Its latitude, at 64°08' N, makes it the world's northernmost capital of a sovereign state. It is located in southwestern Iceland, on the southern shore of Faxaflói Bay. With a population of around 120,000 (and over 200,000 in the Greater Reykjavík Area), it is the heart of Iceland's economic and governmental activity.
Reykjavík is believed to be the location of the first permanent settlement in Iceland, which Ingólfur Arnarson is said to have established around 870 C.E. Until the 18th century, there was no urban development in the city location. The city was founded in 1786 as an official trading town and grew steadily over the next decades, as it transformed into a regional and later national centre of commerce, population, and governmental activities.
The first permanent settlement in Iceland by Norsemen is believed to have been established in Reykjavík by Ingólfur Arnarson around AD 870; this is described in Landnámabók, or the Book of Settlement. Ingólfur Arnarson is said to have decided the location of his settlement using a traditional Viking method; by casting his high seat pillars (Öndvegissúlur) into the ocean when he saw the coastline, then settled where the pillars came to shore. Steam from hot springs in the region is said to have inspired Reykjavík's name, which loosely translates to Smoke Cove (the city is often referred to as the Bay of Smokes or Bay of Smoke) The original name was Reykjarvík with an additional "r" that vanished around 1300.
Reykjavík is not mentioned in any medieval sources except as a regular farm land but the 18th century saw the beginning of urban concentration there. The Danish rulers of Iceland backed the idea of domestic industry in Iceland that would help to stimulate much-needed progress on the island. In 1752, the King of Denmark donated the estate of Reykjavík to the Innréttingar Corporation; the name comes from Danish "indretninger", meaning enterprise. The leader of this movement was Skúli Magnússon. In the 1750s several houses were constructed to house the wool industry that was to be Reykjavík's most important employer for a few decades and the original reason for its existence. Other crafts were also practiced by the Innréttingar, such as fisheries, sulphur mining, agriculture, and shipbuilding.
The Danish Crown abolished monopoly trading in 1786 and granted six communities around the country an exclusive trading charter, Reykjavík was one of them and the only one to hold on to the charter permanently. The year 1786 is regarded as the date of the city's founding; its 200th anniversary was celebrated in 1986. Trading rights were still limited to the subjects of the Danish Crown however, and Danish traders continued to dominate trade in Iceland. Over the following decades, their business in Iceland expanded. After 1880, free trade was expanded to all nationalities and the influence of Icelandic merchants started to grow.
Rise of nationalism
Icelandic nationalist sentiment gained influence in the 19th century and ideas of Icelandic independence became widespread. Reykjavík, as Iceland's only city, was the melting pot of such ideas. Advocates of an independent Iceland realized that a strong Reykjavík was fundamental to that objective. All the important years in the history of the independence struggle are important for Reykjavík as well. In 1845, Alþingi, the general assembly formed in 930AD, was re-established in Reykjavík; it had been suspended a few decades earlier when it was located at Thingvellir. At the time it only functioned as an advisory assembly with the function of advising the King about Icelandic affairs. The location of Alþingi in Reykjavík effectively established the city as the capital of Iceland.
In 1874 Iceland was given a constitution and with it, Alþingi gained some limited legislative powers and in essence became the institution that it is today. The next step was to move most of the executive power to Iceland and that was done by Home Rule in 1904 when the office of minister for Iceland was established in Reykjavík. The biggest step towards an independent Iceland was taken December 1, 1918 when Iceland became a sovereign country under the Crown of Denmark, the Kingdom of Iceland.
In the 1920s and 1930s most of the growing Icelandic fishing trawler fleet sailed from Reykjavík and salt-cod production was the main industry but the Great Depression hit Reykjavík hard with unemployment and labour union struggles that sometimes became violent.
World War II
In the morning of May 10, 1940, following the German occupation of Denmark and Norway on April 9, four warships approached Reykjavík and anchored in the harbour. Many citizens were relieved to find that they were British rather than German. In a few hours, the allied occupation of Reykjavík was complete. There was no armed resistance and taxi and truck drivers even assisted the invasion force which had no motor vehicles initially. The Icelandic government had received many requests from the British government to consent to the occupation, but they always declined on the basis of the Neutrality Policy. For the remaining years of World War II, British and later American soldiers built bases in Reykjavík; the number of foreign soldiers in Reykjavík became about the same as the local population of the city. The Royal Regiment of Canada (RREGTC)formed part of the garrison in Iceland during the early part of the war.
The economic effects of the occupation were quite positive for Reykjavík: the unemployment of the depression years vanished and a lot of construction work was done. The British built Reykjavík Airport, which is still in service today, mostly serving domestic flights; the Americans built Keflavík Airport, which later became Iceland's primary international airport, situated 50 km from Reykjavík. In 1944 the Republic of Iceland was founded and a president elected in popular elections replaced the King; the office of the president was placed in Reykjavík.
In the post-war years, the growth of Reykjavík accelerated. A mass exodus from the rural countryside began, largely due to improved technology in agriculture that reduced the need for manpower, and because of the population boom resulting from better living conditions in the country. A once primitive village was rapidly transformed into a modern city. Private cars became common and modern apartment complexes rose in the expanding suburbs. Much of Reykjavík lost its village feel. In 1972, Reykjavík hosted the world chess championship between Bobby Fischer and Boris Spassky.
Reykjavík has in the last two decades become a significant player in the global community. The 1986 Reykjavík Summit between Ronald Reagan and Mikhail Gorbachev underlined Reykjavík's new-found international status. Deregulation in the financial sector and the computer revolution of the 1990s have transformed Reykjavík yet again. The financial sector and information technology are now significant employers in the city. The city has fostered some world famous talents in recent years, such as Björk, Ólafur Arnalds and bands Múm, Sigur Rós and Of Monsters and Men, and poet Sjón.