The Economic System

Iceland follows a capitalist structure and free market principles with an extensive welfare system. The economy of Iceland has been growing steadily with a high income and a low unemployment rate after the financial crisis in 2008. This crisis involved the default of all 3 of the privately owned commercial banks. This lead the entire country into an economic depression and a significant political unrest (Amadeo, Kimberly). Halfway through 2012, Iceland was regarded as a country with a huge economic success story (2008–2011 Icelandic). The unemployment went down by 6.3% and immigrants were coming to fill job positions. Ever since then their economy has been growing at a steady rate with a high GDP and HDI index.

The economy in Iceland allows the free market and demand to determine the prices and it is also in favor of the interests of the people. Despite of that the government plays an important role in international trade and healthcare.

It also has several elements that serve as advantages as well as disadvantages. Some of the advantages are:

• Goods and supplies are distributed based on the most requirements.

• The most efficient producers with high profits are rewarded.

• Companies and producers are motivated to create cheaper, and more efficient products which means customers receive the best products or services for their money.

• The expanded government reduces excessive competition that may take place.

There are also certain disadvantages:

• Sometimes the less competitive companies are left unsupported by the government.

• Certain companies can depend too much on the government support and the country might end up in debt which in turn reduces the chances of a steady economic growth.