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a sovereign and independent state as the Kingdom of Iceland, having a common king with the
Kingdom of Denmark since 1918. It would last another 14 years before Iceland would declare the
republic it is today.
At the moment, we all know Iceland as an exceptionally highly developed independent very small
state, with one of the highest levels of human development in the world (number 13;
notwithstanding the 2008 financial crisis) (UNDP 2013). This development raises the question: what
explains Iceland’s remarkable political and socio-economic achievements over the 1900s? In this
article it is argued that an important explanation of those achievements is the combination of a
strong educational sector, strong human capital and abundant natural resources (Bertelsen & Hansen
2014; Bertelsen, Justinussen & Smits 2014).
Iceland is a natural resources-based economy as are all Arctic economies. In particular marine
resources (which are outside the scope of this article) and renewable energy resources (the topic of
this article) have played and continue to play a key role in the Icelandic economy and society.
Icelandic exports have overwhelmingly been based on marine resources since the mechanization of
Icelandic fisheries (the industrialization of Iceland) in the early 1900s. Iceland, as a micro or very
small island economy and peripheral to the world economy, has throughout its independent history
struggled to develop and diversify its economy. This struggle to diversify and develop the Icelandic
economy was closely connected with Iceland’s other great natural resource: renewable hydro- and
geothermal energy (Ármannsson 2005; Ísleifsson 2007; Jónsson 2005; Karlsdóttir 2010; Kristinsson
2005; Kristjánsson 1997; Pálsdóttir 2005; Ragnarsson 1975, 1976, 1977; Sigurðsson 2002; Þórðarson
2004).
The authors argue that Iceland has managed to create a domestically controlled, globally connected,
knowledge-based energy sector (Bertelsen & Hansen 2014; Bertelsen, Justinussen & Smits 2014).
This development has created work and intellectual opportunities for Icelanders at home and
increasingly abroad. This development was driven by a fortuitous combination of a strong domestic
tradition of primary, secondary, increasingly tertiary, and vocational education combined with a
strong and successful tradition of “brain circulation”: by going abroad for study or work experience
and returning to Iceland with new knowledge and networks. This section of the article will discuss
how this combination has laid the foundation of this domestically controlled, globally connected,
knowledg