Economy of Greenland
Encyclopedia
The Economy of Greenland can be characterized as small, mixed and vulnerable. The present economy consists of a big public sector
and comprehensive foreign trade, which has resulted in an economy with periods of strong growth, considerable inflation, unemployment problems and extreme dependence on capital inflow from Denmark
and use of outside, mainly Danish, skilled labour.
The economy is critically dependent on exports of fish
, whaling
and textiles and substantial support from the Danish Government, which supplies about half of government revenues. Unemployment remains very high and GDP per capita is similar to the average European economies.
was the mercantile expedition led by missionary Hans Egede
, sent by the Kingdom of Denmark
in 1721. This established the settlement of Godthåb
and re-established Danish sovereignty in Greenland. The Danish government was initially very protective of what it considered a fragile Greenlandic culture, effectively sealing it off from international commerce and maintaining a strict monopoly on Greenlandic trade, allowing only small scale barter (troaking
) with Scottish whalers.
, reforms of the Greenlandic economy were proposed. The G-50 Report was presented in 1950 by the Danish grand commission. The commission comprised Landsrådene (the highest Greenlandic council) and Danish economists. The report outlined a program to transform Greenland from a subsistence economy
to a modern welfare state
. The state would be based on the Danish model, and would be sponsored by Denmark. Following this report, Greenland was made an equal part of the Danish Kingdom in 1953, and Home Rule was granted in 1979.
Greenland left the European Economic Community
in February 1985, mostly due to EEC fishery policy and partly due to the EEC-wide ban on sealskin products. Effectively the only ties Greenland now has with the EU are via Denmark; most EU laws do not apply to Greenland. However Greenland enjoys preferential access to EU markets.
During the 1950s and 1960s the Danish government introduced an urbanization and modernization program, aimed at creating an urban economic environment in Greenland, by expanding the coastal towns. People from the surrounding small settlements were rehoused in hastily built houses, such as the infamous Blok P
, and modern fishing practices were introduced. The program was intended to reduce costs by improving access to education and health care, and by providing employees for the cod fisheries, which grew rapidly during the early 1960s but have since effectively collapsed. This urbanization
has resulted in continuing social problems, such as unemployment and alcoholism.
The Greenland economy shrank in the early 1990s, but since 1993 has grown again. The Greenland Home Rule Government (GHRG) has pursued a tight fiscal policy since the late 1980s which has helped the public budget and lowered inflation. From 1990, Greenland registered a foreign trade deficit following the closure of the Maarmorilik lead
and zinc
mine.
Greenland was formerly the world's premier source of natural cryolite
, but by the late 1980s the reserves at Ivittuut had been depleted. However, with advances in mining technology and increases in mineral prices, previously closed mines are being reopened, such as the lead and zinc mine at Maarmorilik, and the gold mine at Nalunaq.
Companies are exploring hydrocarbon
and mineral
deposits. There have been several offshore licensing rounds since 2002, with a number of successful bids by multinational oil companies in partnership with NUNAOIL
the state oil company for blocks. Press reports in early 2007 indicated that two international aluminum companies were considering building smelters in Greenland using local hydroelectric power.
While the GHRG (Greenland Home Rule Government) has primary sovereignty over mineral deposits on the mainland, as laid down in the 2008 treaty, oil resources are within the domain of the Danish exclusive economic zone. Exploring for oil
has been ongoing since the 1970s, when a series of five dry wells were drilled, and there was a further dry well in the early 2000s. In 2010 British petrochemical company Cairns Oil reported "the first firm indications" of commercially viable oil deposits.
has some near-term potential, but this is limited by the short summers and high costs. Air Greenland
and Continental Airlines
had direct flights from the U.S. east coast from May 2007 to April 2008, but these are now discontinued.
has enabled its expansion, by obtaining higher production of existing crops, introducing new ones, and extending the cultivated areas. Roughly 1% of the total land area can be used for growing crops. Presently 10% of all potatoes consumed in Greenland are produced locally, with a projection of 15% by 2020. Due to the lengthening of the productive season new crops have been introduced, such as apples, strawberries, broccoli, cauliflower, cabbage and carrots. In southern Greenland the growing season is mid-May through to mid-September, on average three weeks longer than a decade ago.
