DEVELOPING AN OPEN ECONOMY
ENTREPRENEURS, INSTITUTIONS AND FOREIGN
TRADE IN NORWAY'S TRANSFORMATION
1845-1975
By
Helge Hveem
Institute of Political Science
and
Programme on International Development Research
University of Oslo
Paper written for the Inter-American Development Bank project
Development Strategies in Small Natural-Resource-Rich
Countries
A Comparison of Latin America and Scandinavia
1989-90
Final draft.
To be discussed at a meeting in Santiago, Chile 8th-10th
January,
1990
I.
The arqument.
Economic performance is often explained as an autonomous
process. But countries do not simply "take off" once they get
started, nor does "self-sustained growth" follow automatically
once the initial steps have been taken. The case of Norway
certainly proves the belief in take-off automaticity to be
misplaced.
In the course of some 100 years, Norway developed from a
poor agribased society to an industrialized welfare state. The
explanation for this is to be found in a combination of
political-institutional,
socio-cultural and economic factors.
Norway's development spans periods of industrial
restructuring, big fluctuations in foreign markets and periods
of economic growth interrupted (and often caused) by external
shocks. Thus, in order to account for Norway's development one
needs an approach which is both eclectic and dynamic.
Institutions and politics have had a decisive influence on
the patterns of change. Being a small and open economy Norway
has had to cope with the effects of geopolitics as a general
conditioning factor in her environment. Geopolitics has
offered Norway disadvantages and advantages as a developing
nation. I shall not make much out of this particular factor in
the following. Instead I shall focus on four factors, the
particular combination of which is believed to be able to
account rather fully and exhaustively for the setting in which
Norway's economic development has taken place:
First, the evolution of social structure and political institutions which have transformed Norway from a society of
relatively independent,
self-sufficiency oriented agrarian
communities with few and weak linkages to the urban sector, to
a highly organized society with complex bargaining between
state and private institutions;
Secondly.
change
the rate and extent of adaptation to technical
(or the failure to adapt) ,
innovative reactions to
competition from abroad, the role of entrepreneurs and the
introduction of industrial policies
(or lack thereof) ;
Thirdly, the way and extent to which the country has been able
to adapt to changes in foreign markets, or in other words her
ability to organize and reorganize the foreign economic sector
to defend domestic stability against external shocks; and
Fourth, the extent to which export income or foreign capital
inflows have been linked to cross-sectoral and cross-regional
development, a gradual raising of processing levels and
development of a domestic market.
I shall offer what may be considered a preliminary, not a
final conclusion on what relative weight these various
explanatory variables have had during different periods of
recent Norwegian history. For one thing some changes have
occurred just by chance. Or "the winner" was not picked in
advance, but just appeared.
The choice of theoretical perspective may,
for the purpose
of this report, be reduced to a choice between two schools. On
the one hand, the externally induced or export-led development
hypothesis (Norman, 1984: Bergh et al,
1980). On the other
hand there is the domestic institutions and policy school. It
attaches more weight to domestic socio-economic and industrial
organization and to industrial policy
(Katzenstein,
1985). One
particular branch of this second school attaches particular
importance to the role of local communities and the political
power of the primary sectors
(Brox,
;
Furre, 1983) . Some
however, take position in between the export-led growth and
the domestic politics explanations and emphasize the way
factors highlighted by the two schools interact as decisive
(Liebermann, 1970; Senghaas, 1982; Maddison, 1982).
I will argue along with the latter. I shall thus argue,
first, that distinct historical epochs are characterized bv
different combinations of explanatory factors, and secondly,
that there is an interesting new perspective to be explored in
analyzing the political-economic orqanization of a country or the way domestic and foreign economic policies are merged
and what institutions are built to support the strategy. This
approach appears particularly appropriate in a comparatively
very open economy (Gourevitch,
1978 and 1986)
II
The lonq view: the formation period until the 1890s.
A "birds-eye view" of economic development trajectories will
have the history of Norway since the beginning of the 19th
century appear as a series of adaptations to external shocks.
Revolutionary or cyclical changes appear as more
characteristic than cumulative change.
a long time a relatively open economy,
Being a small and for
she has always been
sensitive to external forces. She appears at the same time to
have been able to adjust to them. Her vulnerability to such
forces has, however, been dominant at times and led to
temporary stagnation or recession.
2
Agrisociety.
Trade and pre-industrial development apparently first
joined forces decisively when the introduction of the water-
'The distinction is suggested in Sejersted, 1985.
2S ee
Keohane and Nye, 1977 for the distinction between two
aspects of economic interdependence among nations: sensitivity
means that a country is influenced by external events but is
able to cope (carrying whatever costs are inferred on her
without changing policy); vulnerability refers to a situation
where the country concerned is not coping in the short run but
has to carry costs even after having attempted to change
policy.
powered saw created the basis for increased exports of wood in
the 1520s and -30s. For 300 years this basis was vital for the
development of a pre-capitalist merchant economy in Norway,
and it was vital for foreign trade.
Until well into the 19th century, Norway bore the
characteristics of a colonized economy. Export marketing was
dominated by foreign traders
(Hanseatic, Dutch etc) .
Production remained undeveloped and largely under the control
of the colonizer, the Danish King and state. The virgin metal
industry got a boost by the 30 years war and from being
promoted by the state. A more truly nationally based export
economy started to develop at the end of the 18th century.
Norwegian merchant capital demanded that the mercantilist
privileges and monopolies established by the Danish be
loosened as their own business improved.
Then the Danish king threw in support for Napoleon and
geopolitics took over. In 1807, England's fleet virtually
sealed off Norway from Denmark.
The vulnerability inherent in
the typically colonial division of labour between Denmark and
Norway became apparent. Denmark's Napoleon strategy was
n_
a
clear negation of the interests of the province, and it is
obvious that it had consequences for Norway's economic
development"
(Sejersted,
1985:17) . The only real benefit she
derived from the Napoleonic war may have been the introduction
of the potato. In 1814 Norway was transferred as a colony to
Sweden by the great powers that had defeated Napoleon. As a
consequence she lost important markets on the Continent of
Europe.
For most of the first 2/3 of the 19th century, Norway's
economy remained relatively u n - or underdeveloped.
In 1820 her
GDP per capita is estimated to have been one of the lowest in
Western Europe. It was only about 2/3 that of the previous
colonial master, Denmark.
,
Her resource base was also compar-
'Maddison, 1982 p. 161 based on estimations by Bairoch, 1976 II
atively meagre: forests, fish and ships and a few mines were
about the whole of the non-agricultural economy; a population
of less than 1 million; few craftsmen and skilled workers; and
a capitalist class still not accumulating enough to form the
basis for large-scale investments in industrial capitalism.
She was very monocultural,
unskilled,
rather much of an enclave econonomy.
raw material-based and
She was, in other words,
a close parallell to a small "least developed country" in the
present world system.
,
The first industrialization period
It was only around the middle of the century that economic
activity picked up speed and became at the same time more
diversified. A combination of external and internal change,
some of it coming abruptly,
some building up more gradually,
integrated the Norwegian economy into the mainstream of
European industrial capitalism. By 1870, she still trailed
behind most of Northern Europe in gross econonomic terms and
had a slower rate of growth per capita than the Netherlands.
However, her rate of growth per capita was higher than several
other open economies during that period,
including Austria and
Belgium. And in several respects she had started on a process
of fundamental change. It was admittedly still one of uneven
development, but it meant the beginning of the end of the
agribased society. This is why this period may be referred to
as the formation period.
Five trends, to a large extent coinciding and combining,
characterize this process in the 19th century. First, a demo-
araphic explosion that imploded finally throuqh miqration.
Around the 1840s "the children of the post-1814 era" entered
the labour market in large numbers, pressing wages down and
leaving parents behind with more to spend in the market. When
'According to Hodne, 1981, the fate of the three main exportbased raw material industries is crucial in understanding
Norway's development.
the international economic crisis hit in the 1870s, migration
to North America "solved" the political and social crisis that
could no longer be controlled by a growing economy. During the
period 1865 to 1910, almost 2/3 of all the population increase
left the country.
,
Fig. 1 underscores the importance that
migration played in regulating the population during the
formation period.
(Fig. 1 here)
The factors that helped the economy grow were,
secondly,
chanqe of economic policy from contractive almost laissez
faire to expansive monetary and credit policy and, thirdly,
the emergence of an entrepreneurial industrial capitalism.
Economic policy became more expansive, not because of
mercantilist pressure in the first place but rather because
the leading liberal politicians and intellectuals saw it as an
appropriate shift well adapted to the needs prevailing at the
time. Pragmatism, not ideology led the way to change of
policy.
While the start did not result in large-scale industrial
growth that could absorb the rapid population growth
especially in agriculture,'
it created important new
reservoirs of manufacturing potential including competence and
"linkage industries". Textile and later mechanical industries
grew up in waves by copying the front-runner nation, England.
'Li ebermann, 1970; the figure is derived from calculating the
percentage of excess births over deaths. The migration rate
(no of migrants per annum per 1000 inhabitants) during 18951910 was 6,44 compared to 4,21 for Sweden, 3,23 for Austria
and 2,55 for Denmark. Among the Western European countries,
only Ireland and Italy showed higher migration rates during
the period (Bairoch, 1976 p. 250) •
'Liebermann, 1970 (p. 47) is thus right in pointing out that
Norway did not copy the patterns of industrial expansion some
decades earlier and thus did not confirm the mainstream
economic historian's assumption that acceleration of the rate
of population growth is usually concomitant with a rapid
enlargement of the industrial sector, cf. e.g. Cipolla, 1962.
As a "latecomer" or "second wave"
nation, Norway could profit
from the experiences made by the hegemon. A conscious and
comparatively large-scale import of skills and technology was
initiated after the English Parliament liberalized technology
exports in 1842. Imports were often taking the form of
"packaging" or product-in-hand transfer.
,
The textile industry
was helped by the new domestic demand and more flexible labour
market created by demographic changes and by the more
expanionist state.
