The Wealth of a Nation: Norways Road to Prosperity

Abstract

The present paper discusses Norway's way to prosperity during the two last centuries. The main reason for its wealth seems to have been the ability to meet international demand by utilizing its rich natural resources, adopting efficient technology, and draw on a skilled labor force in order to gain high productivity and profitability. Historical national accounts reveal that Norway's wealth was close to the western European average in the early nineteenth century. From the 1840s to the mid 1870s, Norwegian growth rates were very high, due to significant growth in foreign trade. This period was followed by relative stagnation until the 1890s, from when the country saw rapid industrialization on the basis of hydroelectricity. After the two world wars Norway adopted a social democratic rule, with a high degree of economic planning, called the Nordic model. This has contributed to a large public sector and evenly distributed wealth and resources. The discovery of oil and gas on the Norwegian continental shelf marked a new era, when Norway experienced higher growth rates than most western economies. This has made it the country with the highest score in the United Nations Human Development Index (HDI) during the two first decades of the 21 st century.

Does natural resource extraction compromise future well-being? Norwegian Genuine Savings, 1865-2018

“…Natural resources were of great importance for the Norwegian economy long before the discovery of oil and natural gas in 1969 (Grytten, 2020). Since the middle ages, the Norwegian economy has been dominated by the marine and fishing industry (Gullestad et al, 2014;Schwach, 2013).…”

“…Though access to natural resources and HC were favorable for industrialization, a lack of cheap energy sources and domestic capital supply harmed economic development during the 19th century (Grytten, 2020;Lindmark and Minde, 2018;Semmingsen, 1960). Instead of expanding its manufacturing sector, Norway specialized in shipping and natural resource exports.…”

“…The access to cheap energy sources provided Norway with a comparative advantage in energy-intensive industries and made the country attractive to foreign investments. In combination access to foreign capital and the advantage in energy-intensive production promoted the establishment of pulp, paper, manufacturing, and the chemical industry (Grytten, 2020). Semmingsen (1960) notes that economic conditions and technical change severely affected Norwegian demography between the second half of the 19th century and the great depression when Norway experienced a period of mass migration.…”

“…However, changes in US migration policy haltered the migratory movement from 1930 onwards. This amplified the problem of mass unemployment since surplus labor was trapped in Norway (Grytten, 2020).…”

“…for generating unsustainable development (Dietz et al, 2007;Grytten, 2020), there is a present and future problematic for Norwegian development path. Consequently, with reference to GDP and HDI alone it cannot be determined whether Norway's achievements are in fact a result of unsustainable development.…”