municipality whereupon the reindeer population was removed through hunting. By then only a handful of Greenlanders had received training in reindeer husbandry, for only one of whom it was his primary occupation. The rest of the herders, roughly 20 people, were hired Norwegian Sami. When Sami supervision ended in 1978, the results were dismal; reports were sporadic and inconclusive, and herd maintenance effectively ceased with the thereby following range destruction as a result. The conclusion of the experiment was that reindeer herding and husbandry is incompatible with the Inuit hunting culture. However, in stark contrast to the mid-west, the southern herds were successful. In 2008 there was still a strong herd in the Isortoq
area, centered around the Isortoq Reindeer Station. The station is maintained by Iceland native Stefán Hrafn Magnússon and Norway native Ole Kristiansen.
Today animal husbandry consists mainly of sheep farming, with free grazing flocks. Modern sheep farming methods were introduced in the early 20th century, with the first farm built in 1906. The farms provide meat for local consumption and wool mainly for export. Some 20.000 lambs are slaughtered annually in Narsaq
. The lack of private land ownership rights on Greenland forces farmers to jointly agree to terms of land usage. In the south there is also a small cattle farm.
GDP
:
Agriculture - products:
Electricity - production:
Electricity - consumption:
Exchange rates:
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
and comprehensive foreign trade, which has resulted in an economy with periods of strong growth, considerable inflation, unemployment problems and extreme dependence on capital inflow from Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
and use of outside, mainly Danish, skilled labour.
The economy is critically dependent on exports of fish
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
, whaling
Whaling
Whaling is the hunting of whales mainly for meat and oil. Its earliest forms date to at least 3000 BC. Various coastal communities have long histories of sustenance whaling and harvesting beached whales...
and textiles and substantial support from the Danish Government, which supplies about half of government revenues. Unemployment remains very high and GDP per capita is similar to the average European economies.
Historical development
The effective starting point of the modern economy of GreenlandGreenland
Greenland is an autonomous country within the Kingdom of Denmark, located between the Arctic and Atlantic Oceans, east of the Canadian Arctic Archipelago. Though physiographically a part of the continent of North America, Greenland has been politically and culturally associated with Europe for...
was the mercantile expedition led by missionary Hans Egede
Hans Egede
Hans Poulsen Egede was a Norwegian-Danish Lutheran missionary who launched mission efforts to Greenland, which led him to be styled the Apostle of Greenland. He established a successful mission among the Inuit and is credited with revitalizing Dano-Norwegian interest in the island after contact...
, sent by the Kingdom of Denmark
Kingdom of Denmark
The Kingdom of Denmark or the Danish Realm , is a constitutional monarchy and sovereign state consisting of Denmark proper in northern Europe and two autonomous constituent countries, the Faroe Islands in the North Atlantic and Greenland in North America. Denmark is the hegemonial part, where the...
in 1721. This established the settlement of Godthåb
Nuuk
Nuuk, is the capital of Greenland, the northernmost capital in North America and the largest city in Greenland. Located in the Nuup Kangerlua fjord, the city lies on the eastern shore of the Labrador Sea and on the west coast of Sermersooq. Nuuk is the largest cultural and economic center in...
and re-established Danish sovereignty in Greenland. The Danish government was initially very protective of what it considered a fragile Greenlandic culture, effectively sealing it off from international commerce and maintaining a strict monopoly on Greenlandic trade, allowing only small scale barter (troaking
Troaking
Troaking was the barter between the natives of Greenland and Scottish whalers.From the signing of the Treaty of Kiel until the occupation of Denmark by Nazi Germany in 1940, Greenland was a protected and very isolated society...
) with Scottish whalers.
Recent history
After World War IIWorld War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, reforms of the Greenlandic economy were proposed. The G-50 Report was presented in 1950 by the Danish grand commission. The commission comprised Landsrådene (the highest Greenlandic council) and Danish economists. The report outlined a program to transform Greenland from a subsistence economy
Subsistence economy
A subsistence economy is an economy which refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. Capital can be generally defined as assets invested with the expectation that their value will increase, usually because there is the...
to a modern welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
. The state would be based on the Danish model, and would be sponsored by Denmark. Following this report, Greenland was made an equal part of the Danish Kingdom in 1953, and Home Rule was granted in 1979.
