The Rise of the Norwegian Economy Between 1960 and 1980
The Rise of the Norwegian Economy (1960-1980)
Norway is considered one of the world's wealthiest countries based on capital stock and gross domestic product per capita. The United Nations Human Development Index has listed Norway among the top three successful economies in the world. According to Tenold (2019), the Human Development Index ranking analyses aspects such as the nation's income, education, and health. The Norwegian population has free access to education and health services that have been financed by the high levels of taxation. Despite that, petroleum exploration had a significant impact on boosting the country's economy; the standard of life was average before the oil discovery. Thus, an analysis of the rise of the Norwegian economy (1960-1980) will be crucial.
Initially, the Norwegian economy relied on the local farming communities and other industries involved in fishing, hunting, and timber. Nonetheless, the communities found in the North or West depended on fish and international trade due to the climatic and topographical conditions. The late eighteenth century was characterized by economic bloom during the first era of liberalism. During this period, the merchant fleet took precedence with Bergen being the city with a Hanseatic office and largest ports for foreign and domestic trade. Once the country gained independence from Denmark in 1814, it remained a self-sufficient nation with supplies from hunting, fisheries, and agriculture.
Economic growth in Norway began in 1840; however, it slowed down in the subsequent years. Once the country gained independence, it was characterized by the lack of domestic capital, industrial business individuals, and robust institutions (Grytten, 2014). Regardless, access to the natural resources and its proximity to the United Kingdom and the sea allowed them to use the opportunity to change their economic status. Based on Fagerberg, Cappelen & Mjøset (1992), by 1870, Norway was a relatively successful county. The rise par value in 1842 influenced economic progress until the mid-1870s.
The interwar phase exposed Norway to political and economic instabilities. During the 1920s, the banking system was unreliable, and rigid monetary policies were evident. However, after the Second World War, the Labour industry focused on the growth of the enclave. This is because the sectors relied on cheap energy and remained competitive during the recession. Further, the labor markets and regional guidelines were initiated to facilitate structural changes by reducing the share of the population working in agriculture (Fagerberg et al., 1992). This reconstruction period allowed for the development of income policies and diversification of income sources. Additionally, credit policy was adopted as the most effective tool in managing market irregularities. This is because the State would be required to finance inventories in the export enclave when the prices fluctuated. Hence, this era promoted the growth of the country's economy.
The Great Boom
This period was between 1843-1875 when the economic process was influenced by the agriculture and foreign sector's success. The export of fish, timber, and maritime services allowed Norway to become an influential nation in the shipping business. As highlighted by Grytten (2014), the capital was imported from Britain, Denmark, Sweden, and Germany during the great boom. Moreover, in the nineteenth century, the puritan enemies established a business environment that promoted domestic capital, productive labor force, and business focus.
Petroleum Economy: The Rise of the Norwegian Economy
The Norwegian economy’s golden era was 1950-1973. It was characterized by a GDP per capita annual growth rate of 3.3%, stable inflation, and low unemployment rates. Phillips Petroleum in 1969 discovered petroleum resources at the Ekofisk field, which was part of the Norwegian continental shelf. Based on Dośpiał-Borysiak (2017), production from this field was initiated in 1971 with the State as the sole landowner. Over the years, oil exploration has been characterized by a steady decline; nonetheless, gas production has increased yearly. For instance, in 2015, gas represented 50% of the country's total oil equivalents output. Based on the Norwegian Petroleum Directorate projections, the high production levels will be maintained in the subsequent decades.
The model of administration of the petroleum sector has focused on the separation of commercial, regulatory, and policy responsibilities. This sector's objective is to create the profitable manufacturing of hydrocarbons for long term progress and success. In this regard, the petroleum industry's legal framework in Norway is petroleum tax law and petroleum law (Dośpiał-Borysiak, 2017). The administration generated the 10 Oil Commandments, which require that society's most significant value is attained at every stage of production.
On the other hand, the State reserves the proprietary responsibility to offshore petroleum deposits on the Norwegian continental shelf. Over the years, hydrocarbon production in the country has been the source of economic success and the Norwegian welfare state's driving force. This is because the industry has created over 150,000 jobs and opportunities for the population. Notably, the income acquired from the industry is deposited into the Petroleum Fund of Norway. It was established to eliminate the possibility of Dutch disease and avoid instances of the economy overheating. Besides, the direct income acquired from the fund originates from company taxes, dividends, and license payments. The assets are invested in bonds, properties, and stocks. Presently, Norway is the largest stock owner in Europe and is a net creditor to most developing nations.
Dośpiał-Borysiak, K. (2017). Model of State Management of Petroleum Sector–Case of Norway. International Studies. Interdisciplinary Political and Cultural Journal, 20(1), 97-112.
Fagerberg, J., Cappelen, Å., & Mjøset, L. (1992). Structural change and economic policy: the Norwegian model under pressure. Norsk Geografisk Tidsskrift-Norwegian Journal of Geography, 46(2), 95-107.
Grytten, O. H. (2014). Growth in public finances as tool for control: Norwegian development 1850-1950. NHH Dept. of Economics Discussion Paper, (15).
Tenold, S. (2019). Norwegian Shipping in the 20th Century: Norway's Successful Navigation of the World's Most Global Industry (p. 327). Springer Nature.