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Islands økonomiske udvikling efter anden verdenskrig. Thorvaldur Gylfason. Economic developments in Iceland since 1945. Thorvaldur Gylfason. Three key dates. 1904 Home rule Icelandic Minister for Icelandic affairs, responsible to the Althing - PowerPoint PPT Presentation
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Thorvaldur GylfasonThorvaldur Gylfason
Islands Islands økonomiske økonomiske
udvikling efter udvikling efter anden verdenskriganden verdenskrig
Thorvaldur GylfasonThorvaldur Gylfason
Economic Economic developments in developments in
Iceland since 1945Iceland since 1945
19041904 Home rule Home rule Icelandic Minister for Icelandic affairs, Icelandic Minister for Icelandic affairs,
responsible to the Althingresponsible to the Althing Supreme executive power Supreme executive power transferred from transferred from
Copenhagen to ReykjavíkCopenhagen to Reykjavík
19181918 Sovereignty Sovereignty Royal union with DenmarkRoyal union with Denmark Foreign affairs still handled by DenmarkForeign affairs still handled by Denmark
19441944 Independence Independence Controversial: some wanted to waitControversial: some wanted to wait
Three key datesThree key dates
Jón SigurðssonJón Sigurðsson (1811-1879) (1811-1879) Father of the RepublicFather of the Republic Iceland’s first economist, strong advocate of Iceland’s first economist, strong advocate of
free trade, education, and other liberal causesfree trade, education, and other liberal causes
Valtýr GuðmundssonValtýr Guðmundsson (1860-1928) (1860-1928) Initiated movement leading to Home Rule Initiated movement leading to Home Rule Stressed economic and technological progress Stressed economic and technological progress
before full, formal independencebefore full, formal independence
Hannes HafsteinHannes Hafstein (1861-1922) (1861-1922) First minister, revered poetFirst minister, revered poet
Three key Three key personspersons
Rapid economic growth: RevolutionRapid economic growth: Revolution Iceland: 2½% per year 1900-2000Iceland: 2½% per year 1900-2000 Denmark: 2% per year 1900-2000Denmark: 2% per year 1900-2000
Major sources of rapid growthMajor sources of rapid growth Institutions: Democracy, liberty, equalityInstitutions: Democracy, liberty, equality Investment Investment EducationEducation TradeTrade Diversification away from fishDiversification away from fish
Iceland’s economic Iceland’s economic development since 1945development since 1945
Further sources of rapid growthFurther sources of rapid growth Escalating foreign debtEscalating foreign debt
Living beyond our meansLiving beyond our means Question of sustainabilityQuestion of sustainability
Hard workHard work Need long hours to make ends meetNeed long hours to make ends meet
Mixed blessing: Sign of costly inefficiency Mixed blessing: Sign of costly inefficiency Rural interests are overrepresented in the Rural interests are overrepresented in the
AlthingAlthing Special-interest politics has delayed modernization Special-interest politics has delayed modernization
in the direction of a wide-open market economy in the direction of a wide-open market economy
Iceland’s economic Iceland’s economic development since 1945development since 1945
Goods, services, capital, laborGoods, services, capital, labor ““Four freedoms” (EEA)Four freedoms” (EEA)
Ideas, technology, innovationsIdeas, technology, innovations Trade is educationTrade is education
Fierce debate in Iceland … Fierce debate in Iceland … … … since 1843, when Jón since 1843, when Jón
Sigurðsson published his Sigurðsson published his first treatise on tradefirst treatise on trade
Foreign trade is Foreign trade is keykey
More on trade and diversification
For example, debate in 1920s about For example, debate in 1920s about whether to import foreign workers to whether to import foreign workers to “enlarge” Iceland“enlarge” Iceland
Those in favor stressed Those in favor stressed efficiency efficiency gainsgains from industrial expansion from industrial expansion
Those against emphasized threat to Those against emphasized threat to Iceland’s Iceland’s national identitynational identity
Debate continuesDebate continues To join or not to join the EU?To join or not to join the EU?
Iceland vs. Norway Iceland vs. Norway
Foreign trade is keyForeign trade is key
Foreign trade is keyForeign trade is keyIceland’s entry into EEA ten years laterIceland’s entry into EEA ten years later
33 MPs of 63 voted for EEA agreement33 MPs of 63 voted for EEA agreement
Substantial and diverse gains Substantial and diverse gains Backbone of Iceland’s economic Backbone of Iceland’s economic
liberalization in the 1990sliberalization in the 1990s
But, for Iceland, EEA is not enoughBut, for Iceland, EEA is not enough Local oligopoly hurts consumersLocal oligopoly hurts consumers
Even EU membership is not enough Even EU membership is not enough National currency hinders tradeNational currency hinders trade
In these debates, In these debates, there are those who there are those who look outwardlook outward and and
want to make Iceland more like other want to make Iceland more like other countries nearby, and larger … countries nearby, and larger …
... and there are also those who ... and there are also those who look look inwardinward and wish to be on guard against and wish to be on guard against foreign influences and want to keep foreign influences and want to keep Iceland different, and smallIceland different, and small
Some want a mixture of bothSome want a mixture of both Beware of false contrastsBeware of false contrasts
Openness can be a source of strength Openness can be a source of strength
Foreign trade is Foreign trade is keykey
Trade is key to Trade is key to diversificationdiversification, , which also matters greatly for growthwhich also matters greatly for growth
Major challengeMajor challenge Develop Develop human resourceshuman resources through through
educationeducation Iceland’s success derives from its well-Iceland’s success derives from its well-
educated people, not fish in the seaeducated people, not fish in the sea Natural-resource dependence has proved Natural-resource dependence has proved
to be a mixed blessing around the world: to be a mixed blessing around the world: question of question of educationeducation, inter alia, inter alia
Foreign trade is Foreign trade is keykey
In conclusionIn conclusion
The EndThe EndThe key to lasting The key to lasting economic success is a economic success is a market economy market economy based on free trade, based on free trade, diversified economic diversified economic activity, well-educated activity, well-educated labor, and sound labor, and sound policies and policies and institutionsinstitutions
These slides can be viewed on my website: www.hi.is/~gylfason
Political sovereignty, Political sovereignty,
then full then full
independence, independence,
helped Iceland helped Iceland
achieve these goals achieve these goals
““When trade was free in When trade was free in ancient times, the ancient times, the country lived its golden country lived its golden age.age.” (1843)” (1843)
Foreign trade restrictions Foreign trade restrictions were lifted in 1855were lifted in 1855
Jón Sigurðsson Jón Sigurðsson
““You think that someone may swallow You think that someone may swallow
us up. Let them gobble, in the sense us up. Let them gobble, in the sense
that they trade and do business with that they trade and do business with
us.”us.”