Greenland left the European Economic Community
European Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
in February 1985, mostly due to EEC fishery policy and partly due to the EEC-wide ban on sealskin products. Effectively the only ties Greenland now has with the EU are via Denmark; most EU laws do not apply to Greenland. However Greenland enjoys preferential access to EU markets.
During the 1950s and 1960s the Danish government introduced an urbanization and modernization program, aimed at creating an urban economic environment in Greenland, by expanding the coastal towns. People from the surrounding small settlements were rehoused in hastily built houses, such as the infamous Blok P
Blok P
Blok P is the largest residential building in all of Greenland, and the largest building in Nuuk. It contains around 320 apartments and it is said that approximately 1% of the total population of Greenland live in this building.-History:...
, and modern fishing practices were introduced. The program was intended to reduce costs by improving access to education and health care, and by providing employees for the cod fisheries, which grew rapidly during the early 1960s but have since effectively collapsed. This urbanization
Urbanization
Urbanization, urbanisation or urban drift is the physical growth of urban areas as a result of global change. The United Nations projected that half of the world's population would live in urban areas at the end of 2008....
has resulted in continuing social problems, such as unemployment and alcoholism.
The Greenland economy shrank in the early 1990s, but since 1993 has grown again. The Greenland Home Rule Government (GHRG) has pursued a tight fiscal policy since the late 1980s which has helped the public budget and lowered inflation. From 1990, Greenland registered a foreign trade deficit following the closure of the Maarmorilik lead
Lead
Lead is a main-group element in the carbon group with the symbol Pb and atomic number 82. Lead is a soft, malleable poor metal. It is also counted as one of the heavy metals. Metallic lead has a bluish-white color after being freshly cut, but it soon tarnishes to a dull grayish color when exposed...
and zinc
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...
mine.
Sectors of the economy
The Greenland economy is extremely dependent on exports of fish and on support from the Danish Government, which supplies about half of government revenues. The public sector, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy.Oil and natural resources
Deposits of many metals are known to exist. These include gold, nickel, platinum group elements, copper, lead, zinc, molybdenum, iron, niobium, tantalum, uranium, and specialty metals including rare earth elements; as well as coal and diamonds. Prospectors are currently seeking commercially viable deposits. The BMP (Bureau of Minerals and Petroleum) is promoting Greenland as an attractive destination for prospectors.Greenland was formerly the world's premier source of natural cryolite
Cryolite
Cryolite is an uncommon mineral identified with the once large deposit at Ivigtût on the west coast of Greenland, depleted by 1987....
, but by the late 1980s the reserves at Ivittuut had been depleted. However, with advances in mining technology and increases in mineral prices, previously closed mines are being reopened, such as the lead and zinc mine at Maarmorilik, and the gold mine at Nalunaq.
Companies are exploring hydrocarbon
Hydrocarbon
In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons from which one hydrogen atom has been removed are functional groups, called hydrocarbyls....
and mineral
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
deposits. There have been several offshore licensing rounds since 2002, with a number of successful bids by multinational oil companies in partnership with NUNAOIL
NUNAOIL
Nunaoil is the national oil company of Greenland founded in 1985 as an equal partnership between the Greenland Home Rule Government and DONG Energy...
the state oil company for blocks. Press reports in early 2007 indicated that two international aluminum companies were considering building smelters in Greenland using local hydroelectric power.
While the GHRG (Greenland Home Rule Government) has primary sovereignty over mineral deposits on the mainland, as laid down in the 2008 treaty, oil resources are within the domain of the Danish exclusive economic zone. Exploring for oil
Oil exploration
Hydrocarbon exploration is the search by petroleum geologists and geophysicists for hydrocarbon deposits beneath the Earth's surface, such as oil and natural gas...
has been ongoing since the 1970s, when a series of five dry wells were drilled, and there was a further dry well in the early 2000s. In 2010 British petrochemical company Cairns Oil reported "the first firm indications" of commercially viable oil deposits.
Tourism
TourismTourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
has some near-term potential, but this is limited by the short summers and high costs. Air Greenland
Air Greenland
Air Greenland A/S is the flag carrier airline of Greenland, jointly owned by the government of Greenland, the SAS Group, and the government of Denmark...
and Continental Airlines
Continental Airlines
Continental Airlines was a major American airline now merged with United Airlines. On May 3, 2010, Continental Airlines, Inc. and UAL, Inc. announced a merger via a stock swap, and on October 1, 2010, the merger closed and UAL changed its name to United Continental Holdings, Inc...
had direct flights from the U.S. east coast from May 2007 to April 2008, but these are now discontinued.
