Viking Economics (4 page)

In January 1972, the Storting—Norway’s parliament—voted to join the EEC. Members of parliament were then stunned by an enormous protest at the grassroots level. The Labor government was forced to agree to a referendum. That fall, 53.5 percent of the popular votes were against membership.

The Labor Party was shocked. Because the nature of the issue went to the heart of Norway’s future direction, the party regarded the referendum as a vote of no-confidence and resigned. The resignation, however, led to chaos because no major party could step into its place. All had supported membership in the EEC.

Finally a governing coalition was patched together and an interim agreement was signed with the EEC, in lieu of membership, that supported a strong trading relationship for Norway. That relationship continued when the EEC transformed into the European Union (EU).

The Labor Party hoped that, with further education, the grassroots opposition would wither. It set up another referendum for 1994, but again the proposal for membership failed. 2013 polls showed about 70 percent of Norwegians still oppose joining the EU, and the Socialist Left Party (a junior partner that joined the Labor Party in the governing coalition in 2005) went beyond that opposition, urging departure from the European Economic Agreement that interfaces with the EU.

Denmark and Sweden have differed from Norway and Iceland when it comes to this issue: the two Nordics whose boundaries meet the rest of Europe have joined the European Union. Denmark and Sweden carefully avoided joining the Eurozone, however. They retained their own currencies, giving them flexibility that other EU countries have lacked when facing the top-down controlling austerity measures that followed 2008.

While interviewing Norwegians about the EU, I found that, in addition to voting based on their material interests, they also reflected the visionary dimension of the Viking heritage.

Those who most opposed membership in what is now the EU saw the member countries faltering in whatever loyalty they formerly
had to social democratic ideals. Almost everywhere these Norwegians looked, the economic elite seemed to be in charge. Joining the EU, the dissenters feared, would mean that their small country would surrender to the domination of giant banks and corporations.

Norwegians had corrected their errant banks in the early 1990s, but most countries had not done so. When the EU members’ economies took a dive, would governments expect the resulting mess to be paid for by the workers rather than those who caused the disaster? The answer turned out to be yes.

Giant corporations continue to make threats that add evidence to the case made by Norwegians concerned about being out-maneuvered. Writer Asbjørn Wahl tells us that the multi-national Kraft Corporation, which bought the iconic Norwegian chocolate firm Freia, pressed workers in Oslo to accept night shifts. If they refused, Kraft said, it would take the jobs to another European country.
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Those suspicious of the EU expected that high Norwegian standards, such as worker protection and compensation, democratic participation, support for the weakest, and access to economic necessities such as public education, would be pressed downward. Norwegians know how to maintain the stability of their kroner—what might happen with the euro?

My brother-in-law Leif Erik, who lives outside Skien next to farmers, told me that one reason Norwegian agricultural products get such high prices in the EU is because they are reliably of high quality, which cannot be said any longer of most EU farmers’ products. Since Denmark joined the EU, he said, farmers have become so specialized that the country has lost its food security. In contrast, Norway still meets its own needs for meat and dairy
products despite its limited arable land base. What will happen to food security, and the beauty of Norway’s landscape, if the country joins the EU, loses its ability to subsidize its agricultural sector, and sees its farms returned to trees and logging?

Labor Party consultant Dag Seierstad told me during our meeting in the Storting that the growing trend toward a joint foreign policy in the EU also collides with the Norwegian vision of peace. “We must retain our independence,” he said, “in order to follow our own responsibilities as peacemakers.”

And so we have the irony that the people who give the highest per-capita contribution to foreign-aid efforts like the UN Development Program, and who consider their internationalism second to none, stubbornly resist joining the integration process closest to them. The Norwegian Vikings, it seems, remain visionaries.

It’s hard to understand how the descendants of Vikings could have steered into an economic glacier.

Sweden, Norway, and Iceland had made enormous economic gains for half a century by emphasizing the development of human capital and guiding the economy for the common good. They were small ships in shark-infested international waters, and the crews thrived because they had developed resilient structures and chose reliable stars to navigate by.

In the 1980s, Norway and Sweden turned away from what had been working for them and deregulated, giving the financial sectors the chance to act in their own, short-range interests. The private banks speculated, creating housing bubbles. The bubbles burst. Both nations headed into crisis.

To understand what might seem incomprehensible, we need to understand the larger context. It is not easy for small nations to stay focused on their own vision and the wisdom of their own experience when giant nations are telling them they are wrong. Ronald Reagan was elected U.S. president in 1980. Margaret Thatcher
became British prime minister in 1979. Both countries were widely respected in Scandinavia.

Reagan and Thatcher shared an alternative vision: instead of freeing all individuals through increasing their opportunities, it was time to free owners to make more money, and that, they claimed, would trickle down and benefit everyone.

It’s not a new idea, but it found some fertile soil in Norway. A severe international oil shock had come in 1973–74, resulting from the Organization of the Petroleum Exporting Countries (OPEC) hiking the price of oil. The shock triggered the deepest world economic recession since the 1930s. World trade and production grew at a much weaker pace, hurting the Nordics, and Norway in particular. Norwegian economist Lars Mjøset argues that the Labor government’s policy responses included mistakes that contributed to a worrying period of stagflation: economic growth was slowing but inflation was moving upward and unemployment was straining to do so as well.

