The Herring Crisis
It is safe to assert that in October 2008, Iceland as we knew it changed overnight. The fall of the banks initiated an economic crisis that almost four years later is still afflicting the nation. Crisis can be defined as a time when conditions in a certain domain degenerate to a level far worse compared to what they have been like for several years or even decades (J?n ?ttar Ragnarsson 11). Observing history these ?good? and ?bad? times seem to take turns at regular intervals and some say that the current economic crisis was long overdue in terms of average historical frequency in advanced societies (Allen xi). In this context it is interesting to examine earlier periods of recession and study the reasons for and consequences of these circumstances. When my grandfather left to Australia in 1968 to improve his family?s life conditions, the herring collapse in late 1967 had come as a shock to the nation initiating an economic crisis in the country, unemployment increased to a degree never known before and outmigration rates had not been as high since 1887 (Hamilton, Otterstad, and Helga ?gmundard?ttir 114).
The economic growth in Iceland in the 20th century was essentially due to the expansion and development of the fishing industry and until the mid 1970s Iceland?s economy was flourishing and the labour market was in constant demand for work force (Sveinn Agnarsson and Ragnar ?rnason 1; 6). Herring was the main catch and had been ever since the Norwegians introduced the trade to Icelandic fishermen at the end of the 19th century. The Norwegians established processing factories for treating the herring in a way that transformed it into high-value product for human consumption, ready for export (Hamilton et al. 328). The decades to come, the 1930s and 1940s, were characterized by the herring industry and later the period became known as ?the golden years? (Hamilton 2960; ?Sagan: S?ldar?vint?ri??). This commercial industry attracted workers from all over Iceland to the main herring towns, creating a labour market where many people for the first time had the opportunity to earn considerable cash wages (Hamilton et al. 328). People?s occupational habits changed a great deal in these years, the production and export of frozen fish expanded and the construction industry grew and prospered. This development resulted in rich competition between industry sectors over workforce as both the construction industry and service industry advanced (Gylfi ?. G?slason 84-86). At this time my grandfather was working as a housepainter in the Westman Islands and could choose from various assignments, never running out of work (Steingr?msson). In the years 1961 to 1966 the herring stock came to a peak and the national GNP increased immensely but the shock was around the corner (Gylfi ?. G?slason 84-86).
A total collapse of the Icelandic herring stock in late 1967 initiated a two years recession and suddenly for the first time in decades people found themselves out of work and the unemployment rates began to rise. The cause of the collapse was twofold and originated in both overfishing and environmental reasons. During the golden years, expanding markets, technological innovations and increasing effort led to greater success in exploiting the stock and total catches exceeded all records (Hamilton et al. 334; Hamilton, Otterstad, and Helga ?gmundard?ttir 102). In addition to unsustainable overfishing in the previous decades, climate change in the 1960s finally eradicated the herring stock completely. Sudden change in the sea?s salinity and unusual volumes of polar surface water and ice, merging into the Greenland and Iceland Seas, eliminated the herring?s main source of sustenance leaving the fishermen with empty nets (Hamilton 2960; Hamilton, Otterstad, and Helga ?gmundard?ttir 108). On top of this, falling fish prices and decrease in market demand for herring and other fish products were becoming facts. These aspects combined resulted in growing unemployment rates but since World War II unemployment had almost been unknown in Iceland. In February 1968 the unemployment rates were up to 2% of the workforce and went up to 3% by the end of the year (Gylfi ?. G?slason 89: 95).
In response to increased unemployment, people began looking towards other countries for employment, which resulted in great migration numbers, particularly among skilled workers (?Atvinnuleysi? 1968 og 1969? 16). The construction industry was severely affected and in 1969 1/3 of the industry?s workforce was unemployed and several