The Collapse of the Atlanto-Scandian Herring Fishery: Effects on the Icelandic Economy

Abstract

After 1950 traditional herring fisheries were revolutionized by a new technique: sonar, power block, larger nets and bigger boats. As a result all major herring stocks in the North East Atlantic Ocean collapsed. The most dramatic decline was that of the Atlanto-Scandian stock between Iceland and Norway from millions of tons to the border of extinction in a decade. It was one of the largest fish stocks in the world until the fishery crashed in the late 1960s. The catch in 1971 was only 20 thousand metric tons in contrast with the record of 2 million tons in 1966 and the spawning stock declined from 10 million tons to 10 thousand tons in 20 years. After more than 20 years of very restricted catches the stock finally recovered. With hindsight the cause of this disaster was a combination of biological, technological, economical and ecological factors, but the most important ones were over-fishing, recruitment failure and the cooling of the East-Icelandic current which was one aspect of a global climate change in this part of the world during the period 1965-2000. At that time there was no fisheries management authority to limit either catch or effort. The sudden closure of the fishery was a shock to many communities in Norway and Iceland. The small Icelandic economy was especially vulnerable because salting and reduction of herring was for many years the most important export industry in the country, sometimes exceeding 40% of the total value, and a source of wealth around the country that trickled down the society. After describing the simultaneously waning stock and waxing effort by mathematical models we will first demonstrate some macroeconomic quantities before and after the collapse and then take a closer microeconomic look at some of the communities that based their existence on the herring fishery. Finally we will outline the recovery when other species replaced the herring and new industries gradually diversified the economy.

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THE COLLAPSE OF THE ATLANTO-SCANDIAN HERRING FISHERY:
EFFECTS ON THE ICELANDIC ECONOMY
Thorir Sigurdsson, University of Akureyri, thorir@unak.is
ABSTRACT
After 1950 traditional herring fisheries were revolutionized by a new technique: sonar, power block, larger
nets and bigger boats. As a result all major herring stocks in the North East Atlantic Ocean collapsed. The
most dramatic decline was that of the Atlanto-Scandian stock between Iceland and Norway from millions
of tons to the border of extinction in a decade. It was one of the largest fish stocks in the world until the
fishery crashed in the late 1960s. The catch in 1971 was only 20 thousand metric tons in contrast with the
record of 2 million tons in 1966 and the spawning stock declined from 10 million tons to 10 thousand tons
in 20 years. After more than 20 years of very restricted catches the stock finally recovered. With hindsight
the cause of this disaster was a combination of biological, technological, economical and ecological
factors, but the most important ones were over-fishing, recruitment failure and the cooling of the East-
Icelandic current which was one aspect of a global climate change in this part of the world during the
period 1965-2000. At that time there was no fisheries management authority to limit either catch or effort.
The sudden closure of the fishery was a shock to many communities in Norway and Iceland. The small
Icelandic economy was especially vulnerable because salting and reduction of herring was for many years
the most important export industry in the country, sometimes exceeding 40% of the total value, and a
source of wealth around the country that trickled down the society. After describing the simultaneously
waning stock and waxing effort by mathematical models we will first demonstrate some macroeconomic
quantities before and after the collapse and then take a closer microeconomic look at some of the
communities that based their existence on the herring fishery. Finally we will outline the recovery when
other species replaced the herring and new industries gradually diversified the economy.
Keywords: Herring, population dynamics, fleet dynamics, climate change.
INTRODUCTION
Herring (clupea harengus) has been described as a “successful species” (Blaxter, 1985). It is found around
the globe in northern latitudes both in the Atlantic and the Pacific. The largest subgroup is the so called
Atlanto-Scandian stock in the ocean between Norway and Iceland.
Fishermen had caught herring along the Norwegian coast for centuries before they discovered large shoals
in the summertime north and east of Iceland in the second half of the 19th century. They started successful
fishing which, however, was stopped by difficult climate conditions after 1880. It was resumed in the
beginning of the 20th century and continued for almost 70 years. Icelanders soon learned from Norwegians
the technique to catch and process this abundant species which became the backbone of their newly
industrialized economy.
Early in the 20th century biologists had classified three different stocks: Norwegian spring-spawners,
Icelandic spring-spawners and Icelandic summer-spawners (Dragesund, 1980; Jakobsson, 1985), but in
1935 the Icelander Arni Fridriksson, who later became director of ICES, proposed the idea that the spring-
spawners were of the same stock, which spawned close to the Norwegian coast but migrated to feeding
areas around Iceland during the summer. In the late 1940s his hypothesis was confirmed by tagging
experiments. Later, over-wintering areas were discovered in the Norwegian sea where the stock size could
be measued by acoustic methods and underwater photography (Fedorov, 1963). At its culmination a
fraction of the spring-spawning stock with some special characteristics spawned off the south coast of
Iceland but disappeared before 1970. The whole migration pattern changed drastically in the late 1960s
away from the Icelandic coast far to the northeast because of lower sea temperatures and reduced primary
production (Malmberg, 1985; Jabobsson, 1996)).

