186,000 ICELANDERS A SMALL UNIT TRIUMPHS IN A WORLD OF BIGNESS

Press, Volume CIII, Issue 30496, 18 July 1964, Page 12

186,000 ICELANDERS A SMALL UNIT TRIUMPHS IN A WORLD OF BIGNESS

IBu a correspondent of "The Times 1 ' who was in Reykjavik for the visit of the Duke of Edinburgh early thii month.]

For the casual visitor to Iceland the most a small community of this kind can exist at t occupying an area about four-fifths the size of independent economy; and live surprisingly well, in microcosm and its progress a triumph for th of bigness.

Iceland is a land of paradoxes. Perched high up in the North Atlantic, its climate is not nearly so unkind as one might expect, thanks to that universal provider, the Gulf Stream. It is as green and lush in parts as any of England's most favoured corners, thanks to its geysers, the natural hot springs which can be found even in the heart of its capital and which have made it possible to grow bananas under glass. Only a few miles away, however, the country may be a stark and forbidding moonscape, all lava rock and dust. Some of the roads are no more than lava tracks, others might qualify as minor motor-ways. Building Boom At the turn of the century Iceland was economically as backward as any part of Europe; its 70,000 inhabitants still under Danish rule, managed to scrape a meagre living from agricultural smallholdings dotted mostly around the coastal strips, and fishing. Reykjavik, the rapidly growing capital which now houses about half the population, was then a Danish fishing village less than one-tenth of its present size. Today, blocks of flats are springing up all over town in a building boom. Workshops, libraries, cultural centres are rising. The country boasts two airlines, and both are understood to be operating profitably. The transformation came when the industrial revolution came to the fishing industry with the advent of the ocean-going trawler. These were able to exploit the rich fishing grounds around Iceland, still the lifeblood of the country. Home rule and the emergence of its own identity seem to have done the rest. Fishing is, of course, far and away the most important industry and the country's only significant export earner. The postwar boom in food consumption, the switch to frozen foods and Iceland’s early realisation of this trend have done much to foster its prosperity so that today its population with a gross national product of 1500 dollars a head enjoys a standard of living much in line with that of most of north-west Europe.

Apart from its rich fishing grounds, Iceland, again like many of its northern neighbours, has considerable cheap power potential. Water power is there in plenty with only about 3 per cent of the potential tapped so far. More significant recently has been the growing exploitation of the

natural. hot water springs. These already bring heat and hot water to about half the population of Reykjavik and will soon provide even more. The town is at present engaged on a six-million dollars natural heat distribution project to which the World Bank is contributing onethird. At present about 20 per cent of the energy requirements are covered by natural hot springs and another 20 per cent by hydro-power stations, leaving some 60 per cent to be covered by imported fuels, largely oil from Russia. Coexistence generally assumes a different dimension in these parts; sheer proximity sees to that, and, while Britain has now recovered its number one place as Iceland’s trading partner, the Soviet Union follows close behind. Where else in Europe, one wonders, could one see a Russian oil tanker discharging its wares into Esso, Shell or BP storage tanks? Clearly, with an economy so precariously balanced between fish exports on the one hand and cheap power potential on the other, two fundamental economic facts of life emerge: the need for capital to exploit its power resources and attract power intensive industries; and the general need for more diversification. A breakthrough may be on the way in the industrial field as it is understood that a Swiss aluminium group is thinking of putting up a 25 million dollars smelting plant in the north which would bring employment to some 300 people. A step of this kind could mean a leap forward into a new era. It would also mark a welcome move away from the kind of economic nationalism frequently found in a young independent country. What is so remarkable about the Icelandic scene to-

t astounding fact is that all; that 186,000 people England can sustain an !. This is modem society le small unit in a world

day Is that all this has been achieved within 50 years. Possibly, the explanation is to be found in the peoples basic civilisation and in tho smallness itself. For example, there was hardly any illiteracy in the country even at the turn of the century when communications were nonexistent and schools were widely scattered. Five Newspapers

Reading, painting and music are almost instinctive to these delightful people Many of the English standard words are translated into Icelandic, which has been kept in its pure form since A.D. 900. One may wonder how British publishers can ever complain when their Icelandic counterparts manage to make a living. No fewer than five newspapers are published daily in Reykjavik, with the largest enjoying a circulation of over 30,000—an enviable density in a country with 40,000 households. The people are hard working and versatile. A 60-hour week is still quite common and young people use their long summer holidays—from mid May to mid-September—-for doing some job, the boys usually joining a fishing crew. Schoolmasters too, use these vacations to supplement their incomes and provide badly needed extra labour: for the shortage of labour is one of the most pressing problems. A miniature “Wirtschaftswunder” cannot be achieved without considerable inflationary pressures. Wages have been climbing strongly, until last year the drift and actual increases amounted to an untenable 30 per cent. Something had to be done and a wage settlement was in fact reached early this month. This will tie by law wages to the cost of living index for at least one year, and with this agreement the Government believes it has moved a long way towards a stablised incomes policy, the main preoccupation of most industrialised countries at present. When it comes to agreements of this kind the fact that in a small community everybody knows everybody else on Christian name terms (surnames are hardly used in Iceland) must be a great help. 12-Mile Limit

In spite of inflation at home, Iceland’s trading balance has been healthy in recent years. Last year exports rose by 12 per cent and imports by only seven per cent; national income has gone up by 20 per cent in the three years to 1963. Fish prices have recovered after the sharp setback of the late 19505, when increased output of herring oil and meal by Peru and Chile had played havoc with world prices. The question now is how long the fishing boom can last and how successfully Iceland will be able to stand up to increasing competition from relative newcomers to the industry, mainly Russia and Japan. A valuable export business in dried fish, for instance had been built in recent years with Nigeria. This is already on the downgrade as the Japanese as well as local interests have moved in. The much publicised “cod war” with Britain is now largely forgotten. But the 12mile territorial fishing limit is undoubtedly a vital necessity for the country. Iceland, like its more powerful neighbour Norwav, has achieved much to raise its standard of living by making the most of its natural resources, but more remains to be done. To stand still in today’s economic rat-race means stagnation, and it is therefore all the more encouraging that an enlightened international organisation like the World Bank, which has done so much to help the truly underdeveloped areas, is also keeping a friendly eye on Europe’s north.