| Summary: | This thesis assesses the role of social capabilities in the development of Iceland’s economy in 1870-2019. Throughout the period, economic shrinking gradually decreased in the country. The paper argues that a lower frequency of shrinking resulted in better economic performance and that these changes are due to increased resilience to shrinking, provided by the build-up of social capability. By analysing four interrelated aspects of social capability; transformation, inclusion, autonomy, and accountability, the paper argues that each one saw significant advancements in the period. However, the paper is concerned with a long period and, as such, gives a general overview of the development, leaving ample room for research into specific periods that can further the understanding of each social capability process and their respective roles in Icelandic development. The findings are that a rapid structural transformation aided by strong inclusionary policies around the turn of the 20th century may have contributed to less shrinking. The indicators used to measure autonomy and accountability do not show meaningful improvements until post-WWII, highlighting that these processes can develop as an outcome of sustained growth.
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