Norwegian Catch-Up: Development and Globalization before World War II

Published by EH.NET (October 2005)

Jonathon W. Moses, Norwegian Catch-Up: Development and Globalization before World War II. Aldershot: Ashgate, 2005. x + 149 pp. $69.95 (hardcover), ISBN: 0-7546-4354-9.

Reviewed for EH.NET by Ola Honningdal Grytten, Norwegian School of Economics and Business Administration.

It is a courageous project of a non-native, non-economic historian to write an economic history of Norway while staying in Dhaka, Bangladesh, far from most relevant sources and literature. This is exactly what Jonathon W. Moses has done. Sadly, all these drawbacks are clearly mirrored in his new book. However, parts of the book are both informative and give new insight. In general it is also easy understandable and well written.

Moses undoubtedly has a point when he writes on Norwegian catch-up. Norway converged towards the wealthy Western European countries in the decades before the 1870s. Norway also converged towards the wealthiest nations in the world due to the utilization of petroleum in the North Sea during the last decades of the twentieth century. However, there was no general Norwegian catch-up during the period Moses is dealing with, basically from around 1870 to World War II.

The start of the book is as unfortunate as it can be. In a brief overview of what the author calls “A Cinderella Story,” he places Norway as a poor and underdeveloped nation in the nineteenth century with conditions “grim enough to encourage tens of thousands of Norwegians to emigrate every year” (p. 1) even towards the end of the century. The present book then aims “to explain how a country came to enjoy such remarkable wealth (at the present), from a position of such poverty, over such a short period of time” (p. ix). Thereafter, he claims that “since World War II, the Norwegian economy has grown at a remarkable and steady state: between 1946 and 1980 its Gross Domestic Product (GDP) grew by more than 350 per cent! Under the stewardship of the Norwegian Labor Party, this growth was engineered with active state involvement and economic management” (p. 1).

This is about as wrong as can be. In the first place, both older and newer research on historical national accounts and standard of living almost unanimously have shown us that Norway was not a poor and underdeveloped nation compared to the rest of the world. In fact, Norway was significantly above the European average, and in the 1870s it was a relatively wealthy nation. Secondly, the economic performance of Norway was below the OECD-growth rates under the great Labor Party era from 1946 to the 1970s. Thus, this was not a catch-up phase at all.

In a book on Norwegian catch-Up, it would have helped to compare Norway with other states, to try to measure whether there was any gap initially and if this was closed during the period of investigation. Moses explicitly carries out an international comparison in this respect only once, for the period 1870-1910, and then, unfortunately with a completely misleading dataset. He claims that the big Norwegian convergence phase took place between 1870 and 1910 (pp. 111-12). However, this was one of the periods with poorest performance for Norway during the last two hundred years. International GDP-figures reveal that the country had growth rates below almost every other western country during this period (Crafts 1984, p. 440). A better knowledge of standard text books and present research on historical national accounts and economic growth for Norway would have helped significantly, and would have informed Moses that the decades previous to the 1870s made up a period of significant growth in the Norwegian economy, while the growth rates slowed down significantly from 1875 to 1905. In fact, the annual growth rates in GDP per capita have recently been calculated to 2.0 percent between 1850 and 1875 and 0.7 percent from 1875 to 1905 (Grytten 2004, p. 277-79).

Figure 8.1 in the book suggests that real wages increased up to three times more than GDP per worker in the Scandinavian countries between 1870 and 1910 (p. 112). However, such a gap over a forty-year period seems impossible. With its rather misleading framework, the rest of the book goes on to explain trends and developments, which really didn’t take place. Norway was not wealthier compared to the rest of the Western world at the outbreak of World War II than in 1870, and it was hardly more globalized than compared to the turn of the century, rather the contrary. In 1870 Norwegian foreign trade made up 55 percent of total GDP, exactly the same share as in 1938, while in 1900 the share was 64 percent (Grytten 2004, p. 273-275).

