65° - 01.07.1968, Blaðsíða 9

limelight provided by a free press and other
means of communications, in the push and pull
of well organized and powerful groups and under
the impending verdict of the people, as expressed
in free elections. To me, at least, the amount of
success demonstrated by so many societies in this
awesome task is a greater source of wonderment
than the failure.
In the long run the economic goals mentioned
above are not only compatible but closely inter-
related. Rapid economic growth could not over
a long period of time be achieved without a
simultaneous increase in the general standard of
living, nor would it then have much purpose.
Neither can rapid economic growth be achieved
without a relatively full use of available labor
power. A reasonable balance in its external ac-
counts is in the longer run obviously essential to
the operation of any economic goals. Few would
either dispute that a fairly high degree of price
stability, or at least the avoidance of extreme
instability, was of great importance for the main-
tenance of full employment and rapid economic
growth.
The short run is an entirely different matter,
however, and, after all, it is in the short run we
are all living. Interrelated as the principal eco-
nomic goals may be in the long run, they are
frequently incompatible in the short run. It may
not be possible to maintain conditions for con-
tinued economic growth without reducing pres-
sures in the labor market, even to the extent of
accepting some temporary unemployment. It may
also be necessary to accept a temporary reduction
in the standard of living in order to maintain
conditions for economic growth or keep up full
employment. In order to achieve external balance
the temporary sacrifice of both economic growth
and full employment may be unavoidable, as the
recent experience of the United Kingdom clearly
demonstrates. Similarly, the maintenance of full
employment with price stability will frequently
be impossible, especially in the wake of substan-
tial wage increases. When faced with incompatible
goals, the society will have to make a choice, a
most difficult and painful process even in the
best of circumstances, not least in a democratic
society, and one which is likely to be postponed
as long as possible. In delay and indecision the
goal which is most likely to suffer, even without
explicit intention, is price stability, and in many
societies it may also be found the one most ex-
pendable. Severe inflation is an indication of a
society’s inability to reconcile economic goals
in an orderly way. In its own fashion, inflation
resolves the problem and brings about reconcilia-
tion, but, alas, only to leave new and even more
difficult problems to be solved.
Inflation in Iceland is clearly in part the result
of the acceptance of the principal economic goals
of a modern society, especially full employment
and rapid economic growth. Before the war, Ice-
land had no inflation for a period of almost
twenty years, but then it did not seek to eliminate
unemployment, nor, in any conscious or systema-
tic way, to achieve rapid economic growth. In the
nineteen thirties the country accepted economic
stagnation and severe unemployment for a pro-
longed period in order to protect the standard of
living of those employed. In the post war years,
with the depression in vivid memory, the country
has not been willing to make the same choice.
Full employment, and to an increasing degree
also economic growth, have taken precedence
over other economic goals. At the same time
there has, however, been a strong reluctance to
accept temporary cuts in the standards of living
for the benefit of these other goals. The result
has been inflation.
In tbe dilemma of choosing between goals and
in the increasing ascendancy of full employment
and economic growth over other goals, Iceland
does not differ from other developed socities.
Although this may explain why Iceland has had
inflation, it does not, however, explain why Ice-
land has had more severe inflation than these
countries in general. In order to understand this,
the country’s special position and characteristics
have to be taken into account. It is certainly no
coincidence that the countries which together
with Iceland have had severe inflation in the post
war years, belong generally neither to the group
of highly industrial nor highly underdeveloped
countries. They are on the whole, fairly developed
countries which have more or less fully adopted
the economic goals of the most advanced societies,
and aspire to a similar standard of living as these
societies can offer, but for a variety of reasons
still lack the broad and secure economic basis of
a highly industrialized country.
Since the beginning of the century, when rapid
economic development started in Iceland, fishing
and fish processing have largely led the country’s
economic growth and provided most of its for-
eign exchange earnings. This is still true to-day,
and will remain true even after the industrial
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