Icelandic Capitalism – From Statism to Neoliberalism and Financial Collapse

Abstract

This chapter maps the political economy characteristics of Icelandic society in the post-war period. It shows how the period of statism from the early part of the 20th century, with a strong legacy of protectionism and clientelism, changed up to the present. A major turning point came with a shift towards more liberal mixed economy in 1960, which progressed through the 1980s. That was a period of very high growth rates in an egalitarian society. During the 1990s the political economy became significantly more influenced by neoliberal policies, which can be associated with the buildup of an excessive bubble economy in the 2000s. A new policy emphasis in a new environment of globalized finance, of which Iceland became an active part from 1995, in conjunction with a generally lax attitude of laissez faire in public administration, seems to have made possible rather unusual excesses in speculation and debt accumulation. That eventually led to the dramatic collapse of Iceland's financial system in October 2008. In the wake followed a deep recession. The chapter sets this long-term development into a broad societal context, taking account of political power constellations and changes in politics, the labour market and living conditions.

Citation

Ólafsson, S. (2011), "Icelandic Capitalism – From Statism to Neoliberalism and Financial Collapse", Mjøset, L. (Ed.) The Nordic Varieties of Capitalism (Comparative Social Research, Vol. 28), Emerald Group Publishing Limited, Leeds, pp. 1-51. https://doi.org/10.1108/S0195-6310(2011)0000028005