Danish trade monopoly in Iceland

Danish trading posts in Iceland during the Danish trade monopoly 1602–1786

The Danish–Icelandic Trade Monopoly (Icelandic: Einokunarverslunin) was the monopoly on trade held by Danish merchants in Iceland 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 policies of Denmark-Norway, and its aim was to support Danish merchants and Danish trade against the Hanseatic League of Hamburg, increasing the power of the King of Denmark in Iceland.

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 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, Malmö (now in Sweden) and Helsingør. 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

Through the Old Covenant 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 during the 15th and 16th centuries, much to the frustration of the Danish Crown. English traders and fishermen introduced competition to the market and a variety of efforts were taken 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 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, however, they Crown now sought to regain complete control. In the mid 1550s all German property in Iceland was confiscated, including fishing boats and other property that was jointly owned by Icelanders. 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. 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, Helsingør, and Malmö. Merchants wishing to trade in Iceland paid rent to the Crown for trade rights.

In 1619, restrictions were tightened. There 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 trading company in Copenhagen was allowed to trade with Iceland. The Iceland, Faroe and Northland Company's prices were fixed by the Crown. These prices remained relatively stable, however, between 1684 and 1702 they blatantly favored the Danish merchants. Although prices were fixed, not all goods were purchased by Icelanders with capital. Imported rye, 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 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). The royal charter of the company came in to 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 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 and famines in Iceland, the company began to fail and began to be liquidated in 1759.

Further reading

• Gunnarsson, Gísli (1983). Monopoly Trade and Economic Stagnation: Studies in the Foreign Trade of Iceland 1602–1787. Lund: Studentlitteratur. ISBN 9185611069.
• Gunnarsson, Gísli (1987). Upp er Boðið Ísaland: einokunarverslun og íslenskt samfélag 1602–1787 (PDF) (in Icelandic). Reykjavík: Örn og örlygur.
• Jónsson Aðils, Jón (1926). Den Danske Monopolhandel på Island 1602–1787 (in Danish). Translated by Asmundsson Brekkan, Fridrik. Copenhagen.{{cite book}}: CS1 maint: location missing publisher (link)