The Ripple Effects of The Icelandic Financial Crisis: Social Fabric and Public Health in Post-2008 Iceland

This chapter examines how Iceland, known for its strong institutional trust and social cohesion, responded psychologically and socially to the 2008 financial crisis. Using open and multi-source datasets, including the European Social Survey, Statistics Iceland, and the WHO Mortality Database, I examined changes in the social fabric and public health indicators before and after the crisis. The results revealed that trust in political institutions such as parliament, politicians and political parties fell sharply after the crisis, while trust in the legal system remained stable and even increased for the police, especially among highly educated citizens. In terms of health outcomes, in contrast to other Nordic countries, cerebrovascular mortality increased after the crisis. Meanwhile, indicators of psychological well-being, such as life satisfaction and happiness, showed more pronounced declines among the middle and highly educated groups. These findings are partially consistent with the predictions of System Justification Theory, scarcity mindset, and life history theory, and point to context-specific boundary conditions in psychological responses to crises. Iceland's post-crisis transparent governance and public accountability likely played a key role in buffering against deeper social polarization. In this chapter, I have illustrated how crisis responses are filtered through social, cultural, and institutional lenses.