The neoliberal gospel also had some resonance because Viking economics includes many rules and regulations. I remember Berit’s dad Johannes complaining about the red tape involved with his gardening business; land-use regulations meant getting permission to make some changes that he wanted to make. That’s a common experience in Norway, and over time it can chafe.

Perhaps, some Norwegian economists were saying, the market does have its own wisdom that will yield the best result when rules are dropped and each owner seizes the moment without worrying about consequences. If great and respected nations like the United States and the UK take this chance, why not little Norway?

In 1981, the Norwegian Conservative Party formed a minority government, which it expanded in 1983 into a center-right
majority coalition. The coalition deregulated the credit market in 1984. For the first time in decades, the bankers could pursue their own short-term interests.

The Social Democrats remained the governing party in Sweden, but in 1985 they followed the Norwegian Conservatives’ deregulation move. Now Swedish bankers could expand like their Norwegian colleagues. By 1990, all of Sweden’s largest banks were speculating on commercial property and the bubble grew. Despite the bankers’ gamble that what goes up can stay up, the bubble burst. In the next few years, 90 percent of the banking sector experienced massive losses.

The government nationalized two of the banks, sheltered some that looked like they could survive, and took the attitude that the rest could go bankrupt. Stockholders were left empty-handed.

As it turned out, three of the large banks were able to raise necessary capital privately. Regulation was reimposed and Sweden began to recover, taking care to retain its famous safety net to undergird the economy and to protect individual Swedes.

The mid-1990s were nevertheless a challenging time for many Swedes because of the fallout from the bank crisis. The government poured money into professional training and university courses, which of course stimulated the economy. In that period, according to Sweden’s present prime minister, Stefan Løfven, “Almost a million people got a chance to raise their education, which was very good, because when things started to go well, people were on a higher level.”
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Løfven is a welder by occupation and was
the leader of the national metal workers’ union before becoming a politician.

The Swedish version of financial-sector “tough love” put the economy in such a strong position that when the 2008 financial crisis hit most of Europe, Sweden could use a series of flexible measures that minimized disruption. The banks had already been cleaned up. The Swedes used counter-cyclical measures to stimulate demand. Even though it was a member of the European Union, Sweden retained the
krona
, which gave it the advantage of flexibility not retained by nations in the Eurozone. In addition, their famous social safety net worked to keep Swedes accessing health care, education, and job training programs, and maintained the jobs that provided those services.

From this experience, some Swedish economists conclude that a high level of ongoing, thoughtful governmental intervention in the economy works better than occasional large spurts of stimulus.

The result: by 2011,
The Washington Post
was calling Sweden the “rock star of the recovery,” with a growth rate twice that of the United States, much less unemployment, and a strong currency.

In the 1985 elections, the Norwegians voted out the center-right coalition. Labor came back in as a minority government, led by Gro Harlem Brundtland. Norway would not have a majority-based government again until 2005. Brundtland had several terms as prime minister; she strongly influenced Norwegian
politics and society and was nicknamed “the national mother.”

Brundtland was a medical doctor by trade, and one of her achievements was to put climate change on the global agenda. She did not, however, reimpose strong regulations on the banks.

Though Norwegian banks began to wobble in the next few years, few imagined major trouble was coming. But, as in Sweden, the Norwegian bankers’ bubble burst. In 1991, the commercial banking sector collapsed.

In decisive action, Brundtland’s government seized the three biggest banks of Norway (which were the biggest culprits and together represented half the banking sector), fired the senior management, and made sure the shareholders didn’t get a
krone
.

The now publicly owned banks were given new, accountable management and time to clean up. The government told the rest of the private banking sector that they were on their own: if they in fact had money in their mattresses with which they could recapitalize, fine; if not, they could go bankrupt. No way would Norwegian citizens bail them out.

Regulations were put back into place. The lesson to the entire financial sector was unmistakable: risk your own money, not other people’s.

The government gradually sold shares in the banks it had seized and made a net profit. It kept a majority stake in the largest bank, DNB NOR, reportedly as a safeguard to prevent the bank from being sold to foreign banks.

A couple of decades later, in 2011, Norwegian State Secretary Morten Søberg reflected on what Norway learned from its harrowing experience. One lesson was to make the first step the elimination of shareholder equity in the banks chosen for government intervention:

In order to implement neoliberal policies in her own country, British prime minister Margaret Thatcher needed to weaken the labor movement. In 1984, she confronted the coal miners, whose strike deepened into a general strike. Through archival research reporters recently discovered that at the time, Thatcher considered imposing a state of emergency and mobilizing troops.
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Denmark’s center-right government was in that same period seeking to impose austerity measures and also encountered strenuous opposition from labor, including a strike that fared better than that against Thatcher.
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Labor went on the offensive, and
campaigned for a 4 percent pay hike, a thirty-five-hour work week, and increased taxes on corporations.

When the government tried to impose a settlement and ban the strike, some 100,000 workers gathered outside the Parliament building in Copenhagen. They barred lawmakers from going into the building and delayed debate on the government’s legislation. Municipal workers refused to clear Copenhagen streets of the overnight snowfall, while other Danes slogged through the snow to join the protest. Wildcat strikes erupted in many sectors, and the illegal, nonviolent strike spread until about 320,000 workers joined (in a country of only 5 million).
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