Import of capital was not a necessity for this early
industrialization to occur, except for in the construction of
the first railways.
,
Norway completed (1855) the construction
10
of her first railway before more advanced Sweden
that may be explained largely by a fourth factor,
,
a fact
specific
demand: favourable international market access and terms of
trade. The wood industry needed to speed up transportation of
timber from the inland to the sea to meet increasing foreign
demand assisted by the lowering of English tariffs on wood
imports in 1851.
II
Norwegian shipowners were ready to exploit
'Gerschenkron, 1962 for the first, Sejersted, 1985 for the
second expression.
'The latter is referring to the way by which Norwegian
entrepreneurs sought out English textile firms or firms
specializing in related technology purchasing not only the
production equipment, but production skills to the least
detail,
sometimes even buying English foremen, engineers or other
skilled persons. For an author arguing the case for an
explanation of Nor-wegian industrialization to be sought at
the level of firms and their behaviour, see Bruland, 1988.
'Norway exported in fact capital from 1865 on when regular and
reliable national accounts were registered.
10
Construction was completed in 1855, long after most of the
other Western European nations including Denmark (1847) and
only one year before Sweden completed her first railway line.
llIt meant a relative advantage for Norway vis a
vis Canadian
exporters who had so far benefitted greatly from Imperial
privileges.
the conditions opened up by the abolition of the Navigation
Act in the 1840s. But except for wages paid to seamen and for
part of the mechanical industry,
shipping did not create many
backward linkages to the mainland economy.
Many analysts hold that Norwegian agriculture during this
period did not link up much with industry as the "balanced
growth" theories envisage.
But the self-owning peasant-based
economy in fact quadrupled food production 1809-1855 and
important rationalization through technical improvements took
place especially in areas close to the towns
(Va1en-Sendstad,
1962) • The agricultural society also contributed considerably
to the fifth factor of importance, political
institutionalization. Feudal elements were few or nonexisting, largely because nobility privileges had been
abolished after 1814. Norwegian farmers were, in comparison
with their Nordic breathren,
economically and politically
independent. They therefore played a comparatively prominent
role in national politics including in the parliament, the
Storting. Peasant power played, along with cultural and
political mobilization against the alien King, an important
role in stabilizing society."
These stabilizing factors were particularly important
during the socalled "Long Depression" of the 1870s and 1880s.
The crisis apparently hit Norway later but in many ways harder
than most other European countries.
12
"
Political mobilization
Kuznets, S. 195 ; Lewis, A.W., ; and Nurkse, R.
12
Sweden incidentally was a relatively "mild" imperial power
by historical and international standards, allowing Norway
considerable autonomy over economic and socio-cultural
affairs.
"
Norway's GDP fell during this period for the first time in
1878, whereas the first year it fell in Denmark and Austria
was 1873, in Sweden and Belgium 1875 (and in Finland and
Switzerland none of the years during this period); during the
1870-1895 period, GDP fell during three years in Norway and
Sweden but five in Austria, whereas corresponding figures for
Denmark was two, Belgium one and Finland and Switzerland none;
resulted in the introduction of the party system,
parliamentary rule (1884)
and a change in government
Conservative to a Liberal-Peasant coalition) .
(from
Together with
massive migration, these changes took away much of the effect
of the economic decline which was particularly prominent
during the 1879-83 period.
The decline was no doubt to a considerable extent caused
by slacking foreign demand for traditional Norwegian export
products. The domestic market was too small to take off
rapidly increasing production in newly established
manufacturing industry such as metallurgical and the matchmaking branches. New export industries which could replace the
declining raw materials based branches and the non-expanding
domestic market, were not developed (Bjerke, 1966) . And the
shipowners did not respond until very late to the
international change from sails to steam engine. Germany and
the United States reacted much more rapidly to the change of
technology and captured new market shares.
"The Lona Depression": a Schumpeterian crisis
The 1875-1895 crisis was in several respects a typical
Schumpeterian crisis. Shipowners faced dramatic losses in
market shares because foreign competitors were faster shifting
to steam. But in the course of some two decades the Norwegians
organized a turnaround from sail to steam. In 1905, the steampowered tonnage in 1905 overtook sail-powered tonnage.
Norway's position as the world's third largest shipping nation
in the world had been restored.
Shipping incomes accounted for roughly 40 percent of total
foreign incomes of Norway until the early 1970s. Shipping has
thus contributed heavily to balancing foreign economic
accounts. But it never became the engine of industrialization
in Norway. The impetus for change towards the end of the 19th
see Maddison, 1982: pp.88-89.
century did partly come from the introduction of the new
techno-economic paradiqm
l>
represented inter alia by the steam
engine, associated with a strong belief in general progress
and - of particular importance in the case of Norway - with
electricity.
It is an open question whether or not Norwegian industrial
capitalists at the time were more entrepreneurial in a
schumpeterian sense or believed more in the "gospel of change"
than did industrialists abroad. But again the advantage of
being a latecomer may have been proven true. And the Norwegian
entrepreneurs certainly appear to have been almost uncritical
believers in the "gospel of communication": as railways, roads
and shipping, and as banking, insurance and other
infrastructure were developed,
industrialization and economic
growth would automatically follow
(With Andersen and Collett,
1989) .
During the 1880s and -90s, there was a wave of investments
in infrastructure and in new productive facilities. Much of it
appears to have been associated with the kind of imports of
technology from abroad that characterized the first wave in
the 1840s and 1850s. But there were also Norwegian inventions
and innovations. Norwegian engineers graduated abroad and
brought home skills which were put into innovation.
taking entrepreneurs led the development,
"
Risk-
not financial
capitalists or exporters. The capitalist exported capital
during the crisis. Local savings went down and only some few
were willing to invest in the entrepreneurial wave. And
traditional exporters adapted to the international recession
"Freeman and Soete, 1987.
"Examples are the gas turbine invented by Elling 1884, a new
technique for producing oil from cod liver (Møller), and a
series of innovations in the paper and chemical industries by
Størmer. He graduated as an engineer from the Karlsruhe
Technical University in 1860, an illustration of the fact that
the Norwegian entrepreneurs were mostly engineers and almost
always educated abroad, either in England or in Germany.
by halting production.
The state had set up a Ministry of the Interior (1845) in
order to assist industry, notably with roads and railways. The
state did in fact buy the first steam-powered ship as early as
in 1826 - to be used in the mail service. But it had no role
in the booming shipping sector simply because shipowners did
not want it to. It was only after the turn of the century,
when the safety level of Norwegian ships had deterioriated
dramatically and large numbers of seamen's lives were lost,
that a public control body was established (With Andersen and
Collett,
1989) .
Norway was no laissez faire economy, but followed the
Rechtsstaat pattern described by Habermas
(1962). The
Norwegian state was still probably less active in economic
affairs at the time than the state in most other European
countries including Sweden and Denmark. This may have
constituted a weakness compared to other countries in at least
one important respect: she did not develop a strong banking
sector, a point to which I return shortly.
Another factor that probably worsened the crisis and may
have
retarded transformation was the comparatively high dependence
on England as a market and as a source of technology
acquisition. The English market took off more than 1/3 of
Norway's total exports in the 1880s, and dependence on England
was increasing as other markets turned protectionist.
Industrial restructuring was much faster in Germany and the
United States than in England,
a retarding factor that was
transmitted to Norway through her dependence on England.
The well-established exporters were reluctant with respect
to new investment and at the time found many of the new
industrial projects simply unacceptably risky.
If their view
had prevailed, much of the transformation of the economy might
not have happened, at least not as fast as it did.
17
III
From industrial breakthrouqh to the formation of the
bargaining economy
A background has been drawn up,
and several sets of factors
shaping the development process have been introduced.
Reformulating these factors slightly,
I shall organize the
remaining part of the paper around the following four sets:
technological transformation and industrial policy;
economic
policies and the role of the state; policy and organization in
the foreign economic sector; and the transition of Norway from
capitalist through mixed to a bargaining economy.
I shall
preface these four themes with a descriptive part on the role
of natural resources and the evolution of Norway's industrial
organization.
If an attempt were to be made to periodize the development
experience of Norway in the 20th century, the following may be
suggested:
Entrepreneur-led industrial breakthrough,
1900-1920:
The period is characterized by Norwegian entrepreneurial
spirit that makes important innovations, by heavy imports of
capital and by rapid industrialization linked to an
exponential build-up of hydro-electric power producing
capacity. It is helped by, but only partly a direct response
to, market developments, the driving force being a strong
belief in the inevitability of progress.
Ultra-orthodox monetary policy,
class conflict and re-
emergence of the domestic market,
1920s-1935
The effects of an unstable international economic and
political environment is much aggravated by an ill-conceived
"Sejersted, 1970: 88 ff. It may be added, though, that both
the entreprenurs and the exporters may have had a point. What
would have happened if the international upswing had not
occured and the domestic market recreated local demand during
the 1890s ?
economic policy,
resulting in high unemployment and increasing
social conflict. Entrepreneurial initiative and
decentralization of production to small firms producing for
the domestic market contributes much to solving the crisis. So
does the coming to political power of Social democracy and its
compromise with the farming community and industrial leaders.
Emerqence of the state in a mixed economy, 1935 - 50s
This compromise at the same time constitutes the foundation of
the mixed economy where the state assumes a planning and
orchestrating role, arranges for transfers of income to
farmers and fishermen, takes main responsibility for the
infrastructure and leaves most of industry and the services to
the private sector.
Permanent economic qrowth.
welfare state and the
"barqaininq
economy", 1950s-1975
The last period under survey is the period of high and
practically unbroken economic growth.
Surplus is being
invested in continued natural resource-based specialization,
in a welfare state and in a system of political alliances.
That system establishes networks of consultation and
coordination with the main social actors, between them and
between the regions and the national decision-making centers.
The state assumes responsibility for compensating or
protecting those sectors and groups which loose from being
subjected to a more open economy.
The division of labour characteristic of the mixed economy is
replaced by the alliances and networks of the bargaining
economy.
