After many years of strong economic growth, Iceland’s banking system collapsed in 2008 resulting in a severe economic depression. Today the economy is growing again, and Iceland has become a popular tourist destination. Join Active Minds as we review Iceland’s history and explore some of the characteristics of the “Land of Fire and Ice” that make it unique among the countries of the world.

Key Lecture Points

  • Iceland, about the size of Kentucky, has a population of only 339,000 people. Formed by volcanic eruptions along the Mid-Atlantic Ridge, Iceland has 30 volcano systems. 11% of its surface is glaciers.
  • Irish monks first came to Iceland in the 7th century, followed by the Vikings in the 9th century, who came from Norway and their settlements in Britain. The Norse settlers established the Althing in 930—the world’s oldest parliament—marking the start of Iceland’s Commonwealth period. Sometime between 999 and 1000, by decision of the Althing, Iceland converted to Christianity.
  • The Icelandic Sagas with its tales of feuds and heroics were written in the early 12th century and tell the story of the settlement of the island. Because the Icelandic language has changed very little over the centuries, modern Icelanders are still able to read the Sagas in their original language.
  • After a time of turmoil and clan feuds, in 1262, the Althing accepted Norwegian sovereignty. In 1397, the Kalmar Union was formed between Norway, Sweden and Denmark. Iceland was put under the Danish crown.
  • Iceland, like the rest of Europe, was rocked by the Reformation and Danish Lutheranism was imposed on the country in the 16th century. In the 19th century, nationalism was strong in Iceland, as it was in the rest of Europe, with the people’s desire to be independent of Denmark. In 1904 Iceland was granted home rule, but did not gain full independence until 1944.
  • In 1908 Iceland banned alcoholic beverages. This prohibition was in force until 1935 when the ban was lifted against all alcoholic drinks except beer because it was associated with Denmark. Beer was not legalized until 1988.
  • In 2008 Iceland’s three largest banks collapsed after defaulting on more than $85 billion of debt. Instead of bailing out its banks with taxpayer money, the government allowed them to fail. The krona lost more than 40% of its value against the euro over the following three years. Icelandic households lost 1/5 of their purchasing power. Imports became more expensive, pushing inflation into double digits. Top bank executives were tried and imprisoned for market manipulation and fraud. Since then, the economy has had an impressive recovery, largely due to Iceland’s booming tourist industry, now a third of the country’s export earnings.
  • Taking advantage of its abundant geothermal and hydropower resources, 99% of Iceland’s electricity is produced by renewable sources. 90% of Icelandic homes are heated by geothermal energy.
  • In 2010, the volcano Eyjafjallajokull erupted for 6 days, seriously disrupting European air traffic. Iceland has 4 other major volcanoes on the brink of eruption. If one or more blows, the result could repeat or exceed the travel chaos of 2010.

Exploration Questions

  • How has Iceland’s geography and geology influenced its history?
  • Name 2 historical events that show how Iceland is similar to other European countries and two events showing its uniqueness.
  • Describe the factors that have made Iceland the world leader in the geothermal industry.

Reflective Questions

  • What do you think it would be like to live in a country with so much volcanic activity?
  • Have you ever been to Iceland?  What did you find most interesting about this country?

More to Explore

Books For Further Reading

  • Various, Jane Smiley (editor). The Sagas of the Icelanders (Penguin Classics Deluxe). Penguin Books, 2001. 848 pages. These stories depict the lives and deeds of the Norse men and women who settled Iceland.
    Click here to order
  • Halldor Laxness, Independent People. Vintage, 1997. 512 pages. The author tells the story of an independent and flinty old sheep farmer who after years of servitude to others, just wants to raise his flocks and be beholden to no man.
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  • Arnaldur Indridason. Jar City. Picador USA, 2006. 289 pages. Part of an internationally popular series, in this mystery a lonely old man is found dead in Reykjavik. Inspector Erlendur discovers that the man’s past is not only a clue to his murderer, but reveals an even bigger secret.
    Click here to order