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Until 1950 Icelandic catches fluctuated with an increasing trend, sometimes exceeding 200 thousand metric
tonnes per year. Then the herring changed their behaviour and became difficult to find, but new technology
arrived - sonar and power block - which revolutionized the fishery in a remarkably short time.
Oceanographic indicators were favourable and lucrative markets motivated entrepreneurs. Yield went up to
unprecedented levels (more than 0,5 million tons per year), but only for a few years. At the same time
Norway kept on fishing pre-spawning herring and juveniles, bringing total landings close to 2 Mt. Also,
recruitment failed and the stock collapsed dramatically around 1970. Nevertheless commercial fishing was
not banned until 1976 (Sætersdal, 1980). The stock did not recover until 20 years later, but has only
recently and partially returned to Icelandic waters after staying close to the Norwegian coast. The
following diagram describes 50 years of the herring fishery game, where the principal players
were Norway, Iceland and Russia but many other nations participated from time to time.
0
0,5
1
1,5
2
2,5
1950 1955 1960 1965 1970 19 75 1980 1985 1990 1995 2000
Mtons/ year
Forecast origin
(1963)
Fig 1. Total catch of Atlanto-Scandian herring 1950-2000. Source: Norwegian Directorate of Fisheries.
STOCK DEVELOPMENT
In the mid 1960s the International Council for the Exploration of the Sea (ICES) had assessed the size of
the stock from the early 1950s (Anonymous, 1964). Although fishermen and biologists expected the stock
to rise again to previous heights it should have been tempting for a mathematician to specify a time-series
model by combining trigonometric and exponential functions to describe the past development of the stock
–and extrapolate into the future: S=AeBt[1+Csin(Dt)], where S is the stock size and t time After estimating
the four parameters statistically by the Gaussian least squares method using data from 1953 to 1963 the
development of the stock could have been predicted. In fact, reality was even more abrupt than the
pessimistic outlook of a nonviable minimum ten years later. More accurate stock assessment by virtual
population analysis (VPA), not available until several years after the collapse, showed the same trend with
some modifications (Dragesund, 1980).
The present state of the three components of the Atlanto-Scandian herring is different. The Icelandic
spring-spawners disappeared from the catches around 1970, seem to be extinct now and may have been an
offspring of the Norwegian stock. The Icelandic summer-spawners are in better shape than ever with a
stock size of over half a million metric tons and a yearly yield of more than a hundred thousand tons. The
stock was endangered in the early 1970s but was rebuilt by a strict ban for several years. The Norwegian
spring-spawners are relatively stable with a stock about five million tons and a total catch of one million
tons per year, but no agreement is valid of how to divide the total allowable catch between the participating
nations: Norway, Russia, Iceland, Faroes and the European Union.

