Iceland: a tomato source of economic growth

27 May 16

From tomato farming to data storage, Iceland – using its volcanic and near-Arctic resources – could teach us a thing or two about recovery and innovation

What image does ‘Iceland’ conjure up for you – long dark nights, failing banks and disruptive volcanoes? It probably doesn’t include tomato farming.

Perched on the edge of the Arctic, midway between the US and Europe, Iceland is volcanic and mountainous, with lots of frozen tundra. In the 1990s, it emerged from being an economic backwater to become a financial services powerhouse. Then, in 2008, it was one of the hardest hit economies, with three of its banks collapsing and its economy going into free fall.

But Icelanders are tough and resourceful. They let their banks collapse rather than bailing them out, indicted the bankers, cushioned homeowners and let their currency plummet. Now their economy is growing faster than those of the US and Europe and, to some extent, tomato farming symbolises their approach.

Iceland has an abundance of geothermal energy (fire) and cold water (ice) and it has exploited these natural resources to become self-sufficient in cheap, carbon-free energy. However, it has not yet found a way to export the surplus energy produced. The answer has been to use this usually scarce resource to generate products and services that can be exported or to reduce the need for imports.

Iceland uses its natural resources to heat, light and water huge greenhouses to grow tomatoes that would otherwise have to be imported at a high cost, and now exports them. The greenhouses are high tech, requiring little labour. The frozen external environment prevents bugs, so pesticides are not used, but bees have to be imported to pollenate the plants. Conditions are monitored and adjusted remotely using smartphones. And, in a typically Icelandic move, tourist trips to the tomato farm bring in extra revenue.

Much more important than tomatoes, however, is the way that Iceland is using its natural resources to reposition itself in the digital world. Data is now stored in huge shared data centres around the globe and needs to be immediately accessible from anywhere in the world. These data centres consume large amounts of power. Google’s global data centres, for example, consume enough energy to power a city of 750,000 people, equivalent to more than double the population of Iceland. Plus their massive racks of servers require constant cooling. Iceland has almost limitless sources of hydro and geothermal energy to power these centres and infinite sources of cold air and water to provide cooling. Its location also helps as the high speed undersea fibreoptic cables connecting Iceland to North America and Europe mean that it takes less than 80 milliseconds for data to travel from the US to Iceland and back.

Iceland has also invested in a world class IT infrastructure and is rated number three in the world in the ICT Development Index, behind Korea and Denmark, and one place ahead of the UK. Coupled with low corporate taxes, this has made it a highly competitive location for specialist disaster recovery services.

Necessity is said to be the mother of invention. If Iceland can grow tomatoes on frozen tundra, then perhaps our challenges aren’t quite so daunting.

  • John Thornton
    John Thornton

    John Thornton is the director of e-ssential Resources and an independent adviser on business transformation, financial management and innovation.

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