Iceland has a Scandinavian-type economy that is primarily capitalistic, yet there is an extensive welfare system that includes generous housing subsidies and the nation's domestic economy is characterized by low unemployment and a remarkably even distribution of income. (Iceland 2006: 7) The national economy depends heavily on the fishing industry, which provides more than 60% of total export earnings and employs 12% of the work force. The government is very sensitive to the issue of declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, diatomite and ferrosilicon. (Economy of Iceland 2006: 4) Iceland's economy has been diversifying into manufacturing and service industries in the last decade and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with recent trends in eco-tourism such as whale watching, hiking, and nature tours growing steadily.
Iceland's economic performance has been characterized as "impressive," and is seen to be the direct result of the government "refocusing policies on financial stabilisation and market liberalisation." (Suppanz and Laubach 2005: 1) Although Iceland suffered the same fate as other modern, industrialized countries in the global recession of 2002, its most recent recovery "has been much more vigorous than expected, as buoyant househ ...Show more