65° - 01.07.1968, Blaðsíða 10

plants now under construction have been com-
pleted. This has subjected the country to the
vagaries of nature and of foreign markets to a
much greater extent than industrialized countries
are accustomed to. It has also subjected it to the
immense lack of security of depending upon a
limited, although renewable, natural resource,
the exploitation of which was to a large extent
outside its own control. These conditions, ob-
viously, do not by themselves make severe in-
flation unavoidable, as Iceland’s experience dur-
ing the first four decades of the century indicates,
but they make economic management exceedingly
difficult, in case this management aims at similar
goals as in highly industrialized societies.
It is not only the one-sidedness of its economy
which distinguishes Iceland from its industrial
neighbours. An even more profound difference
stems from the smallness of the population in
comparison with the size of the country and the
aspiration of its people. In their struggle for
independence Icelanders were never satisfied with
anything less than full independence. In a similar
way they have never been content with running
anything but a full and complete society. Iceland
could have decided to do without an independent
monetary system, like Panama and many former
colonial countries have decided; it could, like
Luxembourg, have decided to save the expenses
for running a university, and to depend entirely
on its neighbours for higher education; it could
have decided to forego the pride and pleasure of
having its own national theater and symphony
orchestra; it could have decided to avoid the
expenditures for a foreign service, and accept in
this field the help of a friendly neighbours; it
could even have decided to refrain from estab-
lishing the office of a formal head of state. It
has done nothing of the kind. Only in one field,
albeit a very important one, that of defense, have
the Icelanders resigned themselves to a state of
inferiority and, although originally with con-
siderable reluctance, accepted the cooperation of
a powerful neighbour. When the British Govern-
ment last winter greatly reduced defense expendi-
tures, the Economist quipped that Britain now
aspired to become an Iceland with 55 million
people. Knowing more about Iceland than it does,
the Economist might have added that the defense
cut also began to make realistic the Icelandic
dream of becoming a Britain with 200.000 people.
The high aspirations of the Icelanders impose
a heavier burden upon their economy than most,
8
if not all, other economies, large or small, have
to carry. This burden is not, of course, by itself
a sufficient cause for inflation, especially if there
were a clear understanding of the need to sacri-
fice to some extent other economic goals for its
sake. But added to other important economic
goals it makes economic management commen-
surably more difficult.
What are then, in the light of this analysis, the
prospects of cure for Iceland’s persistent inflation
in the years ahead? Unfortunately, they are not
very good. The broadening of the country’s eco-
nomic base, which is already to some extent
under way, is obviously of prime importance in
coming to terms with inflation. But this process
will be slow and difficult at best and will leave
the structure of the Icelandic economy essentially
the same for a considerable time to come. The
strengthening of the institutions of the society,
the increase and dissemination of economic know-
ledge and the improvement of tools of economic
policy are prerequisites for improving economic
management. In all these aspects considerable
progress has been made in Iceland in recent years
and will continue to be made. The recent ex-
perience of industrial countries does not, how-
ever, inspire much hope about the decisive in-
fluence of increased economic knowledge and
improvement of economic tools in controlling in-
flation. If anything, inflation in these countries
has in recent years become an even more serious
problem than before, as the social discipline
created by the depression and the war has been
wearing out. To an Icelander, it has appeared
that these countries were becoming more like Ice-
land rather than Iceland more like them.
It seems therefore unlikely that changes in the
structure of the Icelandic economy will in the
foreseeable future greatly reduce the problems
which in the past have tended to produce inflation.
Neither does it appear likely that the ability of
the society and its institutions to deal with these
problems will soon improve in any decisive way.
More difficult climatic conditions than in the
past as well as increasing competition and protec-
tion in foreign markets might also add to the
problems. The best that under these circumstances
could be hoped for, is that Iceland, as in the past,
without renouncing its high aspirations, will be
able to contain inflation within tolerable limits
and prevent it from stifling economic growth.
65 DEGREES