1. The role of natural resources and the evolution of Norwav's
industrial organization.
The extraction and export of natural resources played a
dominant part in Norway's early industrialization. Timber,
fish and to a diminishing extent metal ores made up most of
commodity exports.
This structure continued well into the 20th century and is
still rather predominant.
Its content has changed with
technological transformation towards higher processing levels
and structural diversification towards more varied production.
The major part of the industrial system was based on
domestic natural resources. With the introduction of hydroelectricity, a growing part of the industry became an entrepot
sector. Much of the equipment and of the ores and metals used
in the metallurgical industry were imported. Thus the
percentage share of base metals in total imports rose from
about 9 to 18 percent during the industrial breakthrough. It
was still some 17 percent in 1975. Norway thus in some sense
has been an "industrial power station", importing base metals,
applying hydroelectric power and exporting the resulting
processed metals. This is the case both for ferrous and nonferrous industry (see Table 2 below) •
In terms of employment, the primary decreased to less than
half of total employment only around 1890 and to about 40
percent in 1910 (See Fig. 2) • The fall of primary sector
employment thus occured later in Norway than in several other
West European countries. In terms of factor income by
industry, the primary and secondary industry sectors were
about equally large around 1910
(Fig.
3) • Primary sector
productivity was thus considerably lower than in manufacturing
industry. The two spurts of increase in the relative share of
manufacturing employment occured in the 1890s and the 1930s,
that is at the end of the two economic depressions. Some
industries, in particular chemical, metal mining and textiles,
experienced dramatic falls in employment during the 1920s and
early 1930s and did not reach 1910 level of employment until
about 1940.
Among the natural resource based industries, mining of
pyrites,
copper and titanium ore were the three most important
branches until after WWII. Iron ore then took over following
the construction of state-owned iron works in the Northern
part of Norway. As far as production of metals is concerned,
copper was the single most important branch until aluminium
took over after WWI.
Primary aluminium has remained the most
important metal product since then,
ferro-alloys and ferro-silicon.
followed by crude steel,
Whereas the latter are largely
based on domestic raw material, the aluminium industry is
totally dependent on imports of alumina. It is, in other
words, the entrepot branch.
Together with other energy-intensive branches,
it formed what
has been referred to as the hydroelectric industrial complex.
At the end of the 1970s it accounted for 10 percent of
manufacturing employment,
12 percent of GNP and 40 percent of
commodity exports. It represented a formidable source of power
over industrial policy that is still very present.
Primary sector contribution to national income was
radically reduced during the 1930s whereas its share of
employment was not equally much reduced. The sector in other
words was particularly hard hit during the long depression, a
factor that contributed much to the national political
compromise between farmers and labour at the time.
In a sense, economic development in the 1930s broke with
the pattern that had been followed since the middle of the
19th century. The response to the crisis of 1875-95 was to
open up for an export-led industrialization strategy. It
followed the principles of industrial capitalism: economies of
scale,
specialization and exchange according to comparative
advantage. In the 1930s, the response was to turn to producing
for a domestic market, to small-scale production and even to
bartering.
I'
It was in a sense a "step back in history", a
return to the practices of previous periods perhaps most
particularly the period right before 1875.
Again, geopolitics intervened and played a role in turning
Colbjørnsen-Sømme Three year plan suggested that barter
would be one solution to a non-functioning market.
Norway back to the "normal" pattern of taking part in the
international division of labour. Or more correctly,
geopolitics combined with latent attitudes among Norwegian
business and political leaders to turn Norway back on the
track.
The German occupation 1940-45 was highly contested by most
Norwegians; the Quisling regime never got a real backing from
the population. This together with Norway's important geostrategic position tied 400.000 German soldiers to stay in the
country.
The Second World War was, in macro-economic terms, a mixed
blessing. Economic growth was halted. The Germans attempted to
develop the traditional industrial sector for their own
military goals. Their plans included the utilization of heavy
water produced at Norsk Hydro's works at Rjukan. These plans
were successfully sabotaged by Norwegian resistance. The
capacity of the aluminium industry was however expanded during
the war. The Germans also attempted to maintain some of the
domestic market orientation of the 1930s in order to
substitute Norwegian goods for English. But the German Ersatzwaren were not the work of Norwegians and were no success.
Norway survived the occupation economically, but did not
develop during it.
Shipping experienced another profit surge
at great loss of lives and ships. The war ended with a strong
latent demand for economic change, and above all for material
growth.
The first part of the post-war growth period,
1946-59, was
characterized by rapid expansion, not by transformation. There
was rapid and widespread introduction of new products and
tech-niques in the chemical, electrical and other branches.
These new technologies were mostly imported; Norway had become
part of the general US-led international wave of
modernization. The export sector and the domestic based
industries were still rather little integrated. Moreover, the
former was competing in an international market, the latter
not. Even in this sense it was a truly mixed economy.
For the first time, Norway had an industrial POlicy.
It
emerged as an important element of the new-born state
interventionism and it was going to repeat the experience of
the first industrialization period at the beginning of the
century. In other words industrial policy after the war was to
exploit what was still believed to be comparative advantages
in an open economy: cheap and abundant hydro-electric power,
access to markets abroad provided by a strong merchant
shipping sector,
and a reservoir of labour still to be found in agriculture.
In terms of restructuring between the sectors, the
transformation of Norway after WWII followed more or less the
pattern of other Western European countries. In 1950 the
primary sector accounted for 30 percent of total employment,
but 14 percent of GNP. During the 25 years that followed,
primary sector share of employment fell to 8 percent. But its
share of GNP did not diminish equally much. The primary sector
in other words improved its average productivity radically
during the period through mechanization and restructuring of
production.
For manufacturing industry and the service sector, the
picture is different. Until the beginning of the 1970s,
manufacturing industry grew about at the pace of the economy
as a whole whereas the service sector had the fastest growth
rate, absorbing the labour reserve from the primary sector.
During the 1970s however, these trends turned. Manufacturing
industry stagnated or receded.
At the same time employment grew faster than during previous
per-iods, a result not the least of the growth of the number
of women
in the labour market.
The service sector, in particular the
public sector, grew rapidly in terms of employment, whereas
"In the course of 1974-78, the percentage of working age women
being employed as wage earners rose from 50 to 60 percent.
its share of GNP stagnated.
The investment rate in Norway has been comparatively high
all through the post-war period.
In terms of investments as a
percentage of GNP, Norway looked more like Japan than EEC and
the United States during 1960-75.
Investments were financed
partly through foreign loans, partly through a combination of
domestic state and private capital. The banking sector has
gradually grown to become an important source of financing
since its modest role in the last part of the 19th century.
The bulk of these industrial investments, before the
petroleum era, were in the hydroelectricity-based industries.
Looking back at the pattern of investments from the point of
view of the 1980s, Norweqian companies and the state to a
large extent invested in overcapacity. The raw-material based
economy remained. During the 1960s in particular there were
heavy investments in expanding hydroelectrical power
production and mineral and metal processing, more than
doubling power production during that decade.
At the end of the period under survey, the petroleum
takes over. In 1973 the government published a white
paper calling for a modest growth in oil production and in the
use of
income from the new source.
11
Oil production started on a
large scale in 1974 under a wide range of state control
mechanisms
(see below). During the few years that followed,
the intentions of the white paper were more or less put aside.
The tide had turned in the labour market, mainland industry
was apparently no longer the motor of the economy, and the
services sector could no longer absorb those who looked for
employment. The fear of an overheated economy that had
2DAccording to OECD statistics, the Norwegian investment rate
varied between 28 and 37 percent, the high figure being due to
petroleum sector investments in 1973-74.
21parliamentary White Paper no. 25 (1973-74), On Petroleum
Policy.
motivated the white paper had given ground to the need to
finance new jobs and the welfare state. The petroleum sector
did not absorb much of the demand for employment
directly. But indirectly, oil incomes made it possible to
employ jobseekers through the state sector and to grant
substantial salary increases to waged labour. As a result
inflation got a boost and productivity growth was reduced.
2. Technoloqical tranformation.
entrepreneurs and industrial
policy.
Risk-taking entrepreneurs in manufacturing industry led the
way into the second period of transformation, what I refer to
as The breakthrouqh period. It started in the 1880s and
represents the (first)
lasted,
"schumpeterian transformation". It
interrupted by market fluctuations and hi's and lo's
in innovative activity, until the Second World War. With some
exceptions, it was a technological transformation of the
production structure rather than economic restructuring:
Changes took place within sectors rather than as a radical
shift of activity from one sector to the other. The main
exception is the 1930s when economic restructuring went along
with technological transformation.
Norway's traditional export industries were seriously hit
by the international recession 1875 - 95. But alongside
recession in those industries went rapid growth in new
industries such as planed wood and later pulp,
canned brisling
production, condensed milk and cement.
Most of these industries found not only a domestic market,
but also export markets. This pattern is the one that one may
find in most of the European countries at the time. What is
particular for Norway is her relative dependence on finding
export markets for her new products. This meant that she had
to cut prices in order to become internationally competitive.
Technological innovations again was one main method, but
labour also shared the burden. Since production was
comparatively labour-intensive, wages were lower than in many
trading partner countries; this was true not only for
industrial workers but also for seamen.
The real breakthrough occurred with hydroelectricity,
the
combination of waterfalls and electricity. Around the turn of
the century industrial relations in Europe were changing
rapidly. New technology (electricity), expanding and new
communications (railways, later motorcars) and an expanding
market associated with a rising middle and labour class
created greater socio-political turbulence and at the same
time new economic opportunities. The revolutionary
breakthrough hit Norway late, but at the same time rather
abruptly. It meant all the more to society as it occurred
along with national liberation. In 1905, Norway seceded from
the union with Sweden.
Era of the capitalist entrepreneur
Industrial projects during "the schumpeterian crisis" were
practically all financed by domestic capital, with a few
important exceptions. Foreign companies also owned a number of
waterfalls producing power to factories, and they were
actively buying up more waterways.