A more persistent use of secondary sources would have helped the author’s analysis. For instance the basic data behind figure 8.2 in the book basically originates from Fritz Hodne (Hodne 1984, p. 306-13). A better knowledge of his work on Norwegian infrastructure investments in the nineteenth century would have given Moses an opportunity to make a more stringent analysis. He would also have benefited from estimates for monetary aggregates (Klovland 2004, p. 237-40) and interwar unemployment (Grytten 1995, p. 245).

Nevertheless, it is interesting and challenging to read Moses’s interpretation of Norwegian economic history during the nineteenth century and up to the Second World War. In fact, he seems to have a more sober impression of the hardships during the 1930s than many native writers on Norwegian interwar history. And in particular his views on emigration from Norway and net capital inflow to Norway before World War I give new understanding of these phenomena. However, when the author concludes that the high rates of emigration from Norway explain the rapid economic growth and industrialization during the last decades of the nineteenth century he spoils his argument. There was neither a rapid growth nor a rapid industrialization during the last decades of the nineteenth century compared to other Western countries, rather the contrary. Moses would also have benefited from reading new research on credit, banking and monetary developments in Norway (Eitrheim, Gerdrup and Klovland 2004).

At the end of the book Moses carries out his appeal (p. 134): Free trade and liberalism was always a problem for Norway and the international economy. Happily, this order was reversed in the interwar and the postwar period.

It can hardly be considered valid information that Norway struggled against international liberalism before World War I. In fact, in the period the book describes, Norway spoke up for international liberalism. As a small open economy she did not only benefit from free trade, but with its huge exports of shipping services, fish and timber, Norway in fact depended on an international free trade order.

The present book must be regarded a mixed blessing. In excusing Jonathon Moses, it can be said that he has taken on an impossible task: it is very difficult to explain a phenomenon, which doesn’t exist. Thus, in terms of catch-up the book is no success. However, it still gives some new and relevant insight from an outsider’s perspective into the development of the Norwegian economy during the pre-World War II era. Moses also generates new and challenging hypotheses on Norwegian economic history, in particular within the topic of emigration. In these respects the book deserves its place.

References:

Crafts, N. (1984). “Patterns of Development in Nineteenth-century Europe” Oxford Economic Papers 36, pp. 438-458.

Eitrheim, ?., K.G. Gerdrup and J.T. Klovland (2004). “Credit, Banking and Monetary Developments in Norway, 1819-1830.” Historical Monetary Statistics for Norway, 1819-2003. Edited by ?. Eitrheim, J. T. Klovland and J. Qvigstad. Occasional Papers 35, pp. 377-407.

Grytten, O. G. (1995). The Scale of Interwar Unemployment in International Perspective. Scandinavian Economic History Review 43, pp. 226-50.

Grytten, O. G. (2004). “The Gross Domestic Product for Norway, 1830-2003.” Historical Monetary Statistics for Norway, 1819-2003. Edited by ?. Eitrheim, J. T. Klovland and J. Qvigstad. Occasional Papers 35, pp. 47-98.

Hodne, F. (1984). Stortingssalen som markedsplass: Statens grunnlagsinvesteringer, 1840-1914. Oslo: Universitetsforlaget.

Klovland, J. T. (2004), “Monetary Aggregates in Norway, 1819-2003.” Historical Monetary Statistics for Norway, 1819-2003. Edited by ?. Eitrheim, J. T. Klovland and J. Qvigstad. Occasional Papers 35, pp. 181-240.

Ola Honningdal Grytten, professor in economic history at the Norwegian School of Economics and Business Administration, Bergen, is editor of the Scandinavian Economic History Review and has published several books and articles on Norwegian and Scandinavian macroeconomic history. Among these are three textbooks in Norwegian macroeconomic history in the nineteenth and twentieth centuries (together with Fritz Hodne): The Norwegian Economy in 1900-1990 (1992), Oslo: Tano; The Norwegian Economy in the Nineteenth Century (2000), Bergen: Fagbokforlaget; and The Norwegian Economy in the Twentieth Century (2000), Bergen: Fagbokforlaget.