Iceland - An Overview

History, Economy, Culture, Educational System

Research Paper (undergraduate), 2008

42 Pages, Grade: 1,3


Table of Contents


Table of Contents

List of Illustrations

List of Abbreviations

1 Selling Iceland

2 General Characteristics of Iceland
2.1 Demographics
2.2 Iceland's Vegetation
2.3 Historical Development
2.4 Political System and International Relations

3 Economy and Industry of Iceland
3.1 Recent Eeconomic Situation
3.1 Economic History
3.3 Struc re of the Economy
3.4 The Main Economic Sectors
3.4.1 Financial Sector
3.4.2 Tourism
3.4.3 Marine Sector
3.4.4 Manufacturing and Power-Intensive Industries

4 Culture of Iceland
4.1 People and Society
4.2 Icelandic Language
4.3 Religion in Iceland
4.4 Icelandic Culture according to Hofstede

5 Educational System in Iceland
5.1 Pre-School (governed by the “the Pre-school Act”, No. 78/1994)
5.2 Compulsory Education (governed by the “the Compulsory School Act”, No. 66/1995)
5.3 Upper-Secondary Level (governed by the “the Upper Secondary School Act”, No. 80/1996)
5.4 Higher Education

6 Facts that Concern Iceland

List of Illustrations

Illustration 1: Location of Iceland

Illustration 2: The surface of Iceland

Illustration 3: Flag of Iceland

Illustration 4: Key figures of Iceland 2007

Illustration 5: Development of Real GDP from 1999 to 2008

Illustration 6: Composition of GDP of Iceland 2006

Illustration 7: Hofstede's dimensions for Iceland

Illustration 8: Structure of the Educational System - Iceland

List of Abbreviations

illustration not visible in this excerpt


This paper was created by Christiane Bätz, Kathrin Hartmann and Anne Kristin Rademacher. Christiane Bätz and Anne Kristin Rademacher wrote chapters "1 Selling Iceland", "2 General Characterictics of Iceland", "3 Economy and Industry of Iceland", "4.4 Icelandic Culture according to Hofstede" and "6 Facts that Concern Iceland". They were responsible for layout, table of content, lists of illustrations, abbreviations and literature, too. Kathrin Hartmann wrote chapters "4.1 People and Society", "4.2 Icelandic Language", "4.3 Religion in Iceland" and "5 Educational System in Iceland".

1 Selling Iceland

"We're selling Iceland," quoted the Financial Times in November 2007 after an interview with Jon Olafsson, CEO of Icelandic Glacial. "The purity and coolness of the island - because Iceland is very cool and hip these days." Though this statement is refered to the water product, it demonstrated the high interest in the island itself. As many know, Iceland is the country where one can witness the phenomenons of Mother Nature: tremendous icecaps and several glaciers, raging rivers and magnificent waterfalls, spouting geysers and steaming solfatara, volcanoes, a multitude of birds and whales. The spectacular landscape is one reason why Iceland's tourism is successful. But in recent years Iceland also drew the attention of many industries to itself. For example, many technological and telecommuniational products have been outsourced in Europe towards Iceland as it provides many competitive advantages in these fields.

Iceland is unique: it is the smallest economy in the world that has its own currency and a flexible exchange rate. It is also an advanced country with excellent institutions meaning low corruption index, the rule of law, a highly educated population and more (cf. Iceland Chamber of Commerce 2006). For most of the 1990s the island presented one of the highest consistent growth rates in the world and low inflation and unemployment. Particularly the resource management in the mainstay fisheries sector, price stability and diversification of the industry contributed to this economic record.

The paper on hand gives an outline of the country. To begin with general information about the island is described. This includes demographic as well as historical and political aspects. The third chapter sketches the development and structure of the Icelandic economy. Current economic situation and main economic sectors are content of this section. Furthermore, the culture is described with the three pillars being religion, language and common history. Also the cultural dimensions of Hostede are analysed for Iceland. Moreover this paper provides an overview of the Icelandic education system. Finally upcoming topics and problems will be mentioned.

2 General Characteristics of Iceland

The following chapter presents Iceland in a general overview. This includes the description of demographic characteristics such as location and sociodemographic statistics. Secondly the vegetation will be depicted briefly followed by the development of the island in history. To complete the general perspektive the political system will be described.