Hydro-electrical power resources attracted financial and
industrial capital in several of the Western countries. While
the Union dissolved, the Swedish bankier Wallenberg entered as
a main partner in the first big industrial venture in Norway,
!!l_lektrokemi sk.
founded in 1904 partly in order to sell
turbines from Swedish ASEA which he controlled (Stonehill,
1965; Seierstad et al.,
1970). In the course of a few years
Norway opened up to foreign capital on a large scale.
There were two main reasons for this rather sudden change.
As suggested already, Norway's commercial banking sector was
comparatively undeveloped.
Shipping had been mostly self-
sufficient as far as investment capital is concerned, industry
was mostly small-scale and not very capital intensive, and
primary sector needs were taken care of by a combination of
private and state banking. The second reason is that the new
industrial projects needed comparatively large inputs of
capital. Economies of scale reasoning had entered Norwegian
economic politics. And there was simply no finance available
to meet the new demands. Hence, Norwegian industry became a
net importer of capital for practically all the period since
the 1890s except for the 1930s when there was no foreign
capital available.
The development of Norway's water-powered hydro-electric
plants - electro-chemical and electro-metallurgical industries
- was not a primarily a planned response to international
demand. It was partly a coincidence, partly due to
entrepreneurial initiative. The entrepreneurs were a mixture
of engineers and financiers, mostly the former. They had had
their education abroad and looked for ways of implementing
their new know-how. Entrepreneurial engineers met researchers
working in relatively new chemical and physical research
laboratories at the university.
22
Out of this resulted the Birkeland-Eyde process whereby
»The University of Oslo was founded in 1811 but was for most
of the 19th century a learning-place for law, religious
studies and humaniora only. Natural sciences had started to
pick up towards the end of the century, however, and
especially in chemistry research was starting off before the
end of the century. An agricultural college was created in
1897, whereas the Institute of Technology was established
thirteen years later, modelled on the German polytechnical
universities.
nitric acid was produced by means of the electric arc.
"
The
process required cheap electricity to produce a marketable
synthetic fertilizer. In the course of a few years the
foundation was laid for what is still the backbone of the
mainland industry in Norway:
fertilizer, electro-chemical and
electro-metallurgical industries. During the period the single
largest Norwegian company, Norsk Hvdro.
was established. At
present the company, after having carried out a series of
international take-overs, is the largest producer of
fertilizer in the world.
24
Installed hydro-electrical power-generating capacity
increased from 34 KW in 1900 to 400.000 KW in 1912 and 1.25
million KW in 1920. Not only did new industries grow up. Old
ones like pulp and paper, textile and copper were
reinvigorated.
Almost all of the equipment and skills needed for the
rapid development of infrastructure and industry that took
place, had to be imported. But the domestic contribution was
not at all without importance. On the contrary, national
entrepreneurial and R&D contributions appear to have been
quite important. The close correlation between domestic
innovation,
foreign capital and industrialization is shown in
Table 1:
"Kristian Birkeland was professor in physics at the University
of Oslo from 1898, and Sam Eyde was an engineer educated in
Germany who worked there as an engineer for several years
until he returned to Norway in 1899. He had become aware of
prognostics about the dramatic future demands for nitrites to
be used as fertilizer during his stay abroad, that production
of natural nitrate in Chile had peaked, that nitrite was an
important element in the atmosphere and that they might be
commercially exploited given the right technology and huge
qantitites of electric power. The two met in 1903 and in 1904
Birkeland's experiments were already promising enough for Eyde
to start organizing commercial exploitation.
"It was founded in 1905 on the basis of the Birkeland-Eyde
process assisted by Wallenberg and with French and German
capital, the German part a few years later being bought out by
the French.
Table 1: The period of nationally based industrialization
Year of industry established:
Process
innovation:
1900
Calcium carbide production
1904
Nitric acid
Birkeland-Eyde
process
1908
Aluminium
Søderberg process
1910
Ferro-alloys
Ellefsen rotating
furnace
1910
Tysland-Hole
Iron and steel
process
1912
Copper smelting
National innovation efforts never totally replaced imports. It
is more correct to say that they interacted. At the same time
their relative importance varied over time. Research training
continued
to be dependent on studies abroad even after a number of
national universities and colleges had been established. Thus,
the percentage of Norwegian holders of a doctorate who had
obtained it abroad rose from 11 percent
24 percent
(1960-67) (Skoie, 1970: 402)
(1920-34 average) to
"
With a rapidly expanding scientific environment, more
complex and requiring more resources than a small nation could
master, borrowing from abroad is only natural. In the case of
Norway,
interacting with scientific communities abroad also
"Incidentally, the present author took part in an academic
protest against the doctorate system in the late 60s, refusing
to start on a doctoral degree programme until it was radically
changed.
resulted in a "brain drain" in particular among engineers.
Between the two world wars,
the networking between science
and business that was initiated in the late part of the 19th
century again proved vital.
It probably explains why
innovation became a major factor behind the solution to the
post-1929 crisis. The upswing started for full in 1933, with a
radical fall in unemployment. This happened after the end of
the Gold Standard parity, but before the change of economic
policy that came with Labour and before exports really picked
up pre-crisis growth rates. The explanation for the upswing
therefore is neither general economic growth abroad nor a
change of economic policy.
The explanation is to be found in domestic structural
transformation. There were even elements of technological
transformation in the process. A host of inventions introduced
during the 1920s mainly in the United States facilitated
labour-intensive production. The once so successful BirkelandEyde process was out competed by the new Haber-Borsch process
in the fertilizer industry. Adjustment meant rationalization
and more unemployed. Strikes exploded and were at one stage
met by military force.
Firms were left to their own fate and went out of business.
Or they formed cartels and managed better. But a number of
firms managed to adjust and a large number of new firms,
mostly small and medium-sized, were formed. One major reason
why the new small-scale industry producing for "primitive"
demand was possible was a new technology, the electro motor.
Many of the
new firms worked with academic research laboratories, or they
established their own. Those firms which had most success were
producing for the domestic market: private houses, consumer
goods for the better off, etc. These firms hit a latent
"According to sources summarized in Skoie, 1970, Norway's
brain drain of engineers showed the highest outflow in this
category in the whole of Europe.
demand,
got a positive response and triggered new investments
in production. An example of the type of innovations that was
done during this period, is the binders.
A number of new firms were established in the peripheral
areas where unemployment was particularly high and wages
therefore low. The shipyard industry had an upswing as
Norwegian shipowners - and this time among the first - shifted
from steam to diesel engines. Leisure industry started up,
rubber boots and rubber tyres were produced; in 1939 there
were 140.000 cars in circulation, all imported."
Thus, industrial employment rose considerably and was the
main reason why the economy could absorb a rapidly increasing
number of new job-seekers, a result of the baby boom of the
1905-1920 period (cf. Fig. 1) .
During the 1945 - 75 period, R&D becomes politicized. The
state established a series of sectoral research councils
during the first post-war years. In 1967, a bourgeois
government set up a government board of research consisting of
five cabinet ministers headed by the prime minister and
assisted by an advisory council.
Innovation had become a
public institution. The state provides not only money, but
guidance. Research policy is targetting R&D to specific goals
with detailed control systems. Still, there is a public debate
over whether the effort is big enough to cope with the demands
of complex and competitive innovation systems,
and whether
targetting is efficient.
Norwegian educational performance expressed by public
schooling and higher education,
also mostly the responsibility
of the state, was comparatively high in the 1960s and 1970s.
But innovation activities were comparatively modest by most of
the OECD standard measures although slightly higher than those
"Attempts to start car construction in Norway were made both
before and after the Second World war but never materialized.
These attempts included development of an electricity-driven
car.
of Finland and Denmark (Ergas, 1987) .
R&D expenditures however
have been increasing as a share of GNP from some 1,2 percent
of GNP
in 1965 to 1,4 in 1977 and to about 1.8 percent in 1987
(Skoie, 1967; Norwegian Council for Scientific and Industrial
Research,
1986) .
The state has over the years become mainly responsible for
financing national R&D efforts, accounting for some 2/3 in
1975.
In comparison, private Swedish companies for example spend
substantially larger parts of their funds on R&D than do
Norwegian companies during the 1960s and 1970s. In fact
Norwegian business are spending relatively less than companies
in most of her competing trading partners. Innovation has
become inevitably more complex and thus institutionalized, but
the private capitalist seems to have lost the entrepreneurial
spirit that was characteristic of the 1900s and 1930s - or
left it to the state.
There appears to have been a shift during the 1980s with
the private sector taking more responsibility for R&D, from
1985 on spending more than the state.
The crucial questions
may again turn out not to be the total size of funds, but
whether public and private R&D is linked to application and to
each other, and whether targetting is successful or not. It
appears that the type of networking that was of such
importance during previous periods,
illustrated most notably
by the Birkeland-Eyde relationship, has been much less
effective during the post WWII era.
3. Economic policy and the role of the state.
Formally, the modern Norwegian nation-state was a
accompli in 1905. In reality, however, the state was still
weak. It had to respond to strong cultural and political
manifestations of national identity.
control over the
It had practically no
industrialization process. But one of its
very first tasks was to respond to popular demand for control
over natural resources.
Combininq resource nationalism with capital imports
The innovator-entrepreneur coalition was nationally based, a
source of great pride at the time. The personification of the
Norwegian capitalist entrepreneur, Sam Eyde, was almost at
level with the prime minister and the world-famous explorers
Amundsen and Nansen in building national self-consciousness.
The coincidence of the finalization of nation-building,
industrial breakthrough based on national innovation,
manifestations of cultural eminence"
and the national
adventurism associated with the Polar expeditions was an
immense boost for the nation, perhaps even turning into a wave
of chauvinism.
The industrializing enterprise was, however, very dependent
on foreign capital. In 1909, foreigners controlled 80 percent
of Norway's mining, 85 percent of her chemical, 44 percent of
her paper and textile, and 33 percent of her metal industries
(Stonehill, 1965) . Most important politically was the fact
that foreigners were buying up the waterfalls and were
controlling three quarters of all falls or two times as much
as was actually used in power production in 1905.
