Birth of a Village - the Innréttingar
With the mercantilist ideology of the 17th and 18th century, there was growing interest in Europe in promoting progress in each country by establishing domestic industry and other economic enterprises. The Danish authorities lent their support to this policy in Iceland by backing a new corporation that aimed to establish industry in Iceland, the Innréttingar. This name was an Icelandicisation of the Danish word Indretninger (= Enterprises). The royal estates of Reykjavík and Örfirisey were among the resources allocated to the new company. A woollen industry was established in Reykjavík. Sixteen buildings were constructed in Reykjavík in the 1750s for the Innréttingar, and this marked the beginning of Reykjavík's evolution into a village. All but two of the buildings have vanished without trace; the house at Aðalstræti 10 is the only one that survives in near-original form, while Aðalstræti 16 has been much altered.
Danish and German craftsmen were brought to Reykjavík to train Icelanders in their crafts. Before long, almost all the workers were Icelanders. The aim of the Innréttingar was to initiate a broad-based economic renaissance in Iceland. Advances were made in the fisheries, shipbuilding, agriculture and sulphur mining. The major enterprises were located in Reykjavík, where buildings were constructed for woollen work and weaving in the area which is now Aðalstræti. New equipment, such as spinning wheels and modern looms, was imported. In Reykjavík other enterprises were also established, such as rope-making, barrel-making and tanning.
The first building in Reykjavík other than the craftsmen's workshops and a few homes, was a large stone structure (now Government House) built on the estate of Arnarhóll, east of the Brook, in 1761-1771. This was built as a jail to serve the whole country, housing 54 prisoners. The aim was for the prisoners to be employed in the woollen industry, thus developing their skills.
Treasurer Skúli Magnússon was one of the main supporters of the Innréttingar, and campaigned in their favour throughout their existence. He had a splendid residence built on Viðey island, which still stands. He lived there from 1754 until his death in 1794.
After 1767 the Innréttingar went into a decline, and the number of employees dropped drastically. The woollen industry survived longest, into the 1800s.