Success story or tall tale? Discursive cooperation and economic restructuring in Iceland

Political economists have long recognized the power of ideas to influence economic adjustment by shaping public policy and fostering inter-firm coordination. This article extends this argument, demonstrating how ideas can have a direct and unmediated impact on economic restructuring. More specifically, it identifies discursive cooperation, or collective storytelling, as a distinct logic of collective action, separate from policy concertation and inter-firm coordination. Examining twenty first century Iceland, this article illustrates how shared narratives accelerated the country’s movement into financial services and tourism by facilitating the diffusion of new business models and attracting external resources. Absent inter-firm coordination, policy concertation, or supportive public policies, however, stakeholders struggled to invest in public goods. Instead of incremental upmarket movement, Iceland was characterized by volatile boom-bust dynamics. In illustrating the transformative power of storytelling in small open economies, this article simultaneously highlights the perils of relying on discursive cooperation alone.