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How does the economy of Iceland work - Essay Example

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The country has a mixed economy whose free market approach has facilitated economic growth. This paper seeks to discuss the country’s economy. The paper will explore how the economy works towards its sustainability.
One of the…
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How does the economy of Iceland work
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How does the economy of Iceland work? Iceland has a relatively small economy. The country has a mixed economy whose free market approach has facilitated economic growth. This paper seeks to discuss the country’s economy. The paper will explore how the economy works towards its sustainability.
One of the characteristic features of the Iceland’s economy and an indication of how it works is its mixed market system. The country’s economy is social based with a mixture of socialism, capitalism, and free market frameworks. The existence of both capitalistic and socialistic ideologies in the country’s economy has led to fair distribution of resources among citizens and major stakeholders in the economy. As opposed to a purely capitalistic economy, the mixed economy in Iceland ensures regulated private ownership and safeguarded welfare of the citizens, a feature that limits exploitation of the public and concentration of resources in the hands of few individuals at the expense of other citizens. The country’s economy also operates through investments into creation of employment opportunities. Reported data on the country’s economy for instance indicates low unemployment rates, an indication that job creation is a prioritized economic policy (CIA, p. 1).
One of the core bases of the Iceland’s economic sustainability is its fishing industry. According to CIA statistics, the industry is responsible for about 12 percent of the country’s economy and is a source of employment to at least seven percent of the country’s population. The fishing industry also sustains Iceland’s economy through the vast export of the fishery products. Contributing about 40 percent of the country’s export identifies fishing as a major source of foreign exchange to the country. The export aspect from fishing industry also indicates the country’s involvements and derived benefits of international trade. International trade is therefore another base for Iceland’s economic functionality and sustainability and includes other exports other resources such as metal ores. The economy is also characterized by significant foreign investments. With cheap energy sources such as geothermal power, the country has been able to attract investors from across the world. Investments in the economy have also undergone diversification towards exploration and exploitation of different available resources in the country. Further, the country has been able to attract foreign revenues through foreign investments by its domestic industries such as its financial institution. The generated incomes from the foreign investments add to the country’s economy (CIA, p. 1).
The country’s economy also works through freedom of industries from government’s regulatory forces. This has been realized to an extent that the government has not enacted economic policies that can regulate its financial institutions towards stability. This is an example of what led to collapse of the banking sector towards a 15 percent fall in the country’s gross domestic product. Another operational feature of the Iceland’s economy is the country’s priority towards its macroeconomic aspects and social welfare as opposed to microeconomic features. The country’s economic policies are therefore geared towards ensuring macroeconomic stability. Such is the reason why the country does not strictly regulate its industries but allows for flexibility for economic forces towards equilibrium (Economist, p. 1).
Iceland’s economy therefore relies on economic forces, with little regulatory inputs from the government, for sustainability of its economy. The economy works through an integration of both capitalistic and socialistic systems that has facilitated investments and employment opportunities.
Works cited
CIA. ‘Europe; Iceland.’ Central intelligence agency. April 11, 2012. Web. April 18 2012. < https://www.cia.gov/library/publications/the-world-factbook/geos/ic.html> Economist. ‘lessons from Iceland, coming in from the cold.’ The Economist. December 16, 2010. Web. April 18, 2012. < http://www.economist.com/node/17732935> Read More
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