In 1936, W H Auden spent a summer in Iceland with his friend and fellow poet Louis MacNeice. The letters and poems they wrote that summer and sent home to Richard Crossman and Christopher Isherwood, among others, offer not only a fascinating record of their own youthful enthusiasms and obsessions but also a record of Iceland itself, a country which was then perhaps the most isolated, impoverished and introverted in Europe.

For the adolescent Auden, Iceland was “holy ground”: a landscape of mystery and dreams. When he finally arrived there, at the age of 29, the reality he encountered “verified his dreams”, but there were infinite irritations. In his letters home, Auden mocked the mediocrity and shabbiness of the architecture, the gloom of the locals, and the awful food—the bitter soups, the dried fish, the overcooked mutton and, a speciality, the rotten shark pickled in sour milk. This was a time of great upheaval in Europe—the civil war had begun in Spain, Hitler was ascendant—but Auden could discover little of what was happening elsewhere in the world. “Reykjavik,” he wrote, “is the worst possible sort of provincial town as far as amusing oneself is concerned, and there was nothing to do but soak in the only hotel with a licence.”

When Auden returned to Iceland in 1964, he found that things had changed beyond all expectation. The country was now a fully independent republic and a member of Nato; military occupation, first by the British and then by the Americans, had brought a greater prosperity and outward curiosity. But the Icelanders, Auden noted, “have not—not yet—become vulgar”.

What, one wonders, would he have made of contemporary Iceland? To visit the country today, especially the vibrant capital, Reykjavik, is to discover that the vexed word “globalisation” might have some meaning after all: there are restaurants specialising in “fusion”, Mexican, Chinese and “Californian-Tuscan” food; there are designer boutiques and sports bars with banks of screens showing English football; there are hectic nightclubs, elegant coffee shops and internet cafes; there are strip malls, cinemas showing the latest Hollywood releases and bookshops open until midnight, where you can buy any European newspaper of your choice on the day of your choice. Everyone you meet speaks English with an impressive, idiomatic fluency. Young people look very much as they do in New York or London: cool, aloof and knowingly fashionable. In fact, you could be in any modern city anywhere in the developed world were it not that alcohol were so prohibitively expensive and the surrounding landscape so thrillingly, disorientatingly strange.

The most popular time to visit Iceland is during the long white nights of summer, when the bars and clubs of central Reykjavik never seem to close and the days can often be warm and dry. But summer in Reykjavik is a time of oppressive congestion: there are too many backpackers in search of the local “vibe”, as celebrated in the novel (and subsequent film) 101 Reykjavik; too many people believing that they will encounter Bjork, Damon Albarn or Jarvis Cocker in a coffee shop—in truth, several years have passed since Albarn lived in the city, and Bjork is now resident in New York.

Early winter in Iceland, before it becomes too cold, is different. I visited in late November, before the pre-Christmas rush, and it was a thrill to hire a car and drive out along empty roads to what is known as the Golden Triangle—the area where, within a few square miles, you find spouting hot springs, including the Great Geyser, the Gullfoss waterfalls and a surrounding near-lunar landscape of canyons, craters and caves.

In summer, tourists are bused out to the Golden Triangle in their breathless thousands; but when I was there, on a wet, misty Monday afternoon, I was quite alone as I stood, in baffled contemplation, beside Gullfoss falls. The black-barren lava fields, the sheer cliffs and gleaming glaciers, the geothermal springs and surging waterfalls, the pristine glacial valleys and high mountain lakes, the volcanic disturbance and threat of earthquakes, the persistent smell of sulphur, the complete absence of trees: travelling through Iceland you never cease to marvel at the strangeness of this landscape, or cease to wonder that people live here.

The Guardian journalist James Meek has described Iceland as being like “one of those science fiction dystopias portrayed in the films of the 1960s and 1970s, when everyone lives comfortable, prosperous, safe lives providing they do not question society’s darker secrets”. It is a good description because there is something genuinely mysterious about this country that defies neat explanation. Despite the rotten weather, the darkness (in winter, there is virtually no daylight at all), the continual sleet and sea fogs, life in Reykjavik is very comfortable. The economy may still be over-reliant on fishing, but there is full employment, life expectancy is among the highest in Europe, the liberalisation of the financial markets has produced a new entrepreneurial spirit among the young and educational standards are high. Above all. Iceland is the closest we have to a genuinely classless society in Europe.

Yet still the intelligent young are leaving, particularly for America. Icelandic literature, beginning with the incomparable sagas written in the 13th and early 14th centuries, is simultaneously preoccupied with themes of arrival and departure. Indeed, there is an entire literature of exile—and the longing for home among Icelanders is profound.

How could it be otherwise, when the landscape of home is so sublime and so sacred?