ValtýrValtýr
Hannes Hannes HafsteinHafstein
GDP per capita 1975-GDP per capita 1975-2001 2001 (US$, ppp)(US$, ppp)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Denmark
Iceland Denmark and Denmark and Iceland’s growth Iceland’s growth performance performance since 1975 is since 1975 is almost almost indistinguishablindistinguishablee
GDP per capita 1975-GDP per capita 1975-2001 2001 (US$, ppp)(US$, ppp)
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Denmark
Iceland
Ireland Denmark and Denmark and Iceland’s growth Iceland’s growth performance performance since 1975 is since 1975 is almost almost indistinguishablindistinguishableeIreland caught Ireland caught up, and up, and surpassed ussurpassed us
Investment 1960-Investment 1960-2001 2001 (% of GDP)(% of GDP)
0
5
10
15
20
25
30
35
40
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Denmark
Iceland
Ireland
Similar Similar investment investment behavior in behavior in Iceland and Iceland and Denmark since Denmark since mid-1980s mid-1980s
Before, egged Before, egged on by high on by high inflation, inflation, Icelanders Icelanders invested moreinvested more
Quantity vs. quality
Tertiary education Tertiary education 1970-1970-2001 2001 (% of cohort)(% of cohort)
0
10
20
30
40
50
60
70
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Denmark
Iceland
Ireland
Denmark Denmark remains ahead of remains ahead of Iceland in higher Iceland in higher educationeducation
Recently, Recently, spurred by spurred by proliferation of proliferation of different different colleges, some colleges, some private, tertiary private, tertiary education education enrolment has enrolment has risen risen
Exports 1960-2001 Exports 1960-2001 (% of GDP)(% of GDP)
0
10
20
30
40
50
60
70
80
90
100
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Denmark
Iceland
Ireland
Exports from Exports from Iceland have Iceland have been stagnant been stagnant relative to relative to national income national income since 1870since 1870
Exports Exports equivalent to one equivalent to one third of GDP: too third of GDP: too small for such a small for such a small country small country
Foreign direct Foreign direct investment 1974-2001investment 1974-2001 (% of GDP)(% of GDP)
0
10
20
30
40
50
60
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Denmark
Iceland
Ireland
Iceland has also Iceland has also been a reluctant been a reluctant recipient of FDIrecipient of FDI
This reflects a This reflects a general general reluctance to reluctance to engage in free engage in free trade, as trade, as witnessed by witnessed by Iceland’s Iceland’s unwillingness to unwillingness to join the EUjoin the EU
High-tech exports 1988-High-tech exports 1988-2001 2001 (% of total exports)(% of total exports)
0
10
20
30
40
50
60
Denmark
Iceland
Ireland
Iceland has not Iceland has not been at the been at the forefront of the forefront of the high-tech high-tech revolutionrevolution
Manufacturing Manufacturing has been hurt has been hurt by preferential by preferential treatment of treatment of fisheriesfisheries
Primary exports 1962-Primary exports 1962-2001 2001 (% of merchandise (% of merchandise exports)exports)
0
20
40
60
80
100
120
DenmarkIcelandIrelandGreenlandFaeroe Islands
Iceland has Iceland has begun to begun to diversify its diversify its economic baseeconomic base
Fisheries Fisheries account for 40% account for 40% of exports and of exports and less than 10% less than 10% of GDP and the of GDP and the labor forcelabor force
Current account Current account balance 1980-2005 balance 1980-2005 (% (% of GDP)of GDP)
-12
-10
-8
-6
-4
-2
0
2
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Forecasts
Foreign debt 1980-Foreign debt 1980-2003 2003 (% of GDP)(% of GDP)
0
20
40
60
80
100
120
140
160
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
GDP per hour of work GDP per hour of work 2002 2002 (US$ at 1999 prices)(US$ at 1999 prices)
0 10 20 30 40 50
TurkeyPortugal
GreeceNew Zealand
IcelandSpainJapan
AustraliaUnited Kingdom
SwedenCanadaFinland
SwitzerlandItaly
AustriaDenmark
United StatesGermany
NetherlandsIrelandFrance
BelgiumNorway