Iceland

Iceland Ísland
Flag Coat of arms
Capital and largest city	Reykjavík
Official languages	Icelandic
Dominant mode of production	Capitalism
Government	Unitary parliamentary republic
• President	Guðni Jóhannesson
• Prime Minister	Katrín Jakobsdóttir
Area
• Total	102,775 km²
Population
• 2022 estimate	376,248
Currency	Krona

Iceland is an island country located in the North Atlantic ocean. It was established by Norwegian viking migrants in the ninth century who brought slavery with them. The 2008 financial crisis severely affected the country, which led to the ousting of neoliberal government officials responsible for mass privatization in January 2009.

History

Independence

At the time of its independence from Denmark in 1944, Iceland was one of the poorest countries in Western Europe. The economy and ruling Independence Party were controlled by a group of fourteen families, nicknamed "The Octopus." A coalition of the Independence and Progressive Party heavily controlled the economy. The largest banks were state-owned and gave favorable loans to the businesses of ruling families.

Social-democratic period

In response to protests, the USA shrank its occupation forces in Iceland from 45,000 to 1,000. In 1948, the two countries agreed to let a civilian company run the Keflavik airfield in order to conceal the U.S. base.

Between 1958 and 1976 Iceland fought a series of minor conflicts with the UK known as the Cod Wars. These conflicts were a result of Iceland increasing its territorial waters, and not allowing other countries to overexploit their fishing stocks which the UK opposed. Iceland was the victor of these conflicts, despite having no military other than a small coastguard, and the UK was forced to recognise Iceland's new territorial limits.

Neoliberalization

Iceland began to slowly liberalize its economy in the 1960s. In the early 1980s, a neoliberal interest group called the Locomotives formed. One of its founders, Davíð Oddsson, became mayor of Reykjavík in 1982 and then Prime Minister and leader of the Independence Party in 1991. He lowered corporate taxes, privatized state companies, and joined the European Economic Area in the 1994. By 2003, all banks had been privatized, with the Landsbanki going to the ruling families of the Independence Party and the Buradarbanki (later Kaupþing) going to the rulers of the Progressive Party. Davíð resigned in 2004 to become head of the Central Bank. Iceland's economy grew rapidly from 2003 to 2007, becoming the third-wealthiest country in the world per capita but also the most indebted in terms of external debt to GDP.

Great Recession

During the economic boom, Iceland's housing prices grew by an average of 16.6% per year. Foreign banks bought and resold Icelandic bonds, which had interest rates five times as high as the rest of Europe. The krona and stock market briefly fell in 2006. When the Landsbanki opened banking services (Icesave) in other European countries, more than 300,000 people 116 local governments deposited in its accounts. By 2008, foreign Icesave deposits reached $10.5 billion, more than half of Iceland's GDP.

After the US bank Lehman Brothers collapsed in September 2009, Oddsson ordered the Central Bank to buy 75% of the shares of Glitnir, the third-largest bank in Iceland. In October, all three of Iceland's major banks failed while holding total deposits of $182 billion. During the Great Recession, the krona lost 80% of its exchange-value compared to the euro, the stock market dropped by 75%, unemployment rose from 1% to 8%, real wages dropped by 12%, prices rose by 27%, and GDP dropped by 9.3%. Household debt reached the same amount as the GDP and non-financial businesses had three times as much debt as the national GDP. Iceland sought help from the IMF, but the IMF demanded that it reimburse the Netherlands and United Kingdom for money they used to compensate Icesave depositors. Icesave's insurance covered €20,887 from each account, but the British and Dutch wanted full reimbursement with interest. Iceland took a $2.1 billion loan from the IMF and a $3 billion loan from Russia and other Northern European countries.

Protests

Mass protests began in January 2009 and were nicknamed the Pots and Pans Revolution because protestors banged pots and pans outside the parliament building. Riot police soon attacked the protestors. The Independence Party allowed new elections in April, and the prime minister and cabinet resigned when their coalition with the Social Democratic Alliance broke down. A new coalition of the Social Democrats and Left-Green Movement won the 2009 elections and restored social-democratic programs.

The Left-Green Movement came to power in 2017. It rejected NATO militarization of Iceland but supports its proxy war against Russia.

Politics

In the 2017 elections, the Left-Green Movement lost three parliament seats, and the the center-right Progressive Party gained five seats. The conservative Independence Party retained all of its 16 seats.