The view from Studio Bility designer Gudrún Lilja Gunnlaugsdóttir’s home just outside Reykjavík would be bucolic were it not for the threat of severe weather. In the former auto repair garage that she and graphic designer husband Jon Ásgeir Hreinsson are renovating, expansive windows look out on a lighthouse at the end of a long jetty. At midnight on the night after Midsummer’s Eve, the sun hasn’t set. We have a clear view of the sky as it grows moody, stooping low and gray, reminding us that summer could disappear precipitously under show-ers of rain and the bruising winds off the North Atlantic.

Iceland is a land of extremes, suspended between Europe and North America, with ties to Scandinavia (Vikings, sagas, an affinity for nature) but few of its high-profile design icons. The countryside features dramatic textures (moss, magma, roiling hot springs, and glacial crevasses), while much of its tiny, cosmopolitan population lives in the highly rational architecture of the capital, Reykjavík. The national language, like much of Iceland’s architecture, is literal and lacks extraneous embellishment or preciousness. Additions to the lexicon are often made up of precise, elaborate compound words (Icelandic is not unlike German in this respect), augmenting the Icelandic vocabulary to keep pace with developments in technology and the sciences. (The word for “deodorant,” svitalyktareydir, entered the dictionary some decades back and literally means “smell-sweat-destroyer.”) But this highly efficient brand of economy is tempered by a widespread faith in fairies and huldufólk, the hidden people who inhabit stones.

It wasn’t until 2000 that the Iceland Academy of Arts began to grant degrees in design, and today, as the first graduates establish studios and show new work, Reykjavík’s burgeoning design community is reaching new heights. Last year Gunnlaugsdóttir curated the exhibit Magma/Kvika: Icelandic Contemporary Design 2007 at the Reykjavík Art Museum, which featured the multidisciplinary work of more than 80 local designers, a striking number relative to the country’s population of 300,000.

Over skewers of fresh fish brought home from a hole-in-the-wall shop in the nearby harbor, Gunnlaugsdóttir talked about what’s afoot and why it’s time for all of us to keep an eye on Iceland.

That the population is as small as it is, only 300,000 in the whole country, and that it is always cold.

The progress of making things is much faster here because somehow you tend to hurry before the storm hits. Summers are more playful, and we do not take work too seriously. You may see a sign on an office door reading “Due to very nice weather, we are taking the rest of the day off.” Very nice weather, meaning more than 68 degrees. I think many creative people fill their heads during summer. Winters are more for sitting down at your table, taking those things you gathered in your mind during the summer, and making something from them. Last year, Haraldur Jónsson used black paper to create the exhibit Crumpled Darkness, which really represents what it is like to live in the darkest days of winter. Architects have played with our climate; the moss wall on the city hall designed by Studio Granda is a good example. Its colors and forms transform with each season. Icelandic wool keeps us warm and is an inspiration. “Love gloves” are woolen mittens that are joined together so you can still hold hands on cold winter days.

I really wanted to figure out what makes design here distinct, but I discovered that we are very international and mixed. You can find projects that are linked to our stories and myths, like the work by Vik Prjónsdóttir, which is full of wit but still practical, substantial, and even ecofriendly in its production and creation.

We also have a lot of designers whose work is very craft-based, with materials like ceramics, wool, and fish skin. Good examples of this are shops like Kirsuberjatréd and Kraum and the work of ceramicist Kogga.

You can see the city shining in the creations of young designers. In fashion it is names like Naked Ape, which makes street clothing with screen-printed artwork by various Icelandic artists. Mundi Designs is an exciting new fashion label headed up by a young graphic designer.

In a way, I think many designers think it is too close to them and maybe a bit naive. Fairies and huldufólk are a part of our history and have been in our stories for ages. It might now be a good time to introduce those creatures in designs. I’ve used them in a few of my own designs. It’s important for us to remember that we are not living alone in this world.

Reykjavík is a big part of our culture, but the countryside is even bigger. Many people have summer houses or second homes in the country—–or come from a family of farmers way back. You are always close to your roots and know where you come from. We all take inspiration from nature and our sagas. Not that we dwell in the past, but we know where to look to create something new from our past.

The design community is young, and still has to find its way. Iceland is a great country for making prototypes and limited editions due to the closeness of the factories, but it is too expensive for export in mass production. The government could be a lot stronger in setting a goal for the future of Icelandic design.

In architecture we have some really great Icelandic buildings, and local architects have fought to preserve our building style. It is so important that old and new come together and enrich each other.

Go to a local pool, and after a good swim go into the hot pot. That is where very important conversations take place—–about politics, culture, gossip, whatever is an issue worth talking about. You should not miss the feeling of soft moss on rough lava. You can find it close to the city and in the countryside; just step out of your car and feel it. And during the winter, a blizzard—–go outside and feel the weather in all its strength.