Chapter 6: Iceland
Settled by Norwegian and Celtic (Scottish and Irish) immigrants during the late ninth and tenth centuries ad, Iceland boasts the world’s oldest functioning legislative assembly, the Althing, established in 930. Independent for over 300 years, Iceland was subsequently ruled by Norway and Denmark. Fallout from the Askja volcano of 1875 devastated the Icelandic economy and caused widespread famine. Over the next quarter century, 20 per cent of the island’s population emigrated, mostly to Canada and the US. Limited home rule from Denmark was granted in 1874 and complete independence attained in 1944. The second half of the twentieth century saw substantial economic growth driven primarily by the fishing industry. The economy diversified greatly after the country joined the European Economic Area in 1994, but Iceland was especially hard hit by the global financial crisis in the years following 2008. Literacy, longevity, and social cohesion are first rate by world standards. Iceland’s Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income. The economy depends heavily on the fishing industry, which provides 40 per cent of export earnings, more than 12 per cent of GDP, and employs 7 per cent of the workforce. It remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum and ferrosilicon.
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