Engineering the Economy through Austerity: The Influence of International Economic Expertise in Iceland after the First World War

• Published in: Contemporary European History
• Main Author: Jóhannesson, Sveinn M.
• Other Authors: Háskóli Íslands
• Format: Article in Journal/Newspaper
• Language: English
• Published: Cambridge University Press (CUP) 2024
• Subjects: Iceland
• Online Access: http://dx.doi.org/10.1017/s0960777324000110; https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S0960777324000110

This essay explores how Iceland, a newly independent state on the northern European periphery, responded to the international agenda for post-war stabilisation set out by economic experts after the turmoil of the First World War. It shows that the government of the so-called Austerity Alliance, led by Jón Þorláksson, adopted austerity policies devised at the international financial conferences in Brussels (1920) and Genoa (1922). To please external experts and creditors, it implemented a comprehensive fiscal and monetary policy of austerity and created a new central bank that was independent of politics. The aim, however, was not to divorce markets from government in a return to a pre-war era of laissez-faire as the scholarly literature suggests. Offering the first analysis of ‘the Icelandic business cycle’, the Þorláksson government enforced austerity by carving out ‘the economy’ – a measurable entity legible to expert management – that greatly expanded the role of the state.