ON THE INDUSTRIAL HISTORY OF ICELAND
For a long time, this volcanic island was one of Europe’s poorest countries, as only a small portion of the land is suitable for agricultural use and Iceland possesses virtually no natural resources. Thus, Iceland never developed into an industrial nation – the prosperity it achieved toward the end of the 20th century was due to the country’s booming services sector.
The only natural resource that was exploited on a large scale was sulphur, which is formed mainly through volcanic activity. During the Middle Ages, this mineral was used as an antibacterial agent in medicines and for manufacturing dyestuffs. Demand exploded with the proliferation of firearms starting in the 14th century, as sulphur is a key ingredient in gunpowder. The sulphur trade illustrates the dominance of foreign powers over Iceland: the kings of Norway controlled the mining in the 12th century until the English, who originally sailed into Icelandic waters to fish, took it over, before the merchants of the Hanseatic League acquired the business toward the end of the 15th century. Sulphur was mined primarily in the vicinity of Lake Mývatn and in Krýsuvίk on the Reykjanes peninsula in open-cast mines, with Húsavίk serving as the main shipping port. The profits are said to have been breath-taking, and in 1561 the Danish crown secured a monopoly. By the end of the 16th century the deposits were largely depleted, but mining continued until well into the 20th century.
In 1602, the Danish king imposed a general monopoly on trade that plunged the island into centuries of bitter poverty, as the peasants were also subject to strict serfdom. For instance, they were only permitted to go fishing when the field work was finished, and rowed out in open skiffs while foreigners were routinely since fishing Icelandic waters in sailing vessels. A professional fishery did not emerge until elimination of the trade monopoly in 1855, and more and more Icelanders put to sea in flush-decked smacks. Soon after, they ceased selling dried cod, instead preserving their catch by salting it. Toward the end of the 19th century, the Icelandic fishery reached an industrial scale. As an export product, salt cod was in particular demand, especially in England and southern Europe.
The expanding fishery drove the economy. The first bank was established in 1855, new fishing towns developed, factories for ice-making and fish processing sprang up in the harbour towns. The first fishmeal factory opened in Siglufjördur in 1910, and in 1915 a new port facility began operation in Reykjavίk, whose population doubled. The mechanisation of the Icelandic fishing fleet began in 1905 with the first trawler, the “Coot”. The herring fishery also flourished, but when salted-fish exports collapsed in the 1930s, the industry suffered a severe crisis that lasted until the demand for fish exploded during World War II.
The second pillar of Iceland’s industry is based on the utilisation of energy from renewable sources. Most Icelandic homes are geothermally heated, while most power is hydroelectrically generated. The first small hydroelectric plant was commissioned in Hafnarfjördur in 1904, and many more followed. After gaining independence from Denmark in 1944, Iceland was soon generating so much energy that is was possible to erect new factories such as the Gufunes fertiliser factory and the Iceland State Cement Works. The national energy company Landsvirkjun, founded in 1965, continued to expand its hydroelectric capacity. As a consequence, American and multinational corporations opened up energy-intensive aluminium works in Iceland to take advantage of electricity that was so low in price that it was worthwhile to import bauxite, the main raw material. To further promote this sector, a gigantic hydroelectric plant was recently erected in Kárahnjúkar, but this industrial policy is meeting widespread public protest on account of its environmental impact.