Understanding Growth Policies and Economic Success: Iceland and Malta, 1945-1980

This paper analyses how the small European island nations of Iceland and Malta transitioned from economic dependence to thriving development between 1945 and 1980. Both faced significant challenges during this era, marked by postwar global and European political volatility. In 1945, the newly established Republic of Iceland exhibited a significantly stronger economy than the non-sovereign island of Malta. The economy of Malta, which gained independence in 1964, grew faster than the Icelandic economy in the 1960s and 1970s despite a significantly lower output. By 1980, Malta had narrowed the output gap with Iceland. The paper examines the factors that contributed to the different growth rates of the two island economies during the period under review. Selected growth policies and plans adopted by both governments will be examined and compared, along with shifts in their respective political emphases, based on analytical frameworks and scholarly perspectives of dependency theory, small island studies scholarship and comparative political economy.