As soon as the dissolution of the Union was settled by a
referendum, the Storting took up the flag of resource
nationalism. In the course of a couple of weeks during 1906,
temporary "panic legislation" was written and passed. It
prohibited the construction of more than small-sized hydroelectrical plants without the permission of public
authorities; regulated (that is limited) the role of
foreigners' ownerhsip of waterfalls; and decided that Swedish
citizens be treated as foreigners. The law was later
"Several authors of international reputation, such as Henrik
Ibsen and Bjørnstjerne Bjørnson, and the composer Edvard Grieg
were at the height of their careers; Bjørnson was awarded the
third Nobel literature prize in 1903.
strengthened and made permanent
(1909)
under the name of
Concession Laws. They were to secure public control over not
only waterfalls, but even railroads. Foreign ownership rights
was to revert to the state after 60-80 years without
compensation to owners.
Linking resource nationalism to the socialization of
infrastructure did not aim at, neither did it keep foreign
capital from continuing to invest in Norwegian industry.
The Norwegian government at the time introduced joint venture
as an option to foreign capital. The latter accepted it to a
large extent. In 1909 thus, 44 percent of all hydroelectricity production was foreign owned. In fact industrial
production grew
more rapidly after 1909 than before. One reason may have been
that the concession laws were liberally practised, another
that the Norwegian state used the laws to enforce decisions
whereby Norwegian firms wherever possible were selected for
sub-contracting deliveries to new ventures
(Bergh et al.,
1980: 105)
Some part of the industrialization w a s , moreover, loan
financed abroad. Thus between 1900 and 1913, accumulated
foreign debt rose from representing 1/6 to 1/2 of GNP. This
was the first period of internationalization in the Norwegian
case.
The emergence of the state as an economic actor now
entered its formation stage. It was, however, only partly
triggered off by the manifestation of national sovereignty
that followed the strong secessionist movement. One matter of
controversy between Norway and Sweden had been Norwegian
discontent with the role of the Union's corps diplomatiQVE! and
its consular services in particular. As the Norwegians saw it,
these services showed a complete neglect in serving their
export and shipping interests.
The most important reasons for the growth of the state
were first, the mobilization and orqanization of new social
and political actors, first through social liberalism and
later socialism, and a rapidly growing labour movement; and
secondly the demands of a more complex economy.
concentrate on the latter,
We shall
returning to the former below.
State intervention in productive sectors had made a
beginning
in agriculture, but was practically non-present in the
manufacturing industry. The period 1875-1905 was a profound
restructurinq of aqriculture. The "gospel of communication"
bore fruit in the countryside. The production of cereals had
been drastically outcompeted by continental and American grain
after the opening up of foreign trade from the 1860s on.
Norwegian peasants turned to livestock production especially
along the railroad lines,
and they turned from self-
sufficiency to production for the market.
In the process the
state stepped in to ease the costs of restructuring that
migration could not take away. It played a prominent role both
as a transmitter of knowledge and as creditor (Bergh et al. ,
1980) . The Agricultural College was established in 1897,
thirteen years before the Institute of Technology. Here strong
political interests and economic need combined to activate
state intervention. The farming group in the Parliament was a
strong force all along since 1814, an expression of the
comparatively free-holding Norwegian agriculture."
Fisheries were for a long time a very important sector the
contribution of which to GNP increased throughout the 19th
century until about 1880. Fisheries, in particular those based
on herring and cod, accounted for 5 percent of GDP and 43
percent of total commodity exports (Bergh et al,
When industrialization picked up speed,
fell. But fisheries
1980:46).
the share of fisheries
as did agriculture, maintained a high
29In 1814 66 percent of the land was owned by freeholding
peasants, while the percentage in 1875 was 95. While 36
percent of the active farming population owned their land in
1865, by 1875 the corresponding figure was 50 percent; see
Bergh et al., 1980: 19.
political profile throughout and long into the 20th century,
in fact until this day.
There are several reasons for this. In the 19th century
the resource situation for fishing probably was the most
important factor. In particular when the herring reappeared
along Norwegian coasts in the 1830s,
fisheries were able to
substitute for some of the opportunities lost in agriculture
due to the Napoleonic wars and their impact on trade regimes.
Fisheries provided employment to between 5 and 8 percent of
the active working population, and for many small farmers it
was a necessary supplementary source of income.
Even fisheries prove the case of technological
transformation in times of crisis. When the herring
temporarily disappeared from Norwegian waters in the 1870s, it
forced fishermen out from the coast to off-the-coast and open
sea fishing grounds. Bigger boats and new catching equipment
were introduced rapidly. Even though the herring returned to
the coasts, technological transformation meant increased
conflict among fishermen between the owners of big boats and
small, between new and traditional technology.
The monetarist disaster
The inter-war period offers an "instructive confrontation
between economic theory and economic reality"
(Sejersted,
1985: 89) • It was a confrontation between two radically
opposite coqnitive maps. One stressed monetarist goals and a
passive state. The other grew out of class conflict and looked
at the state as an instrument (labour) or partner (social
liberals and farmers) .
If a causation chain were to be suggested, a combination of
unbalanced industrial development and maladapted economic
policy created social and political responses that caused the
affected to organize and the state to take a more wide-ranging
role.
In a comparative perspective, economic growth in Norway was
not at all low for the period as a whole. The average annual
growth rate in GNP per capita for 12 of the present OECD
member countries
was around 1 percent against more than 1.5
percent for the period 1870-1913.
JO
Norway and Switzerland,
however, had a higher average growth rate for the second than
for the first period.
The period 1920-38 was above all a period of strong conjunctural waves and farreaching restructuring of the Norwegian
political economy, through a process of economic and political
ups and downs. The crisis signal was turned on in 1920, but
the recession took on a more lasting character in 1922 only.
The socio-political responses were very immediate. Labour
union membership grew along with unemployment.
After 1922 international markets picked up and many
economists and politicians argued that the crisis was only a
short and temporary one and would soon be behind them. They
therefore stuck to an orthodox monetarist policy. The Krone
was revalued by 70 percent over less than 2 years. As a
consequence unemployment soared from 10 to 20 percent,
first
of all in manufacturing industry. This took place irrespective
of the fact that there was still economic growth
internationally. Policy-makers decided that the Krone was
overvalued; that was the important thing.
What policy-makers further did not realize was that there
were serious structural imbalances in the international
economy and in the foreign economic sector of Norway. New
industrial nations grew up outside Europe and North America,
resulting in a saturation of markets that was further
aggravated by slack in demand for some traditional export
products. Norwegian agriculture was hard hit by new
competition from Eastern European land-owners and other
farming areas
(Argentina) producing at low cost and sending
their excess production abroad. An organizational "revolution"
associated with widespread utilization of electricity and
3C'Maddison's estimate for the period 1913-50 is 1.1 (1982),
whereas Svennilson's estimate for 1913-38 is 0.8 (1954) .
other new technologies
(combustion engine, rayon) laid the
foundation for mass production
(Svennilson,
1954) • It was less
widely and rapidly introduced in Europe than in North America
(Fordism) and the passive Norwegian state made the situation
even worse. Finally, capital was less disposed to invest in
production in Europe than it had been before the war; overseas
territories and countries with what was seen as better opportunities
(abundant cheap labour and raw materials) were
preferred by many investors.
Inflow of loans from the United States compensated for this
lack of capital in Europe. Then came the Wall Street crisis in
1929 and the flow stopped. The importance of this is
contested.
Some argue that if the flow had continued, the recession could
have been avoided. As Lundberg points out, one would not have
been able to prevent the recession even if capital flows had
been kept up because they were not used to attack the longterm structural problems (Lundberg,
1953) • Part of the problem
was also that adaptation would have meant both a
reorganization of distribution systems and that overproduction
was limited. But instead of cutting production, firms formed
cartels (with the support of the state). Overproduction was
transformed into overcapacity (Sejersted,
1985:
95) •
Structural mal- or non-adaptation is thus one possible
explanation for the impact that the crisis had on Norway as
well as on other European countries. With practically no
industrial policy and a social welfare policy that was still
to be implemented, the main area of policy intervention was
monetary policy.
The war had suspended the system of the gold standard and
monetary relations were in chaos.
Influential economists
pleaded for a return to pre-war policies after the war, with
the gold standard and parity as the basic tenets. They were
opposed, at times strongly, by other economists and by
influential businessmen. But monetary policy - or what may
perhaps be referred to as the then heqemonic economic ideoloqll
- remained in power throughout the 1920s and until the change
of policy occurred practically at the same time in Great
Britain,
several other European countries and in Norway. Again
the English influence was strongly felt in Norwegian economic
affairs. A continued belief in the Rechtsstaat type of liberal
prevented a policy based on productionist economic theory and
an interventionist state from
winning over monetarism (Polanyi,
1944) .
The crisis hit Norway with full effect in 1930-31.
Unemployment rose to 33 percent. Since the United States
several years earlier had closed up for continued free
immigration, the outlet formerly used to such a great extent
by Norwegian jobseekers was no longer an option. During the
1920s readjustment of the Krone against foreign currencies and
accompanying wage increases res-ulted in increased demand. It
was adressed to consumer goods which were practically not
produced in Norway; demand therefore was channeled abroad and
led to increased imports. Exports were seriously hit by the
overvalued Krone.
The bourgeois government finally left the old parity in
1931 as did the British. But it had no real alternative to put
in its place. When the Labour party introduced its new
economic policy, the Three year plan and an expansionist
policy, there was still strong resistance based on another
"monetarist" assumption: that investments had to be financed
by domestic savings. Since there was at the time a low savings
ratio, the NEP was felt to be hazardous. But Labour, led by
the practitioner Colbjf2lrnsen
31
and the theoretician Ragnar
Frisch represented the radically new economic thinking along
the lines set out by Keynes, and it finally won through.
