Jonsson, Gudmundur
(1992)
The state and the Icelandic economy, 1870-1930.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis examines the role played by central government in the economic development of Iceland in the period 1870 to 1930 - an era during which the country was transformed from an extremely poor and backward dependency of Denmark into an independent, capitalist state. The study focusses on three spheres of government involvement. The first is institutional change with special reference to agriculture, the largest sector of the economy. The study demonstrates how land tenures, peasant obligations and the regulation of the labour force came to be seen as obstacles to modern farming and examines policies aimed at reforming the institutions underpinning them. Public expenditure policy and its relevance to economic development is the subject of the second part of the thesis. A detailed statistical analysis is undertaken of public expenditure on economic services, its composition and share in total expenditure. In comparison with other countries in Northern Europe economic expenditure in relative terms and per capita was remarkably high in Iceland. The emergence of modern banking is examined in the third part of the thesis. The main topics covered here are the creation of an Icelandic currency and the institutional setting for the central bank function, public investment credit funds and government measures to mobilize credit for the private sector. The thesis concludes that big public spending on a wide range of economic activities, the prominent role of government in shaping the institutional framework of the economy and its heavy involvement in banking indicate an unusually high degree of state intervention in the economy. This is best explained by the strong commitment of the fledgling Icelandic government to economic development and the lack of capital and entrepreneurship which the state was to substitute.
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