You're comparing a country to medium sized cities though - on a continent with a population of 750 million people, versus a country like America with 350 million, it's like 350 thousand. What small City governments can do and how they govern is different from alrger cities like NY, different again from states and from the monster of the federal government or the European union
Iceland is not that small. It's comparable to many medium sized cities in Europe, or a district of a big one.