"Ole Colbjørnsen had worked with the Soviet Five year plan in
the 1920s and was in many ways the father of the new policy in
Norway. His thoughts were first presented in Colbjørnsen, Ole
and Axel Strømme (1933), En norsk 3-Arsplan (A Norwegian Three
Year Plan).
But despite the fact that the crisis was very evident,
victory for the Norwegian NEP might not have come as swiftly
and undramatically had it not been for three factors, all of
them political and institutional.
First, Labour had been in government for a brief interlude
in 1928, in fact helped to the role by the King in a situation
of internal strife among the bourgeois parties. The Labour
party had in the 1920s adopted a socialist policy with a
social democratic flavour rather than that of Bolshevism which
had the support of a minority in the party. And the brief
experience with government legitimized state institutions to
the party cadres and legitimized the party to the nation. With
important electoral progress in 1933 Labour was set for a
leading role.
Secondly, the farming community represented to a large
extent by the Farmers' party, was in a deep economic crisis
due to low food prices. In order to solve the crisis, it was
willing to break out of the bourgeois group and compromise
with Labour.
This compromising was formalized in the socalled "Crisis
Settlement" in 1933.
Thirdly and as part of the process of moderating Labour,
the trade union movement was prepared to enter into
compromising with capital organized in the Federation of
Employers and the Federation of Industries. A settlement that
formalized the common goal - to reach agreement on wages,
working conditions etc - was reached in 1935. This agreement,
The General Aqreement ("Hovedavtalen")
has since then formed
the basis for wage settlements in Norway.
The foundation also was laid for the institutionalization
of mixed economy in Norway. It is an economy where the state
controls some part of production (and infrastructure) and of
income and establishes legal and economic frameworks for
private markets. It is further characterized by a clear
separation between the market and the state. In some sectors
or branches thus, the market is let to operate freely, whereas
in others the state is the undisputed decision-maker on
economic parameters.
May strict planned economy principles have been implemented
if Labour had gotten a clear majority during the 1930s ? Most
probably not. Geopolitics and the strong bourgeois-liberal
tradition would have prevented it. And then Labour moderated
itself gradually. At no point therefore was there a real
possibility that the compromise establishing a mixed economy
would have been destroyed. But the question still remained:
what is the right mix ? How much plan and how much market ?
The finalization of the state.
With the enormous expectations accumulated during WWII, all
was set for a policy of the highest possible economic growth
and material living standard.
Students of Frisch were ready to
take on the task. After a brief interlude of a broad coalition
government in 1945, Labour got a clean majority in the
Storting for the first time in the Fall of that year, a
majority it kept until 1963. During the months that followed
the 1945 victory, a new price law and other regulating
measures were introduced. Public expenditure as a percentage
of GDP rose from 17 in 1938 to 25 in 1946; after WWI it had
been 7 percent. In 1975 it had again doubled to reach 50
percent.
This growth was organized through a rapid and broad
development of public administration. During 1945-55 the
number of ministries increased from 10 to 15; the number of
public offices was doubled; and the number of public servants
trebled. The number of public laws and regulations was
strongly increased. At the end of our period (1971-74),
parliament produced annually an average of 88 laws and 288
public decrees or instructions
(Aubert,
1976) .
The post-war economic policy was based on four premises.
First, and as I have just pointed out, a strong state was
needed.
But there was a general consensus that Adam Smith ought to be
firmly placed alongside with state intervention. The ideology
of the mixed economy was thus penetrating both politics and
business. Protagonists of the planned and the market economy,
respectively, were left on the flanks.
Secondly, it was a "no experiences" policy. It was a
return to what was known as Norwegian specialities - electrochemical and electro-metallurgical industries. Thirdly, and it
follows from the confirmation of Adam Smith, the principle of
the open economy. But the new-born social and political
coalition built around interests that now became even better
organized, were reluctant to give up the extent of protection
that development in the 1930s and before had offered
agriculture, domestic market based industry and services. But
the opening up to the wave of consumer goods coming in
particular from the United States was not something that was
easily and smoothly accepted by the democratic corporativist
system.
The fourth element that was introduced was to cement the
system of socio-political coalitions.
Its effect was also to
take some of the strength out of the protectionist lobbies.
It
was most visible in the coming of the welfare society.
Provision of social services and public health care, better
and more education at all levels above primary schools that
had been compulsory for several decades, and other aspects of
what is now known as the "developed society", were introduced.
It followed naturally from the coming to power of the Labour
party, but was strongly supported by the nation-wide
coalitions which were now built ever stronger into permanent
organizational structures.
The establishment of a liberal international economic order
was the other main stimulus for a compromise between the
liberalizing and the protectionist fractions. Bretton Woods
represented in itself a compromise worked out at the
international level in particular in negotiations between the
Americans and the British. The compromise was one of "embedded
liberalism" (Ruggie,
1982) that offered national governments a
wide range of intervention if national interests were
seriously threatened.
If the industrial policy and the welfare state were to be
implemented at one and the same time - which was the aim of
government supported by the national coalitions - huge inflows
of capital would again be needed.
Government policy from 1946
on was to stimulate savings; the savings rate in Norway in the
1950s and later was one of the highest in the OECD. But it was
still far from sufficient to provide for the amount of
investments that were planned for. The Storting therefore
accepted the Marshall Plan offer after a debate where
Communists and nationalistic-minded fractions opposed it. The
amount of aid did not exceed 20 percent of gross capital
formation in any of the four years it was given,
1949-52 (Hoff
and Isachsen, 1979), but it contributed much to the high rise
in investments that took place from 1948.
In exchange for Marshall Aid some of the regulatory devices
that were ready to be implemented, were softened. Escape
clauses and other loopholes in the GATT and IMF rules
nevertheless made it possible to maintain a system of
redistribution and of direct and indirect subsidies to
agriculture and some parts of industry. Among other things,
the state decided to establish state-owned iron and steel
works against the will of important business fractions, the
Farmers and the Conservative parties
IGrl2lnlie, 1973). The
result, Norsk Jernverk. was to become a constant source of
friction between Labour and the Right, the latter being
opposed to the project from the very beginning but more and
more so as it turned out to be in almost constant need of
state financial support in order to expand and to cover
running deficits.
A similar but less dramatic conflict along a Socialist private capitalist division was seen in other branches of
industry. The state had taken over the aluminium industry
works expanded by the Germans during the war. Labour opted for
a strong state role, but backed off as the expansion of the
industry met not only local opposition, but also a need for
foreign markets and capital. Alternatives that opted for a
national strategy not only of state control over the industry,
but also nationally based marketing and distribution systems
abroad were overruled. One explanation may have been that
leadership did not dare to behave as risk-taking entrepreneurs
like those acting at the beginning of the century (Tresselt,
1968) . This sort of explan-ation may underestimate the market
power of the international aluminium cartel. Vertical
integration and a dominant position at all levels in the
product line were probably a strong barrier to the entry of
newcomers. It was only in the late 1970s that the Norwegian
aluminium industry started to internationalize in order among
other things to take control over sources of supply.
Growth and redistribution in the 1960s and 1970s
The immediate post-war period was thus a period of
9rqanizinq a compromise on industrial and foreiqn economic
policy. In iron and steel works and aluminium in particular,
there was a mixture of state and private ownership, with two
of the three aluminium companies owned jointly by the state
and foreign TNCs, the third being a joint venture between a
Norwegian and one foreign company. 32
Electricity production
About half of the shares in Norsk Hydro is controlled by the
state, in the 1970s and 1980s it has been 51.4 percent; Aardal
and Sunndal Verk A/S, long the biggest producer, was first a
fully state-owned company but in 1957 became a joint venture
between the state and Alcan. On two occasions the relationship
between Alcan and state interests in the company became the
source of political conflict, in 1966 almost leading to the
fall of the government. After the second big debate in 1974, a
gradual take-over by the state was decided and implemented. As
the company experienced serious economic problems during the
1980s, it was finally merged with and taken over by Norsk
Hydro in 1985 to become consolidated as Hydro Aluminium. The
third company in the industry is Elkem which controls Karmøy
Aluminium jointly with Alcoa. The Norwegian aluminium industry
had been taken over by the state;
long ago.
so had roads and railroads
State control over hydro-electricity production was
to become a backbone in the
"hydroelectrical industrial complex" that dominated industrial
policy in the 1950s and 1960s
(Midttun,
1989) . For the rest
the private ownership principle was to be the basis of
industry and services. State banks were in a leading position
as financers of housing, and there were para-statal credit
institutions for industry and agriculture.
Shipping was the
one sector that, due to the fact that more than 90 percent of
its business is freight between third countries, was most in
favour of a liberal economic order - nationally as well as
internationally.
When petroleum was found in the North Sea, Norway was quick
to follow up or even lead in the international wave of
expansion of exclusive economic zones
(EEZ) • Moreover,
the
state was to take control over the new resource. Even though
Labour at the time was running a minority government, it got
support for the principle of national public control. At the
same time, the Norwegian state continued the "double-track"
policy towards foreign control over natural resources that it
innovated in hydroelectricity. Foreign companies are subject
to a fairly rigorous taxing and planning system. The state has
informally made foreign corporate access to North Sea
petroleum contingent upon foreign supplies of funds for R&D in
Norwegian firms. At the same time a mixture of organizational
solutions in the operation of petroleum production on the
Shelf substantiates the compromise between national and
foreign interests. Similarly, the state (through its whollyowned Statoil company) shares control over Norway's part of
has all along its history been dependent on imports of bauxite
after it decided that the S0derberg process was not commercial
compared to the leading foreign processes. It is only recently
that the companies has started to invest in their own raw
material (bauxite and oxide works) abroad, mostly in Central
and Latin America.
the shelf with one semi-public and one private company.
4.
Foreiqn economic policy and orqanization.
Commodity trade and shipping have together accounted for
between 30 and 50 percent of GNP in Norway 1845 - 1975. In
terms of commodity concentration,
the share of the four most
important commodity categories in Norwegian exports
(value)
fell from 90 percent in 1866-70 to slightly above 50 percent
in 1975. With the coming of the oil from the mid-1970s on, the
percentage has increased to about 65 percent
prices) .
