Danish–Icelandic Trade Monopoly
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The Danish–Icelandic Trade Monopoly (Icelandic: ''Einokunarverslunin'') was the monopoly on trade held by Danish merchants in
Iceland Iceland is a Nordic countries, Nordic island country between the Atlantic Ocean, North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge between North America and Europe. It is culturally and politically linked with Europe and is the regi ...
in the 17th and 18th centuries. Iceland was during this period a territory controlled by the Danish-Norwegian Crown. The origins of the monopoly may be traced to the
mercantilist Mercantilism is a nationalist economic policy that is designed to maximize the exports and minimize the imports of an economy. It seeks to maximize the accumulation of resources within the country and use those resources for one-sided trade. ...
policies of Denmark-Norway, and its aim was to support Danish merchants and Danish trade against the
Hanseatic League The Hanseatic League was a Middle Ages, medieval commercial and defensive network of merchant guilds and market towns in Central Europe, Central and Northern Europe, Northern Europe. Growing from a few Northern Germany, North German towns in the ...
of
Hamburg Hamburg (, ; ), officially the Free and Hanseatic City of Hamburg,. is the List of cities in Germany by population, second-largest city in Germany after Berlin and List of cities in the European Union by population within city limits, 7th-lar ...
, increasing the power of the
King of Denmark The monarchy of Denmark is a constitutional political system, institution and a historic office of the Kingdom of Denmark. The Kingdom includes Denmark proper and the autonomous administrative division, autonomous territories of the Faroe Is ...
in
Iceland Iceland is a Nordic countries, Nordic island country between the Atlantic Ocean, North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge between North America and Europe. It is culturally and politically linked with Europe and is the regi ...
. The monopoly was enacted by a set of laws passed in 1602 and lasted until 1786. During this period, trade was permitted to take place in 20 (later 25) designated trading posts, according to a fixed rate of prices determined by the king. The merchants acquired the rights to the trading posts in exchange for a fixed rent, with the
Vestmannaeyjar Vestmannaeyjar (, sometimes anglicized as Westman Islands) is a municipality and archipelago off the south coast of Iceland. The largest island, Heimaey, has a population of 4,414, most of whom live in the archipelago's main town, Vestmannaeyja ...
being rented at a higher price. For the majority of this period, these leases were managed by Danish trading companies, however, from 1759–1763 and 1774–1787 the leases were managed by the Crown directly. From 1602 until 1619, the trading monopoly was tied to the Danish cities of
Copenhagen Copenhagen ( ) is the capital and most populous city of Denmark, with a population of 1.4 million in the Urban area of Copenhagen, urban area. The city is situated on the islands of Zealand and Amager, separated from Malmö, Sweden, by the ...
,
Malmö Malmö is the List of urban areas in Sweden by population, third-largest city in Sweden, after Stockholm and Gothenburg, and the List of urban areas in the Nordic countries, sixth-largest city in Nordic countries, the Nordic region. Located on ...
(now in
Sweden Sweden, formally the Kingdom of Sweden, is a Nordic countries, Nordic country located on the Scandinavian Peninsula in Northern Europe. It borders Norway to the west and north, and Finland to the east. At , Sweden is the largest Nordic count ...
) and
Helsingør Helsingør ( , ; ), classically known in English as Elsinore ( ), is a coastal city in northeastern Denmark. Helsingør Municipality had a population of 63,953 on 1 January 2025, making it the 23rd most populated municipality in Denmark. Helsin ...
. From 1620, trade was limited to merchants based in Copenhagen exclusively. Danish merchants were forbidden to participate in economic activities in the country other than trade until 1777.