Agriculture, horticulture and forestry
Agriculture is presently of little importance in the economy, but climate changeClimate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
has enabled its expansion, by obtaining higher production of existing crops, introducing new ones, and extending the cultivated areas. Roughly 1% of the total land area can be used for growing crops. Presently 10% of all potatoes consumed in Greenland are produced locally, with a projection of 15% by 2020. Due to the lengthening of the productive season new crops have been introduced, such as apples, strawberries, broccoli, cauliflower, cabbage and carrots. In southern Greenland the growing season is mid-May through to mid-September, on average three weeks longer than a decade ago.
Animal husbandry
Reindeer herding has been introduced to Greenland in various thrusts since 1952. Concerted attempts were made in mid-west Greenland in the 1980s and the 1990s, but these failed due to the immobility of the herds, resulting in trampled lichens and the subsequent destruction of the winter range. In 1998 mid-west reindeer husbandry came to an end, when the remaining herd was sold to the NuukNuuk
Nuuk, is the capital of Greenland, the northernmost capital in North America and the largest city in Greenland. Located in the Nuup Kangerlua fjord, the city lies on the eastern shore of the Labrador Sea and on the west coast of Sermersooq. Nuuk is the largest cultural and economic center in...
municipality whereupon the reindeer population was removed through hunting. By then only a handful of Greenlanders had received training in reindeer husbandry, for only one of whom it was his primary occupation. The rest of the herders, roughly 20 people, were hired Norwegian Sami. When Sami supervision ended in 1978, the results were dismal; reports were sporadic and inconclusive, and herd maintenance effectively ceased with the thereby following range destruction as a result. The conclusion of the experiment was that reindeer herding and husbandry is incompatible with the Inuit hunting culture. However, in stark contrast to the mid-west, the southern herds were successful. In 2008 there was still a strong herd in the Isortoq
Isortoq
Isortoq is a settlement in the Sermersooq municipality, in southeastern Greenland. Its population is 93 as of 2010.- Population :...
area, centered around the Isortoq Reindeer Station. The station is maintained by Iceland native Stefán Hrafn Magnússon and Norway native Ole Kristiansen.
Today animal husbandry consists mainly of sheep farming, with free grazing flocks. Modern sheep farming methods were introduced in the early 20th century, with the first farm built in 1906. The farms provide meat for local consumption and wool mainly for export. Some 20.000 lambs are slaughtered annually in Narsaq
Narsaq
Narsaq is a town in the Kujalleq municipality in southern Greenland. The name Narsaq is Greenlandic for "plain", referring to the beautiful plain on the shore of Tunulliarfik Fjord where the town is located.- History :...
. The lack of private land ownership rights on Greenland forces farmers to jointly agree to terms of land usage. In the south there is also a small cattle farm.
Statistics
GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
:
- official exchange rate - $1 700 million (2005)
Agriculture - products:
- forage crops, garden vegetableVegetableThe noun vegetable usually means an edible plant or part of a plant other than a sweet fruit or seed. This typically means the leaf, stem, or root of a plant....
s; sheepDomestic sheepSheep are quadrupedal, ruminant mammals typically kept as livestock. Like all ruminants, sheep are members of the order Artiodactyla, the even-toed ungulates. Although the name "sheep" applies to many species in the genus Ovis, in everyday usage it almost always refers to Ovis aries...
, reindeerReindeerThe reindeer , also known as the caribou in North America, is a deer from the Arctic and Subarctic, including both resident and migratory populations. While overall widespread and numerous, some of its subspecies are rare and one has already gone extinct.Reindeer vary considerably in color and size...
; fish
Electricity - production:
- 295 GWh (2004)
Electricity - consumption:
- 274.4 GWh (2004)
Exchange rates:
- Danish kroner (DKr) per US$1 – 4.707 (2008),5.9468 (2006), 5.669 (2005), 5.9911 (2004), 6.5877 (2003), 7.8947 (2002), 8.3228 (2001), 7.336 (January 2000), 6.976 (1999), 6.701 (1998), 6.604 (1997), 5.799 (1996), 5.602 (1995)