By Purvi Reddy 10A

To understand this Nordic nation’s current economy, it is important to first comprehend its history. Iceland was amongst the poorest nations in the world during the late 19th century. Agriculture was the primary and most popular sector until industrialization struck. The mechanization of its fishing ships, demand for fish rising due to wartime, and Iceland being an island added up to the creation of a large fish driven economy. By the late 20th century, around 83% of Iceland had shifted to working, directly or indirectly, in the fishing industry.

Then, in the 1990’s, ex-Icelandic Prime Minister David Oddsson prioritized the liberalization and diversification of Iceland’s fish-focused economy and ended up privatizing its entire banking sector. Considered a revolutionary decision then, and even now, it caused Iceland to move towards an economy heavily based on foreign investment banking and financial services. By 2007, the bank’s assets were valued at almost 750% of the country’s GDP, and the Icelandic unemployment rates were an impressive 1.75%.
Then, in 2008, three of the nation’s leading banks – Kaupthing, Glitnir and Landsbankinn – went bankrupt. There were numerous reasons for this, including the credit market drying up and investments turning toxic as banks proved unable to cover their debt. Given the banks unprecedented and astronomical growth, Iceland was unable to cover their debts either. Pension funds reduced by 25% and unemployment rates more than tripled. 14% of the workforce faced a reduction in pay and around 7% had their workload forcibly reduced.
So, midst their biggest financial crisis since 1961, Iceland reformed its entire banking sector, again. It took a few big IMF loans, but Iceland made sure it did not slash their welfare programmes and government wages and banned foreign currency loans. Another proper diversification of sectors occurred and Iceland expanded to the technology and tourism sectors.
Women and female-employment
The ratio of women in full-time work relative to that of men increased from 4.7% in 1992 to 56% in 2010. Iceland has always had a relatively positive environment for working women through ages where it was not as accepted in many other parts of the world. In 2016, women accounted for 48% of the elected representative in the Icelandic parliament – the closest a country has ever come to equal political representation. In recent years, Iceland has achieved the smallest gender pay gap in the world and has held that position of over 9 years. Moreover, in 2018, Iceland enacted the world’s first equal pay law.
In Iceland, men enjoy a 3-month paternity leave, and about 90% of them take it, making it easier for women to continue their careers – something that is almost impossible in most other nations even today.
Post-crisis and the rise
By 2015, Iceland’s total public expenditure was back to their pre-crisis 20 year average of 43% of GDP. Several factors now aid it function as one of the world’s most successful economies including a relatively young population, a historically low unemployment rate, a fully funded private pension funds and a relatively small population.
During the crisis, employment in the public sector declined by 39% due to the privatization of the banking sector. Post-crisis however, employment has shifted towards public tourism organization, increasing public sector employment from 15% in 2007 to 48% in 2016. The ratio of tourism-generated foreign exchange revenues to total export revenues averaged at 31% in 2015, and the turnover in business related to the tourist sector was nearly 49 %.
Education System
All of the above combined form a world-class, progressive education system that advocates equal opportunity for all regardless of their background. Most people in Iceland choose to go for the public education route, which is inexpensive and extremely effective.
It is no surprise that all these factors have led to Iceland having the lowest unemployment rate in the world, being just under 3%. It is an impressive nation that pioneers the future, both in its progressive policy, resilient administration and responsible citizens. For all its past turmoil, it stands proud for a host of achievements, and one can only expect more from them in the future.

 

Author Details:
My name is Purvi Reddy and I am currently in Grade 10 IGCSE. I like writing articles such as these as the process of non-fiction writing gives me the opportunity to research and learn things I would not ordinarily have. I also enjoy reading and debating.