History


Early international trade

Through the
Old Covenant Abrahamic religions believe in the Mosaic covenant (named after Moses), also known as the Sinaitic covenant (after the biblical Mount Sinai), which refers to a covenant between the Israelite tribes and God, including their proselytes, not lim ...
of 1262 the king of Norway had the power to control trade to and from Iceland. With the union of the Danish and Norwegian Crowns in the 14th century, that power was effectively overtaken by the Danish state. However, this power was scarcely excercized until the 17th century. English merchants became prevalent in trade with Iceland towards the end of the
Middle Ages In the history of Europe, the Middle Ages or medieval period lasted approximately from the 5th to the late 15th centuries, similarly to the post-classical period of global history. It began with the fall of the Western Roman Empire and ...
, and from the 1430s until the 1470s, they held a de facto monopoly on the valuable Icelandic
stockfish Stockfish is unsalted fish, especially cod, dried by cold air and wind on wooden racks (which are called "hjell" in Norway) on the foreshore. The drying of food is the world's oldest known preservation method, and dried fish has a storage li ...
trade. This was much to the frustration of the Danish Crown, which made a variety of efforts to expel them. The crown attempted to enforce licences upon English fishermen operating in Iceland, it prevented English vessels from passing through the Danish straights to trade in the Baltic Sea, and finally offered for
Henry VIII Henry VIII (28 June 149128 January 1547) was King of England from 22 April 1509 until his death in 1547. Henry is known for his Wives of Henry VIII, six marriages and his efforts to have his first marriage (to Catherine of Aragon) annulled. ...
to take Iceland as collateral for a loan. Although these efforts failed, the Crown successfully pitted a group of German traders against the English. In the 16th century, German governors were installed in Iceland and a series of skirmishes between English and German traders erupted off of the coast. By 1540 the English lost commercial contact with mainland Iceland, and by 1560 were driven from the islands completely.The German merchants from Hamburg were more profitable for the Danish in Iceland. They increased the overall volume of shipping to Iceland, improved competition for stockfish, and offered Icelanders better terms of trade. As the 16th century progressed, German merchants dominated trade in Iceland. The Danish crown increasingly sought to undermine their control and reap the benefits of trade directly. In the mid 16th century all German property in Iceland was confiscated, including fishing boats and other property that was jointly owned by Icelanders.


The Crown's monopoly

In 1602 all foreign merchants were expulsed from Iceland and only subjects of the Danish-Norwegian Crown were permitted to trade in Iceland. According to the state, this restriction on foreign trade was implemented to help 'stimulate trade and seamanship' within
Denmark–Norway Denmark–Norway (Danish language, Danish and Norwegian language, Norwegian: ) is a term for the 16th-to-19th-century multi-national and multi-lingual real unionFeldbæk 1998:11 consisting of the Kingdom of Denmark, the Kingdom of Norway (includ ...
. In practice, it was designed to prevent the growing cohort of merchants from Hamburg from renewing their trade privileges, instead handing these trade privileges to Danish and Norwegian merchants, particularly those in
Copenhagen Copenhagen ( ) is the capital and most populous city of Denmark, with a population of 1.4 million in the Urban area of Copenhagen, urban area. The city is situated on the islands of Zealand and Amager, separated from Malmö, Sweden, by the ...
,
Helsingør Helsingør ( , ; ), classically known in English as Elsinore ( ), is a coastal city in northeastern Denmark. Helsingør Municipality had a population of 63,953 on 1 January 2025, making it the 23rd most populated municipality in Denmark. Helsin ...
, and
Malmö Malmö is the List of urban areas in Sweden by population, third-largest city in Sweden, after Stockholm and Gothenburg, and the List of urban areas in the Nordic countries, sixth-largest city in Nordic countries, the Nordic region. Located on ...
. Merchants wishing to trade in Iceland paid rent to the Crown for trade rights. These trade rights were typically leased to merchants for 6 year periods. The cost of trade rights to a particular port was tied to the volume of fish products it produced, as they were Iceland's most valuable export. This meant that the right to trade with ports in the fishing regions of the southwest were more costly than those with northeastern ports, which primarily exported agricultural products.