(varying with oil
Imports show a corresponding decline from about 65 to
45 percent over the 110 years (See Table 2 and Fig. 4) •
Fish and timber exports against cereals and textiles
imports start out as the foreign trade structure of the 19th
century. They are overtaken by metals and minerals towards the
middle of the 2oth century. In these commodities, however,
Norway's trade
Table 2: The commodity structure of Norwegian foreign
trade,
1866-1975 (percentages, value of trade, selected
data)
1866-70
1901-05
Ex
Ex
1955
1939
1920
1975
1m
Im
Ex
1m
Ex
1m
Ex
Ex
Im
Im
Fish ea 37
Cereals
1
Textiles
Timber
42
Paper
Minerals
8
Metals
12
Ships
Vehicles
20
Machinery
11
Fertilizer
Four most
important90
46
product categories, %
32
29
14
7
9
14
36
6
9
13
13
27
18
11
16
16
18
18
6
8
4
12
8
24
10
7
13
13
17
14
22
21
8
10
22
20
16
7
9
10
5
8
19
18
10
20
6
64
83
53
75
59
59
56
64
55
51
Source: Central Bureau of Statistics, Historisk statistikk,
Oslo, 1978.
is intra-industry trade; the entrepot character of the
aluminium and partly ferro-alloy branches is part of the
explanation. With the modern economy comes imports of
machinery and cars.
Norway's foreign trade and finance policy was highly
dependent on England for more than 100 years. In general, it
has been heavily influenced by the type of regimes imposed by
other countries. Besides England's free trade and gold parity
policy, Norway was influenced by Sweden' customs union. For
Liebermann these two foreign regimes were decisive influences
on Norway's economy throughout the 19th century
(1970:115) .
The Swedish-Norwegian Customs Union
(1815-1905) reduced
duties on goods between the two countries, but at the same
time limited the access of the Norwegian merchant fleet to
transportation between the two countries and between Sweden
and third countries. The latter measure was adopted in order
to assist the Swedish fleet to develop. Liberalizatin of trade
between the two resulted e.g.
in Swedish metal exports
outcompeting gradually Norwegian production.
A law passed in 1875 introduced a duty free common market
for commodities, but the advantages of the innovation was
limited because of disputes over rules of origin matters. A
new law in 1887 attempted to clarify these matters, but was
not really put into effect as Sweden
adopted a more
protectionist policy in 1888. Whereas Sweden followed Germany
on the protectionist road, Norway following England was one of
the last European countries to enter it. The customs union, in
other words, was rather in-effective at the end.
Until the 1830s the interest of farmers prevailed in trade
policy which was otherwise moderately free trade oriented.
Protectionism was strengthened during the 1830s to protect
farmers against cheap Swedish grain, but at the end of the
decade a gradual reduction of protection started. This
relative liberalization lasted until the 1880s. During the
1845-1875 period, however, free trade was relative and it was
infant industry protection. There were low or no duties on
imports of raw materials and mass consumption food. There were
higher and over the period increasing duties on manufactures
which could not be produced in Norway.
Tariffs were at the time an important source of state
income. Customs duties were accounting for almost 3/4 of all
tax income to the state in 1840 and at least 40 percent in
1875
(Liebermann,
1970) . The protectionist lobby in the 1880s was a coalition of
industrialists, trade unionists and municipality council
leaders. This coalition has been one almost irresistible force
in Norwegian trade politics all since.
It was for instance
decisive in forcing government to take Norway out of the
Multifibre Agreement from 1978 to 1984
(Hveem,
1989).
The lobby did not succeed until late in the 1890s, and it
had to make a compromise with the free traders in 1897. In
1905, however, protectionism finally won through, another
illustration of the nationalist mood at the time. From 1905 to
the early 1920s, there were steadily increasing import duties
on agricultural and industrial manufactured products.
Did the late adoption of protectionism aggravate the
depression in Norway
? Or would it rather, given her status as
a semi-autonomous nation-state,
have been making things worse
if she had adopted protectionism before she in fact did
? For
agriculture and the growing but fragile domestic market
oriented industry, the late adoption may have been a problem.
For shipping it is likely that matters worked the other way
round. The interest of shipping in free trade regimes has been
a constant in the modern history of Norway, and it still is.
But even shipping met protection abroad.
It may thus be that
Norway on the whole lost from not moving earlier towards
protectionism in the 1870s and 1880s.
During the next long international recession - the crisis
of 1922-1933 - trade policy in Norway was not very different
from that of other European countries. During this period, as
I have shown above, it was exchange rate policy that mattered
most. The monetarist influence led to revaluation and kept the
Krone overvalued for most of the period.
It was only after the
change of political regime a few years later that the economic
policy was also radically changed.
The high degree of specialization in the Norwegian case
might have developed an enclave economy of the Latin American
type. The pattern of geographic location made new and modern
smelting industry live alongside small-scale farming in poor
mountainous areas, and that developed the coastal and riverain
areas whereas large parts of the inland lagged behind. There
has been a steady trend towards urbanization during the whole
period covered; between 1905 and 1920 it was more rapid than
during other sub-periods except in the 1960s.
The First World War did not basically halt these trends.
Norway managed to behave for most of the war as a "neutral
ally", trading with both parties to the war, but sympathizing
most with the British and the French. Trade volumes went down,
but export income was kept up by higher prices. And Norwegian
shipowners had booming business on risky contracts;
seamen's
lives and ships were lost in great numbers. In the economic
sphere foreign debt was largely repaid and a large share of
foreign-owned stock in important industries bought by
Norwegians.
The war thus was a mixed blessing to the neutral country.
Foreign currency reserves were abundant and the Norwegian
krone grew strong. But domestically social
(class) differences
had become greater and inflation was rising. Also the only too
obvious imbalances in international supply-demand conditions
and the relationship between war winners and losers
represented a potential threat to Norway. Her vulnerable
export economy made her probablay less prepared to handle
vulnerability than many others. As Bull puts it: "there was no
production sector which was only domestic - the foreign
economic sector penetrated everywhere. And this foreign
economy was in chaos after the war" (Bull,
1979:25).
After the Second World War and the Bretton Woods system
was a fact, Norway was among those countries who signed the
original agreements to set up the IMF, GATT and the OEEC
(later OECD) . This meant that she took on herself to adopt the
policy of the new regimes. There were however important
transition rules. First of all, she had obtained temporary
exemption from obligations to liberalize agricultural imports.
This exemption was made a lasting element of Norwegian trade
policy during the whole of the post-war period and has come up
for critical review in a GATT panel at the request of apple
exporters in the United States.
33
As trade regulation has shifted from tariff to non-tariff
barriers, Norway has followed suit. Comparative statistics are
not well developed in this area, but those that exist appear
to indicate that Norway among OECD member countries is
comparatively much using NTBs. According to one source 14
percent of public expenditure in Norway at the end of the
1970s were subsidies or transfers of income to particular
groups or sectors, whereas the corresponding figure for Sweden
was 7 and for Denmark 5 percent (Steen,
1989: 147). According
to official Norwegian estimates, the level of subsidies have
been reduced in the 1980s, and for the manufacturing sector it
is lower than that of Sweden for that period.
The after-war period has also been characterized by a
reorientation of foreign trade patterns and by
institutionalization of trade co-operation. There are two
trends worth observing and they may appear as contradictory.
First, trade patterns have become less of the "beggar-thyneighbour" type that they became from the turn of the century
and until well into the 1930s.
Trade with the other Nordic
countries have increased after WWII. Some of this may be
explained by the establishment of Nordic Council, a common
market for some goods, labour and institutionalized
cooperation in other fields as well.
A proposal to establish a customs union was however turned
down at two instances.
JI
She joined the European Free Trade
Association (EFTA) when it was formed. Although several of the
"The issue was settled in the first instance by the panel
during Summer 1989 giving the US interests support.
"The explanation is probably to be found in both endogenous
and exogenous factors, such as a certain degree of competition
among the countries in important sectors (paper and pulp, iron
and steel, shipyards etc) for the endogenous and geopolitics
(Finland has an Agreement of cooperation with the Soviet
Union, Sweden is non-aligned, Denmark, Iceland and Norway are
members of NATO) •
original members of EFTA,
in particular Great Britain have
left the organization in favour of EC membership, it is still
important for Norwegian trade relations especially on the
import side.
Secondly, Norway has opened up for more trade with nonEuropean partners after WWII,
in particular with North
America. Both these trends reduced the share of foreign trade
accounted for by the EC. In 1972 the Norwegian population by a
small but clear majority in a referendum turned down an
application to join the EC as a member. Instead it an
association treaty that provides for free flow of manufactured
goods, but negotiated agreement on fish and a few other goods
and no exchange agreement on agricultural products. In 1975
some 45 percent of foreign trade took place with the EC
countries (fig. 5) • After that time, however, trade patterns
have again become reoriented and are increasingly concentrated
on oil and gas exports to the EC. At present some 70 percent
of exports have EC countries as their destination, in
particular UK and West Germany. Norway will supply some 25
percent of FRG's natural gas consumption in 2000 through pipelines. The export relationship is embodied in physical
installations.
Also,
leaders of the few big Norwegian companies who were
clearly in favour of membership in the EC at the time of the
referendum, have continued to "vote with their feet" in the
1970s investing rather exlusively in EC countries. Despite a
higher rate of foreign investment since 1974, Norway is still
rather much an export economy. Her foreiqn investments account
for activities abroad which are far less important than
exports and much less important in relative terms than those
of e.g. Sweden.
Throughout the period of industrialization, Norway's terms
of trade have been relatively stable. Compared to the Latin
American experience, it appears as ultrastable. It slipped
into an adverse trend only in the 1930s
(see Fig.
6) .
Throughout the formation period in the 19th century,
it was
similarly stable with a mostly positive trend for most of the
time. The fact that Norway could sell raw materials to England
in exchange for cheap textiles and capital goods under
conditions of favourable terms of trade must have played a
very important role in her development process.