2.1 Demographics

The following map shows that Iceland is situated northwest of the UK and in between of the Greenland Sea and the North Atlantic Ocean (cf. CIA Factbook 2007). The biggest volcano island of the world is about 300 km away from Greenland and 800 km away from Scotland (cf. Auswärtiges Amt 2007a). Iceland's area comprises a total of 103,000 sq km with a coastline of 4,970 km. There are windy winters and cool summers (cf. CIA Factbook 2007) with an average temperature of 5.1°C (cf. Iceland 2007a). The following map illustrates where Island is located.

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Illustration 1: Location of Iceland (Source: Central Bank of Iceland 2007)

The country is divided into the Capital Area, West-Iceland, the Westfjords, North-Iceland, East-Iceland, South-Iceland and the Highlands (cf. Visit Iceland 2007b). Iceland's average height is 500 m above sea level. The highest point, Hvannadalshnukur in the glacier Öræfajökull, reaches 2,119 m. One-quarter of the country lies 200 m below sea level as a result of marine abrasion and glacier erosion during the Pleistocene era (cf. Iceland 2007b). Many glaciers, waterfalls, hot springs and volcanoes can be found in Iceland, e.g. the largest glacier Vatnajökull with 8,300 km², the largest lake Þórisvatn 83 km², the longest river Þjórsá 230 km and the tallest waterfall Glymur in Botnsá 190 m (cf. Visit Iceland 2007c).

In Iceland's capital Reykjavik there live about 116,446 of Iceland's total population of 307,261 (cf. Auswärtiges Amt 2007b). Nearly 67 percent of all inhabitants are between 15 and 64 years old, whereas about 12 percent become older than 65 years. Only about 3.27 of 1,000 people die at birth, whereby life expectancy at birth is measured at 80.43 years. A homogeneous mixture of descendants of Norse and Celts, which comprises 94 percent and 6 percent of foreigners, lives in Iceland. They speak Icelandic, English, Nordic languages and German. 99 percent of the population is liberated (cf. CIA Factbook 2007). About 97 percent of the whole population is religious while 88 percent belong to the protestant church. But many people are still superstitious and believe in gosts and elfs (cf. Quack 2004, p. 137).

Iceland's infrastructure is not fully widely developed. There are no railway lines, only streets where one can drive with one's car. Every 1,000 inhabitants about 33 percent have landline and mobile phones, TVs and computers. Iceland does not have a military force (cf. Welt in Zahlen 2007).

Germany is nearly three times as large as Iceland as has about three times more of the population than Iceland. On average Icelandic get 34.2 years old whereas Germans get

42.6 years old. Population growth in Iceland is a little bit better with 0.87 percent than in Germany with -0.02 percent (cf. Welt in Zahlen 2007).

2.2 Iceland's Vegetation

Iceland's vegetation is not that versatile than in other contries. Only about one-quarter of the total area of Iceland has a continuous plant cover mainly due to unfavourable climate, glacier movements, volcanic activity and overgrazing. The most common vegetation is determined by various low-growing shrubs, especially heather, crowberry, dwarf birch, bog whortleberry, bearberry and willow. The vegetation has greatly worsened due to human habitation, accompanied by extensive soil erosion. Since the early 20th century, steps have been taken to halt erosion by reseeding and fencing off land to keep out sheep. In general, the vegetation is sub artic and distinguished by an abundance of grasses, sedges and related species. Much moorland and heatland can be found, too. But all over Iceland there are large areas of bare rock, stony deserts, sandy wastelands and lava fields (cf. Iceland 2007c). The following map shows Iceland's surface which is covered by lakes, glaciers and lava fields among others.

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Illustration 2: The surface of Iceland (Source: Iceland 2007c)

2.3 Historical Development

In the eighth century Irish monks settled in Iceland. But they left the country on the arrival of the Norwegians in the period of 870-930. At the end of the settlement period, the parliament called Althingi was established (cf. Auswärtiges Amt 2007c). In the year 1000 Christianity was adopted in Iceland mainly because of Norwegian pressure. Around 1022 Iceland made its first international agreement with the king of Norway, which concerned the rights of Icelanders in Norway and Norwegians in Iceland. The first Episcopal seat was set up in southern Iceland at Skalholt in 1056. In that period of time Greenland was discovered and colonized by the Icelanders. They were also the first Europeans to be in America. The 13th century marked the "Golden Age" of saga writing.

