Markets and adaptation drive national prosperity, article argues

In an opinion article published by Morgunblaðið, Vilhjálmur Bjarnason and María Matthíasdóttir argue that the prosperity of countries and individuals depends not on natural resources or dominance over others, but on adapting to circumstances and using knowledge to serve markets seeking goods and services.

The article cites the adaptation of Swiss goldsmiths after the Reformation leader John Calvin called for a ban on ornaments, jewellery and statues. Rather than abandoning their craft, Swiss goldsmiths began making inventive watches. Watchmaking became an industry producing highly sought-after goods, so popular that Donald J. Trump felt compelled to impose very high tariffs on Swiss watches.

The authors note that American tourists can avoid those tariffs by buying Swiss watches in Switzerland. They also point to the Swiss franc’s rise against other currencies: Swiss watches continue to sell for the same price in francs as before. The same applies to Swiss chocolate, which consumers choose despite having access to chocolate from around the world.

Switzerland’s adaptability

The article suggests that Switzerland’s position may be desirable because of its remarkable ability to adapt. The country has reached bilateral agreements with the European Union on most issues and introduced European Union rules, particularly in financial markets, to make itself an attractive counterpart in financial instruments.

Switzerland also engages in carry trades involving United States government bonds for temporary gains. The authors say Iceland has never achieved a comparable level of adaptation except through what they describe as a self-defeating approach: repeatedly devaluing the króna.

They argue that Icelandic wage earners have borne the cost of failures in employment and economic policy, and that currency devaluation is not a solution but creates a new problem.

Switzerland is an attractive trading partner, the article says, perhaps partly because of its geographical position. Swiss authorities also consider membership in the European Free Trade Association, EFTA, desirable. Switzerland pays the organisation’s operating costs together with its three other member countries, according to the article.

Iceland’s adaptation

The authors say they have recently heard advertising built around the message that “we can do this ourselves”. They argue that Iceland’s improved living standards have not come from within, but from outside, through agreements with foreign countries and international organisations made in stages since 1960.

Although Iceland was a member of the International Monetary Fund and the NATO treaty included a declaration supporting free trade, sustained improvements in living standards began only with measures introduced by the Viðreisn government after 1960, albeit with interruptions.

The article says continuous economic growth began with Iceland’s participation in the European Economic Area, EEA, the common market of European countries.

It also argues that the value of seafood products produced by Samherji hf, an Icelandic company, does not come from the company alone. The products are of little value while sitting in a freezer warehouse, but become valuable once they reach the market and are sold.

Access to foreign markets is described as a prerequisite for welfare in Iceland. The authors say it is reasonable to require products to be made according to food legislation and the standards familiar to buyers.