Norway's §xchanqe rate policy has turned from relative
liberalism to moderate regulation. She has not used the
exchange rate as an instrument in the foreign economic sector
to the extent that some other West European nations have done.
She has largely followed the hegemon:
the British, later the
American exchange rate policies up until the 1930s and early
1970s respectively. But most small West European countries did
so, and their way of handling the international fixed exchange
rate regime was to cope with inflationary tendencies by
adapting domestic prices through wage control, not re- or
devaluate. As Maddison puts it with reference to Aukrust
(1977), she was part of the general trand whereby "smaller
countries, and particularly Scandinavia, tended to drift with
world price trends" (1982:
134) .
The British devaluation in 1967 was a problem to be
tackled; so was the Swedish devaluation in 1982. With maybe
some political overtone, the Norwegian government reacted
strongly to the latter criticizing it for being an outright
"beggar-thy-neighbour" policy.
35
There was much less reaction
when the Finnish and the Icelandic governments manipulated
their currencies. The latter two do not count by far as much
as the Swedes as far as interdependence relations (trade and
investments) are concerned.
"The Norwegian government at the time was bourgeois, whereas
the Swedish was Social Democrat; this may have caused a
slightly inflated reaction, maybe more for domestic political
reasons than for reasons of foreign policy. The Norwegian
government compensated for the Swedish 16 percent devaluation
by giving the most severely affected Norwegian industries a 1
billion NOK support package.
In 1973 the Norwegian government decided to join the
"snake", the moderately-fixed exchange rate system organized
to counter the destabilizing effects of the unilateral US
decision to let the dollar free from the Bretton Woods
obligations. In 1978 government reversed its decision and kept
out of the European Monetary System. The fact that the British
government did the same thing may have played a role in making
that decision, but there was also a mounting feeling of belief
in the Krone caused by the starting up of oil production and
exports.
Since 1978 the Norwegian exchange rate system has been to
let the Krone rate be decided by a basket of 14, later 12
currencies, the internal composition of which and the relative
weight of the respective currencies being decided upon by the
Norwegian Central Bank, Norges
Council
assisted by the Currency
(see below) .
During the last year a mounting pressure to join the EMS can
be registered. The present Social Democrat government is
willing to consider the matter seriously whereas it has not
been willing to resume discussion of EC membership. Its policy
with respect to the EC approach is to try out the" EFTA card":
to attempt to get the other EFTA members to seriously
negotiate closer coordination of policies and harmonization
with the EC Internal Market.
5. The transition to the "barqaininq economv".
The compromise between Labour and the farmers and the national
agreement in the labour market in 1935 laid the foundation for
the bargaining economy of the post-WWII period. The compromise
reflected the type of Democratic corporatism
(Katzenstein,
1984) or nation-wide formation of coalitions
(Olson, 1982)
that has come to be seen as typical of the Scandinavian
countries since the mid-1930s.
The ba,,rqaininq economy is a society where a major share of
resource allocation is decided upon through institutionalized
negotiations between a number of independent decision-making
centres in the state, in organizations and in firms. Through
routinized interactive processes these centres develop a
common understanding of problems and become integrated into
bargaining processes which facilitate compromises.
The bargaining economy has transcended the mixed economy.
The bargaining economy provides opportunities for social
actors to manifest their respective opinions in confrontation,
but at the same time to develop mutual understanding of each
others' goals. The ultimate purpose is to reach agreement
whenever conflict of interest exists. As a result stateprivate conflicts are being reduced. So are capital-labour
conflicts. Strikes are still allowed and are being used, but
not to a large extent. Instead, the system offers incentives
for the actors in the labour market to reach agreement, first
because the state delegates to other social actors to decide
on several matters and secondly because the state sometimes
finances part of a settlement (Hernes, 1975; Olsen, 1978;
Nielsen and Pedersen,
1989) •
A strong network of independent nation-wide organizations
is as much of a prerequisite for the functioning of the
bargaining economy as an effective state. It is therefore not
a mere coinci-dence that the growth of nation-wide
organizations in Norway occured along with the growth of state
administration, during the first post-WWII years. 170 national
organizations were formed during 1945-50
(Moren et al,
1976).
Before that period agricultural and fishery organizations were
dominant in the economic-productive sector. Primary sector
organizations have thus developed particularly strong
organizational representation of group interest.
This may explain why the primary sector is still able to
extract subsidies and other concessions from the state well
out of proportion to their contribution to GDP because. The
way and extent these two sectors integrate with ministries and
politicians have led scholars to see the cross-institutional
integration as a seqment.
rest of the economy
encapsulating its members from the
(Dahl-Jacobsen, 1965; Olsen, 1978) . Their
relative
strength in the institutional network may also be a function
of the fact that the two primary sub-sectors represent in
large part the peripheral regions of Norway. Their
representatives compensate for their reduced economic clout by
being relatively better organized than other group interests.
So far they have been largely able to solve internal conflicts
between large and small producers, but such conflicts
occasionally make compromising difficult.
Manufacturing and services organizations grew up only
after WWII. The evolution of the organizational system in
other words follows rather closely the pattern of the state.
In some instances, the state has in fact stimulated, even
demanded, that organizations are set up. An organized
counterpart is better than anarchic relationships.
It took most of the 1950s to organize consensus and vital
compromises and prepare the foundation for the new politicaleconomic system. The finalization of it coincided with the
start of the "economic growth miracle" internationally. One of
its main purposes was to provide shelter and compensation to
those groups which were negatively affected or did not
automatically obtain Pareto-optimal outcomes by the
functioning of the economy. Part of the system therefore also
organized a consensus between export and import competing
interests. The extent of success of this system is among other
things reflected in the level of subsidies
(see above) .
As trends in education, changes in production structure
and the building of social services all show, the
"miracle"
started around 1960. In 1950 only 3 percent of the population
at the age of 25 had passed higher education. The percentage
was about the same in 1960, but then surged to 6 in 1970 and
continued to increase after that. The big educational
explosion however was in secondary education where the
percentage of 19 year old who passed exams doubled from 1960
to 1970 and increased further to 27 percent in 1975. A major
reason for this explosion was the arrival of women to a
position of equality with young men.
The coming of the welfare state was a major factor behind
the increase in public expenditure. Public expenditures on
social security increased from 8.5 percent of the GNP in 1955
to 13 percent in 1963. The real rise was however to come from
around 1965 when (1966) the Storting passed a law giving all
Norwegians a state pension after the age of 70
(67) • In the
1970s and 1980s, the share of the public sector in GDP has
remained more or less at the 50 percent level.
A large number of tripartite committees is an important
feature of the system. They consist of representatives from
the state, from capital and from labour. The legitimacy of the
committees was largely supported by the fact that the state,
both government and the Storting,
deleqated authority to these
institutions.
In Norway there are some 900 councils, committees and
boards appointed by the state at present, some 100 of these
being appointed ad hoc.
"
They are composed of
representatives of concerned interests, that is organizations
or sectors particularly concerned about policy in a given
"heir purpose and composition is publicized every year in a
separate report to the Storting normally numbered Report to
Parliament no. 7A.
area, and the state (or para-statal institutions concerned) .
This means that both capital and labour are represented in all
institutions of some importance,
sometimes by nation-wide
general, in other cases by specialized organizations (and in
many cases by both) . It also means that the reqional interest,
a dimension that came to prominence in Norwegian politics
during the 1930s and that after WWII has become a dominant
force in the Norwegian bargaining economy, is well
represented.
Most of the institutions are dealing with social relations,
cultural-scientific and educational affairs or work in the
various sectors of production and trade. Among the latter,
there are as may be expected,
comparatively more institutions
in the primary than in the industrial
(manufacturing) sector.
The institutional network is also part of international
bargaining relations, or have as a task to handle
vulnerabilities caused by changes that are channelled through
the foreign economic sector.
65 of the total of the 900
committees deal with matters related to the foreign economy.
Practically all of them have been set up after WWII. The
number and the importance of these committees appear to have
fluctuated with fluctuations in international markets and
regimes as well as with domestic demand. This is illustrated
by the fact that there have been three waves of committee
"production": one associated with the establishment of Bretton
Woods (e.g. The Currency Council), one with the surge in
exports in the 50s (The Export Council) and the last one in
the 1970s having to do with the emergence of Norway as a
petroleum producer (British-Norwegian committees), the
declaration of Exclusive Economic Zones in fisheries, both
coinciding with international restructuring and a resultant
domestic demand for crisis assistance
(Textile Council) .
Some committees have been as much arenas for bargaining
within collective actors (sector organizations for labour
e.g.) as between them. This appears to be particularly the
case for those sectors which are part of the transfer economy:
part of their incomes derive from public support
(subsidy)
systems. A case in point is again the primary sector. The fact
that these committees have been delegated the task of
allocating public resources obviously make them important
institutions in the political economy of the country.
The gradual transition from the mixed to the bargaining
economy that has taken place in the post-war era is
illustrated in the purpose and the composition of committees.
At the same time, there is still some division of labour among
state and private sector institutions in performing economic
policy functions. The Currency Council
(set up in 1946) has
only state representatives, a confirmation that exchange rate
policy is an exclusively public domain, a matter of
coordination between the Foreign Affairs, Commerce, Finance
and Industry ministries and the Central Bank, with the latter
gaining more power recently.
IV
Epilogue.
Norway appears to face three serious questions at the entry of
the 1990s. Is her industrial strategy well founded ? Does she
suffer from the lack of entrepreneurial spirit ? And is the
bar-gaining economy turning out to be a stumbling-block to
necessary
transformation ?
Petroleum incomes may have come as manna from heaven. But
oil production has made the Norwegian industrial structure
even more raw material based than before, and there are
symptoms of the "Dutch disease". Oil production has generated
new skills, but relatively few job opportunities. Exports of
unprocessed or semi-processed minerals and metals now account
for close to 2/3 of total exports. Another traditionally
important sector,
shipping, has turned to internationalization
in order to maintain