No, Norway Was Not a Poor Country Before Oil Was Discovered
A brief economic history of Norway. How Norway developed into a rich country long before the discovery of North Sea oil.
Ask almost any Norwegian about Norway before oil was discovered in 1969, and they will tell you that Norway was poor country before oil was discovered.
It is not strange that they say this because it a myth we get taught in school. I am not sure what the motivation for this story was, because it isn’t true. It is true that Norway was poor compared to what it is today. The problem is that it gives the impression that Norway was poor in relative terms, which is absolutely wrong.
Norway was not among the poorest countries in Europe historically. It was among the richest! Now why do I bother writing about this? One reason is because in these times social democracy is being more heavily debated internationally due to political leaders such as Bernie Sanders in the US and Jeremy Corbyn in the UK. Many on the left like to point to Nordic social democracies as models. In these discussions I’ve noticed there is a propensity to dismiss Norwegian development with the argument that Norway would be a poor backwater if not for the discovery of oil.
Lets examine the claim with some historical data. The map below shows GDP per capita in Europe before the outbreak of World War II.
Notice something funny? The supposedly backwater of Europe, is marked off as the richest country in Europe, even ahead of Switzerland. How about looking at Norway right before the oil income started coming in. Oil was discovered in 1969 and production started in 1971, so 1970 should be a good year to look at.
Darker green indicates higher GDP and darker brown indicates lower GDP. Again we can see Norway marked off as one of the richest countries. This pattern is consistent going further back in the 1800s was well, judging by data presented on wikipedia on historical GDP numbers.
How Did Norway Get So Rich, so Early?
Ola Honnigdal Grytten gives an account of Norwegian economic history here.
Norwegian economy grew strongly in 1843 to 1875 not long after Norway gained autonomy in 1814 and entered a political union with Sweden. Grytten mentions fish exports, timber and maritime services as key industries. At some point Norway had the world largest merchant fleet. In 1875, 7% of the whole world’s merchant fleet was Norwegian. The 1840s was also when Norway started industrializing.
In 1905 Norway was able to start utilizing its vast hydro electric power, resulting in the founding of the the largest Norwegian company for a long time: Norsk Hydro, producing fertilizer using electricity.
Of course simply having natural resources is not enough to get rich otherwise Africa would have been the richest region in the world and Japan would be dirt poor.
Institutions and human development is also of major significance. An unusual feature of Nordic countries was that historically while they were among the poorer regions of Europe, they had unusually high literacy levels. In medieval times, Iceland e.g. may have been the most literate country in Europe.
As I’ve written about before geography is very important. In particular access to efficient transport by water ways is almost more important than natural resources for development.
The Netherland being low and flat benefitted economically from the ease at which canals could be dug. Britain had advantage both in ease of building canals as well as being an narrow island giving in more coastline relative to landmass.
Norway is slightly different. The country is not suited for canal building with all the mountains and hard bed rock. However Norway has an extremely jagged coastline full of fjords, giving it Europe’s longest coastline. With lots of forest, this gives a good starting point to be a major maritime nation. Many places have lots of forest. Russia e.g. has far more forest than Norway. However this forest is not easily accessible by water. The combination of huge coastline and lots of rivers allowed Norwegian timber to easily be moved to ships on the coast for transport to the rest of Europe for export.
Now Even Nowegian Comedians Address this Myth
If you are Scandinavian reading this, you may enjoy watching comedian Harald Eia puncture this myth in one of his episodes of “Sånn er Norge”. In “Rik og lik” Eia talks about many of the same things which I do here but with a different angle and a lot of humor.