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From 1220 until 1262 a period of civil war took place which led to Iceland's submission to the king of Norway in 1262. Althingi accepted a new monarchical legal code only until retaining legislative powers in 1281. When Norway, Sweden and Denmark formed the Kalmar Union in 1397, Iceland fell under the sovereignty of Denmark, but still retained constitutional status. In the 15th century Iceland had close contact with England. The English often sailed to Iceland for fishing and trade. Printing was established in the 1530s and in 1540 the New Testament was published in Icelandic. Ten years later the Danish king brought about the Reformation of the Church after a strong opposition by the Catholics. Lutheranism became the state religion. The great wealth of the Catholic Church was removed and the last Catholic bishop, Jón Arason, was guillotined. These events strengthened Danish royal power. In the 16th century Hansa and English trade were replaced by a Danish trade monopoly. Absolute monarchy was established in 1662 and Denmark totally ruled Iceland. The loss of legislative powers was disastrous for the Icelandic economy.

The 18th century marked the most tragic period in Iceland's history. Because of many famines, epidemics and natural disasters which led to a sharp reduction in the population. In 1845 Althingi was re-established as a consultative assembly after being dissolved a couple of years earlier. Ten years later foreign trade was liberalised. In 1874 Iceland obtained its own constitution and control of its finances. In 1904 home rule was established. That means that Denmark agreed autonomy to Iceland so that the first Icelandic government minister could be appointed. Finally Iceland became independent of Denmark in 1918 but still shared the same monarch with Denmark. Until 1940 Denmark administered Iceland's foreign affairs and operated the coast guard. This agreement with Iceland came to an end after Germany occupied Denmark in that year. At the same time Britain occupied Iceland. One year later American troops replaced British forces. On 17 June 1944 Iceland was formally declared Republic of Iceland (cf. Iceland 2007d). This date represents Iceland's national holiday as well. Iceland became a member of the United Nations (UN) in 1946 and of the North Atlantic Treaty Organization (NATO) in 1949. Two years later Iceland entered into a Defence Agreement with the USA that stills stands.

The extension of Iceland's fishing jurisdiction from 3 miles in 1952 up to 200 miles in 1975 led to "Cod Wars" between Iceland and the UK. Iceland joined the General Agreement on Tariffs and Trade (GATT) in 1964, the European Free Trade Association (EFTA) in 1970 and the European Economic Area (EEA) in 1994. In 2001 Iceland became a member of the Schengen Agreement (cf. Auswärtiges Amt 2007c) and accepted the Kyoto Agreement by the UN in May 2002 (cf. Auswaertiges Amt 2007d).

Illustration three shows the national flag of Iceland which has existed since 19 June 1915. The blue colour should represent the Atlantic Ocean whereas the colours red and white refere to the country's slogan: "Country out of fire and ice" (cf. Ipicutre 2008).

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Illustration 3: Flag of Iceland (Source: Ipicture 2008)

2.4 Political System and International Relations

Iceland as a constitutional republic is governed by Geir H. Haarde who is a member of the independence party and has been in this position since May 2007. State president is Ólafur Ragnar Grímsson who was first elected in August 1996 and re-elected in 2000 and 2004. Foreign minister Ingibjörg Sólrún Gísladottir who belongs to the Social Democratic Alliance was also elected in May 2007. Next elections will be in 2011. The unicameral parliament consists of 63 seats. All governmental parties belong to either a coalition of independence parties which are liberal-conservative or the Social Democratic Alliance. Opposition parties consist of the Progressive Party that is left liberal, the Left-Greens, which are left social democratic, and Free Liberal Party, which are fisher orientated. Iceland's administrative structure is divided into six regions, 23 administrative boroughs and 98 communes (cf. Auswärtiges Amt 2007e).

The parliament has the authority over finances and can influence the executive arm of the government. Althingi consists of 63 members, which are elected every four years. Its members have parliamentary immunity. Legislation is the main role of Althingi. On 16 February 1920 the Supreme Court of Iceland held its first session. The Court holds the highest judicial power in Iceland (cf. Auswärtiges Amt 2007e).