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Estimated model:
S=12exp(-0,12t){1+0,42sin(0,60t)}
0
2
4
6
8
10
12
14
16
1950 1955 1960 1965 1970 1975
Time
Stock size / Mtons
Measurement s
(tagging and
acoustics)
Statistical model
Measurement s
(VPA)
Forecast
origin
(1963)
Fig 2. Estimation and extrapolation of the exponential-trigonometric model S=AeBt[1+Csin(Dt)]
FLEET DYNAMICS
Theory tells that in an open access fishery market forces should control the effort: vessels enter if there is
profit, exit in the case of loss. Let us propose a linear model to test this hypothesis: )( 0
PPk
E
E
i
i
i=

where the effort Eis defined as the product of the total number of vessels participating in the fishery, their
mean GRT and the mean number of days at sea. The lag

Ei=(Ei+1 Ei)is the effort difference between
the current year (i+1)and the previous year (i). Piis profit as a percentage of revenue in a sample of annual
accounts, P0some threshold value, which may be interpreted as an opportunity cost, and kaconstant. The
model simply states that the relative change in effort each year is proportional to the profit margin the year
before above (or below) the threshold. Estimation of this model with data from the Fisheries Association of
Iceland during 1955-1969 gives moderately significant results with the equation:
()( )
0050,0123,0
0086,0233,0 i
i
iP
E
E+=

with a correlation coefficient R=0,44
which means that k = 0,0086 and P0=0,233/0,0086 = 27% per year.
The estimated model seems to be a paradox since the threshold value is negative, meaning that the fishery
continued to expand in spite of negative profits most of the time. This peculiar result can be explained by
characteristic factors of the abnormal monetary policy in Iceland at that time: government intervention,
inflation, negative real interest, subsidized funds and controlled exchange rate of the krona.

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Fig 3. Estimation of the fleet dynamics equation
STOCK AND EFFORT
Bioeconomic theory defines an equilibrium point where the marginal values of both stock and effort with
respect to time are zero (Hannesson, 1993). When the fishery develops these quantities will follow a time
path in a stock-effort phase space around this point spiraling towards stability or overshooting it leading to
extinction of the stock if time permits. Well known examples are hunting of the Pacific fur seal (Wilen,
1976) and fishing of the North Sea herring (Bjorndal and Conrad, 1987). In both cases the final
extermination was not reached but in the case of the Atlanto-Scandian herring it was very close before the
fishing stopped according to effort data from the Fisheries Association of Iceland and stock data from
ICES.In simple models the equilibrium is a fixed point, but taking into account varying price, cost and
catchability it moves and accelerates the path to zero as the following diagram displays.
0
1
2
3
4
5
6
7
8
9
051015
Stock / Million tons
Effort / Million GRTdays
Time path
1955-1969
Moving
equilibria
Fig 3. Stock-effort phase diagram for the Icelandic Atlanto-Scandian herring fishery
ECONOMIC EFFECTS
The sudden end of the herring adventure had immediate and widespread effect on Iceland, both
economically and socially. Many macroeconomic indicators took a dive: GDP, export, import, household
expenditure (but not government expenditure!), fixed capital formation etc. Consumer prices went up and
the exchange rate of the currency down. Some of these quantities recovered remarkably soon but others
remained unstable for a long time, e.g. the inflation and currency rates. In the long run the crisis stimulated
-1
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1
-80 -60 -40 -20 0 20
Previous profit in %
Relativechange ineffort
–27% !