State trading companies

In 1619, restrictions were tightened. These further restrictions are believed to have been in response to the continued presence of German mercantile interests in Iceland, who used Danish merchants as puppets to circumvent the restrictions. To further prevent this, the Crown prohibited the export of Icelandic goods to Hamburg in 1620. The 1619 restrictions mandated that only the Crown's chartered trading company in Copenhagen was allowed to trade with Iceland. The ''Iceland, Faroe and Northland Company'', and its succeeding iterations were not
joint-stock companies A joint-stock company (JSC) is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholder ...
. Unlike most European colonial companies, it was owned by its operating merchants who conducted business relatively independently. The trade company's prices were
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by the Crown. These prices rarely changed, and did not fluctuate relative to the international price of goods. However, between 1684 and 1702 prices blatantly favored the Danish merchants. Although prices were fixed, goods were not typically purchased by Icelanders with capital, as little money was in circulation. Imported
rye Rye (''Secale cereale'') is a grass grown extensively as a grain, a cover crop and a forage crop. It is grown principally in an area from Eastern and Northern Europe into Russia. It is much more tolerant of cold weather and poor soil than o ...
, for example, was typically exchanged for domestic goods, often fish products. Danish merchants exploited this bartering system and routinely undervalued Icelandic goods. This was the case with Icelandic cod, for example, which Danish merchants sold in Europe for more than three times the price they paid Icelanders. The artificially low sale price of fish discouraged Icelandic investment in fishing, and records show a decline in the production of fish products over the period of the trade monopoly. The ''Iceland, Faroe and Northland Company'' collapsed in the 1650s in the fallout of war between Denmark and Sweden. Foreign merchants quickly filled the vacuum left by the trading company. The Crown had difficulty re-establishing its monopoly on trade after the conflict subsided in 1660. After 1660, the crown increased the price of rent for trade rights and four merchants in Copenhagen emerged in control of trade with Iceland. In 1684, changes were again made to trade rules by the crown in an effort to make larger profits. The trade rent was again increased with each port of trade being auctioned off to the highest bidder within Copenhagen. As a result, each port in Iceland came to be controlled by its own merchant. At the same time, the crown changed its fixed prices, increasing the price of goods imported to Iceland, and decreasing the price of goods produced by Icelanders. In 1732, the Crown established a new trading company, the ''Second Icelandic Company'' (Danish: ''Det Andet Islandske kompagni''), with its royal charter coming into effect in 1733. The shareholders of the company were exclusively Danish and were primarily smaller merchants with connections to trade in Iceland. The ''Second Icelandic Company'' was
liquidated Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although di ...
by 1743 and in its place the ''Third Icelandic Company'' (''Det Tredje Islandske Kompagni'') was established in connection with the Chandlers Guild. The Crown aimed to again increase its profits off of trade with Iceland, doubling the rent it charged merchants for trade rights. The guild paid the Crown for exclusive rights to trade in Iceland between 1745 and 1770. Following a series of
natural disasters A natural disaster is the very harmful impact on a society or community brought by natural phenomenon or Hazard#Natural hazard, hazard. Some examples of natural hazards include avalanches, droughts, earthquakes, floods, heat waves, landslides ...
and
famines A famine is a widespread scarcity of food caused by several possible factors, including, but not limited to war, natural disasters, crop failure, widespread poverty, an economic catastrophe or government policies. This phenomenon is usuall ...
in Iceland, the company began to fail and began to be liquidated in 1759.


The monopoly's decline

In the late 18th century, the Crown made several efforts to improve economic circumstances in Iceland. A Royal Commission (Icelandic: ''Landsnefndin fyrri'') was sent to assess the economic climate of Iceland in 1770 and return with suggestions. After a new regime, which favored
classical liberal Classical liberalism is a political tradition and a branch of liberalism that advocates free market and laissez-faire economics and civil liberties under the rule of law, with special emphasis on individual autonomy, limited government, eco ...
policies, came in to power it appointed a second Royal Commission in 1785. The second commission concluded that the existing monopoly hurt Icelanders and that trade needed to be opened up in order to improve Iceland's economy. By 1787, the restrictions of the monopoly were reduced and all independent Danish and Norwegian merchants were allowed to trade within Iceland. However, Faroe Islanders and
Greenlanders Greenlanders (; ), also called Greenlandics or Greenlandic people, are the people of Greenland. Most speak Greenlandic language, Greenlandic, an Eskaleut languages, Eskaleut language. Greenlandic Inuit make up 85–90% of the people of Greenland. ...
were prevented from establishing independent trade routes. The strict ban on trade with merchants outside of the Kingdom of Denmark-Norway also remained in force.


Impact

The Icelandic public was reliant on foreign imports for
household goods Household goods are goods and products used within households. They are the tangible and movable personal property placed in the rooms of a house, such as a bed or refrigerator. Economic role Businesses that produce household goods are categori ...
, fishing equipment, and food. Under the trading monopoly, Icelanders became reliant on a small number of merchants who could not supply their needs, and the period was marked by
scarcity In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
.
Smugglers Smuggling is the illegal transportation of objects, substances, information or people, such as out of a house or buildings, into a prison, or across an international border, in violation of applicable laws or other regulations. More broadly, soc ...
and foreign merchants, who were typically from the
Netherlands , Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...
, are recorded to have violated the Danish monopoly and supplemented the limited supply. The monopoly stagnated economic potential in Iceland, causing demographic crises and maintaining inequality. It also prevented external investment, even from Danish merchants, meaning that all profit derived from trade with Iceland was funnelled back to Denmark. Although the monopoly officially ended in 1787, demands for
free trade Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold Economic liberalism, economically liberal positions, while economic nationalist politica ...
with countries outside of the Kingdom of Denmark were not met until 1855. This part of the 19th century also saw increasing ideas of
national identity National identity is a person's identity or sense of belonging to one or more states or one or more nations. It is the sense of "a nation as a cohesive whole, as represented by distinctive traditions, culture, and language". National identity ...
in Iceland, and the former trade monopoly was increasingly viewed as proof of the crown's colonial oppression.


References


Further reading

* * * {{DEFAULTSORT:Danish-Icelandic Trade Monopoly Denmark–Iceland relations Trade blocs Economic history of Denmark History of international trade 17th century in Iceland 18th century in Iceland 1602 establishments in Denmark Former monopolies Foreign trade of Denmark