Iceland follows an environmental orientated policy. Due to many natural energy sources, especially water and earth warmth, Iceland covers about 70 percent of its total energy demand and 99.9 percent of its total electricity demand with renewable resources. In the future the government aims at the automobile industry specified on hydrogen driven cars (cf. Auswaertiges Amt 2007d).

The goal of Iceland's domestic policy is to consolidate economic growth at low inflation rate as well as the reduction of inequality in foreign trade. Environmental policy influences the industries meaning that no big projects can be executed in natural protection area and they have to be accepted by the parliament (cf. Auswärtiges Amt 2007e).

Iceland's foreign policy focuses on a Nordic Agreement, the NATO, the Defence Agreement with the United States and the European policy including EFTA, EEA and Schengen without actually being a member of the European Union (EU). Another issue is the solidarity with other smaller European countries (cf. Auswärtiges Amt 2007f).

Iceland defines itself strongly through its own culture and language. The cultural policy includes the thousand-year-old saga tradition: dance, literature, sculpture, art and music. Furthermore, Iceland belongs to one of the first Organization for Economic Co-operation and Development (OECD) countries to support education. Grammar school comprises classes one to ten, secondary school classes 11 to 14. Since the new educational structure of 1999, English is the first foreign language to be learned. Danish follows as second and is taught from class seven on. A third foreign language can be chosen voluntarily from class nine on. In total, there are eight universities with 17,100 students (cf. Auswärtiges Amt 2007j).

Political relationships between Iceland and Germany are excellent. They have a trustworthy and narrow relationship. Next to the Nordic partners, Iceland regards Germany as one of the most important partners in Europe. In 2006 Germany was the most important trade partner, followed by the USA and the Netherlands. With a proportion of 14.9 percent of Iceland's total exports, Germany belonged to the main importing countries from Iceland on third place after the Netherlands and Great Britain. Iceland's imports from Germany reached 12.3 percent in that year. Germany mainly delivered electro-technical products, cars, machines and hardware. Iceland is also a powerful supplier of fish for Germany since fish processing in Bremerhaven and Cuxhaven rely on the import of Icelandic fish. Germany is the entrance to markets in Middle and Eastern Europe for Iceland. In 2004 many new flight connections were established between Iceland and German cities, especially for tourists who want to visit Iceland in the short summer period from June until August. Regarding tourism, the biggest visiting group in Iceland comes from Britain followed by US Americans, French and Germans (cf. Auswärtiges Amt 2007g).

Comparing Iceland's inflation rate to the one in Germay one can say that Germany is better off with 1.9 percent than Iceland with 3.8 percent, whereas the unemployment rate is much lower in Iceland with 2.3 percent than in Germany with 9.69 percent. Economic growth is much higher in Iceland with 6.1 percent than in Germany with 1.3 percent (cf. Welt in Zahlen 2007).

Iceland does not belong to the EU but to the EEA. The question whether Iceland should join the EU or not is discussed frequently. But no final decision can be expected for the near future. The population's opinion varies between denial and occasional acceptance (cf. Bundeszentrale für politische Bildung 2007). Because of the cooperation of the EEA and the EU, Iceland has many contacts with the EU. Numerous regulations by the EU, e.g. in the environmental sector, are therefore adopted by Iceland. Through the acceptance of the Schengen Agreement Iceland is equated to the EU member states regarding questions of visas and border control (cf. Auswärtiges Amt 2007h).

3 Economy and Industry of Iceland

The following section presents the development and structure of the Icelandic economy. It is intended to serve as framework for understanding the remarkable progress of the economy. The first section provides a summary of current economic situation followed by the description of historical development of Iceland's economy. Afterwards Chapter 3.3 treats of the structure of the economy.


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Iceland - An Overview
History, Economy, Culture, Educational System
University of Cooperative Education Mannheim
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Iceland, Overview, History, Economy, Culture, Educational, System
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A.-K. Rademacher (Author)C. Bätz (Author)K. Hartmann (Author), 2008, Iceland - An Overview, Munich, GRIN Verlag,


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