Iceland and the European Recovery Program. An historical analysis of how economic challenges and domestic politics shaped a unique economic development program

The Icelandic membership in the European Recovery Program is often overlooked in the historical literature that focuses on examining the complex legacies of the Marshall Plan. But the Icelandic ERP is quite unique when examined more carefully. The country emerged from the war relatively unscathed and had in effect benefitted enormously during the years of the war. Yet the country received a generous share of ERP assistance. Per capita, Iceland received the more financial support than all the other 16 ERP member countries. At the same the Icelandic government maintained strict isolationist trade policies and was an awkward member of the OEEC. Iceland would maintain these policies all the way up to 1960. Meanwhile the countries of Western Europe were adopting liberal economic policies, which, which facilitated three decades of growth. This has been touted as one of the primary achievements of the ERP. Which begs the question, why did Iceland receive so much financial support and not adopt the policies stipulated in the ERP conditions? This dissertation will seek to answer this question. Focusing in on the role of domestic politics and how that factor influenced the design of Iceland’s unique ERP program. The analysis will make use of archival evidence, officials documents from the US and Icelandic governments, and articles published in the four main newspapers, which dominated the political discourse in Iceland in the post-war years.