumble on a group of people gathered on the sidewalk outside the prime minister's office. They're dressed in black and carry black flags, one with the anarchist's symbol on it. The ringleader, a short, blond woman with a megaphone and a trash bag, shouts and pitches food at the building's facade. Mustard is squirted on the wall. So is something I've good reason to believe is rémoulade sauce. The woman with the garbage bag intones a spiteful-seeming speech, and then the crowd sets off across the street, over the grass of Arnahóll Hill.

Subsequent investigation of the crime scene reveals the thrown food to be raw meat, smoked lamb (deli-sliced), and two wedges of blue cheese. This, I learn, is "rat food," left for Geir Haarde, the prime minister. (It is also unsettlingly like my hotel breakfast.) The blonde is a witch who just cast an evil spell. By the time I follow them across the green, the witch has disappeared inside the jagged concrete bunker of the Central Bank, hoping to lure out (or perhaps to hex) Davíð Oddsson, the chairman of the bank's board of governors. The inner doors have locked behind her, so her posse waits in the foyer, where motion sensors nudge the outside doors open and shut.

The witch exits eventually, alone. Stopping to face the waiting crowd, she opens up her garbage bag and brandishes what looks like an oddly appointed sex doll. It has a pillow head, a hipster-tight white shirt with buttoned pockets, and a suit in the dimensions of Joe Pesci. A mop of yarn hair mimics Davíð's iconic thatch. The witch marches away from the bank, bearing the effigy on her forearms like an animal pelt, then she pulls its pants down and, with awkward flourish, whips the stuffed cloth buttocks with a clump of twigs. She throws cloth Davíð to the ground. She picks him up. She stuffs him back into the garbage bag and walks away.

Just a few years ago, this might have qualified as provocation, but today it's more like flogging a dead horse. For Iceland, Davíð Oddsson is an object lesson in diminishing political returns. He's spent most of his adulthood in government, first as Reykjavík's mayor and then, for an astounding 13 years, as prime minister. (He served briefly as foreign minister, too, before taking the reins of the Central Bank in 2005.) The Davíð doctrine is heavily inflected with the Reagan-Thatcher creed: At the peak of his power, he pushed for deregulation, privatization, and, eventually, tax cuts. He turned a budget deficit to surplus and set the groundwork for the growth of the past decade. From his last years as prime minister, though, he has been increasingly embroiled in controversy. Now he is the symbol of a leadership thought to have led its people off a cliff. The rush of criticism winds back to his actions well before the crash: Outside the bank, one protester lambastes him for enrolling Iceland in the coalition of the willing.

It is an accusation that sits uncomfortably, a reminder that this weird public Kabuki is, somehow, the glint off larger problems. The evening before, my girlfriend and I shared a geothermic pool with a National Guardsman en route home to the Midwest after a year abroad. "Afghanistan," he said softly. Steam spiraled from the water as he told us how he'd worked with Taliban defectors, trying to steer locals from the lure of short-term profit and from mullahs teaching a perverted, corrupt Islam. "They say, you know, 'hearts and minds,' but it's really more like carrots and sticks now." Across the pool, Icelandic twentysomethings on their stomachs in bikinis swirled their ankles in the air. A half-submerged couple nearby seemed for a moment to listen to the guardsman's stories; then they started talking softly in the tone that's used to plan the next day's errands.