Norway has, together with Sweden, often been idealized as the most successful case of postwar social democracy. Indeed, in economic terms the achievements are even more striking than those of its larger neighbour. Beginning the century on the agrarian fringe of European capitalism, Norway has been transformed into a country whose per capita gdp in 1987 was second only to that of Switzerland in Europe, and whose egalitarian culture and level of social provision have captured the attention of radical reformists throughout the world. Several elements of this advance have been common to Scandinavia as a whole, but as we shall see, the relationship between state and economy has developed in fairly distinct ways in the region. Moreover, the neo-liberal ‘blue wave’ which rolled over Western Europe in the 1980s has had considerably greater impact in Norway than in Sweden, combining with the pressures of a destabilized international economy to threaten many of the postwar structures. This makes it easier to appreciate the earlier accomplishments of social democracy, but it also shows that the Nordic innovations often depended upon the convergence of specific national conditions with the dynamic phase of Western capitalism that lasted from 1945 to 1973. In this article we shall outline the formative stages of the Norwegian political economy with special emphasis on the problems encountered by Norwegian reformism as high growth turned to low growth, concluding with critical reflections on the vicissitudes of the ‘Norwegian model’ and its prospects in the 1990s.footnote1

In 1814 Denmark lost its Norwegian colony, which gained home rule in a union with Sweden. Norway was at that time primarily a minifundia economy, with extensive peasant ownership and no indigenous aristocracy.footnote2 The groups in power—state bureaucrats, a small but growing bourgeoisie, a few rich farmers—were weak and politically divided, although the bureaucrats regarded the farmers as their loyal clients and pushed for a constitution that would enfranchise all freeholders and leaseholders. In fact, the Constitution of 1814 created a political system particularly open to mobilization by peasants and other ‘peripheral’ groups,footnote3 who secured a high degree of local government in the 1830s.footnote4 From the 1850s the ruling elites were also challenged at the cultural level. Teetotalist and lay protestant movements were stronger than elsewhere in Scandinavia, and Norway, like Finland, experienced a movement for language revival, with the result that today it has two official languages: standard Norwegian (akin to Danish) and new Norwegian (more like rural dialects).

In the second half of the nineteenth century these two currents became the poles within the National Assembly. The Liberals or Venstre (literally, ‘Left’) were the party of the rural and ‘countercultural’ groups, with important support among the urban intelligentsia, teachers in particular, while the Conservatives or Høyre (literally, ‘Right’) united high-level bureaucrats and certain business interests. The Liberals led the struggle for parliamentarism, which was finally established in 1884. When the Labour Party (dna) was founded in 1887, it initially collaborated with the Liberals and was successful in winning general suffrage and achieving some basic social demands.

In the nineteenth century the Norwegian economy contained a few modernizing islands within an ocean of traditionalist agriculture. The major industries were forestry, mining, fisheries and shipping.footnote5 From 1850 the opening of the world economy under British dominance spurred a certain diversification into pulp and paper production, whaling and canning, and by the 1880s Norway had developed the world’s third largest commercial fleet. Towards the end of the century, however, tendencies of inertia were becoming apparent: traditionalist agriculture hampered the rational exploitation of forests, Norwegian fisheries were failing to adjust to high-income markets, and shipping was lagging behind in the change from sail to steam. Then the possibility of employing Norwegian water power in modern energy-intensive production processes (e.g. furnace processes) suddenly drew the attention of international capital to the country as a suitable place for the manufacturing of fertilizers, aluminium, steel, and chemicals. The Norwegian bourgeoisie and the state were unable to exploit these options themselves, and so heavy industry, with many of the plants scattered at the end of the western fjords, close to the great waterfalls, became largely dependent on foreign investment. Political pressure to secure increasing spin-offs for Norwegian industrialists came mainly from the ranks of the Liberal Party. It is important to realize that Norway’s industrial structure still rests upon these historical layers: a fairly large forest industry, a heavy furnace industry producing semi-finished metals and chemicals, and finally shipping, which in the interwar period managed to solve its late-nineteenth-century problems.

As the class structure of Norway changed in the early part of the century through the process of industrialization, the Liberals and Conservatives failed to join forces in a single non-socialist party. This weakness was accentuated by the splits from the Liberals: first an Agrarian party was founded in 1920 to represent the purely economic interests of the farmers; then a Christian Party sprang up in the 1930s and went on to become a national presence with support from the teetotalist and lay protestant countercultures. The Liberals were left as mainly the party of urban intellectuals.footnote6

There were also splits among the socialists. In the 1920s, as a radical syndicalist fraction took over the Labour Party, a social-democratic grouping broke away to the right. When Labour left the Comintern in 1923 after a short period of membership, a Communist Party (nkp) split off. But it never became an influential factor in Norwegian politics, and the two other parties soon reunited. In this way, the party structure became characterized by a strong, homogeneous Labour Party and a non-socialist bloc fragmented into four parties, whose policies have again and again proved difficult to reconcile.footnote7

Partly as a response to the crisis of the early 1930s, Labour turned to reformism, and the trade-union confederation (lo) and the Norwegian Employers’ Association (naf) negotiated a nationwide general agreement which homogenized various conditions (concerning voting regulations, support actions, etc.) earlier laid down in uncoordinated collective agreements. Thus a genuine labour–capital compromise guaranteed industrial peace throughout the period covered by the agreement. Such a development would, of course, have been hard to imagine without the powerful and self-assertive advance of the trade-union movement, whose membership rose consistently from 84,000 in 1922 to 357,000 on the eve of World War II. At the same time, the dna more than doubled its membership from 80,000 in 1930 to 170,000 in 1938. A large proportion of this total (currently around 60 per cent) joined through a system of collective affiliation of trade unions, although, as in Sweden but unlike in Britain, union bodies did not as such have any say in the Party’s decision-making process.