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fishing of other species and establishing of other industries to replace the herring. The next three diagrams
demonstrate some of the most serious changes which affected both the daily life of ordinary people and
created an unhealthy environment for managers of firms and institutions. The data are selected from the
book Historical Statistics (1995) published by the bureau Statistics Iceland.
Fig 4. Annual growth of Gross Domestic Product
Fig 5. Inflation: Annual changes of Consumer Prices (___) and Disposable Income per capita(---)
Fig 6. Real exchange rate of the krona relative to GDP (---) and Labour cost (__)

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SOCIAL EFFECTS
Negative social effects were e.g. demographic movements, temporary unemployment and emigration to
other parts of country or other countries. Siglufjord in the middle of the north coast of Iceland,
sometimes called the “herring capital”, is a typical example It was almost a no man’s land when
Norwegian fishermen chose it as their work station in 1903 and started an industry which continued to
grow for half a century. When the herring moved to the east the town lost its status, population declined,
value of real estate fell and plans of the government and local fishing companies to replace the herring by
other species like capelin, shrimp and cod have only had a partial success in this geographically isolated
place. The only reminder of the “silver of the sea” is the Herring Era Museum which is an internationally
awarded tourist attraction. Many other communities in Iceland and Norway suffered similar fate
(Hamilton, 2004).
Fig 7. Siglufjord at the end of the herring era. (Photo: T. Sigurdsson)
0
500
1000
1500
2000
2500
3000
3500
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Fig 8.Siglufjord´s population in the 20th century Fig 9.The Herring Era Museum
(Painting: O. Kristfinnsson)

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TRANSITION
Before the collapse of the herring industry the Icelandic economy was very monotonic. Marine products,
mostly cod, counted for about 90% of the export value of goods and the value of herring products was
between 20% and 40%. After the collapse marine products dropped to 70%, herring to 5% and a new
species, the capelin rose to 10% but has been very variable. A real novelty was the beginning of a new
heavy industry: aluminium smelting by electricity from hydroelectric or geothermal power stations. The
value of that product from one factory became soon 10% of the export value but later other smelters were
added and disputable prospects to multiply the production are discussed. Recent plans from the Ministry of
Industry and Commerce indicate that a radical transformation of the Icelandic economy is taking place in
the sense that marine products will no longer dominate.
Proportions of value
0
10
20
30
40
50
60
70
80
90
100
1950 1960 1970 1980 1990
%
Marine products
Herri ng
Alumi ni um
Capelin
Fig 10. Relative export value of different goods from Iceland 1950-1990
This development has continued since 1990 and will probably continue as last year´s export and a five year
prognosis shows:
2005: Marine products 56,7 %
Herring 3,7 %
Aluminium 18,5 %
Capelin 4,8 %
2010: Marine products 40 % ?
(Forecast) Aluminium 40 % ?
Sources:Statistics Iceland, Ministries of Industry and Commerce, Ministry of Fisheries

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SUMMARY
The consequences of the almost total elimination of the herring industry in a short period of time can be
classified in negative and positive effects and summarized in the following table.
:+
Short-term drop in many Fast recovery of some
economic indicators economic indicators
Long-term inflation and Gradually improved
economic instability economic management
Unemployment and Utilization of
emigration other species
Demographic Fisheries management
disturbance from OA to ITQ
Discarded vessels and Modernized fleet and
bankrupt factories diverse industries
CONCLUSION
The collapse of the great Atlanto-Scandian herring stock was inevitable because new technology increased
catches despite decreasing stock. At the same time climatic and oceanographic changes were unfavourable
and the free access prevented any sensible management of the fishery. Market failure escalated effort
despite biological and economical warning signals.
The effects on the Icelandic economy were only negative in the beginning but gradually positive
consequences appeared. Herring became the first example of a quota system in the fisheries which
nowadays encompasses all fleets and all important species within the exclusive economic zone. Other
species have partially replaced the herring and new industries have reduced the relative importance of
fisheries in the national economy.
At the end of the day the experience of the mismanagement of the Atlanto-Scandian herring taught us a
lesson. Even today there is a controversy between scientists, fishermen and politicians how to manage fish
stocks in North Atlantic waters, but they should have learned enough to avoid the same mistake.
International cooperation in research, surveillance and regulation is necessary.

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