Modern Norwegian Economic History

Since Norway’s formation as an independent sovereign state in 1814, its small open economy has, like its neighboring countries, experienced significant economic growth. During the last several decades petroleum has made the country one of the wealthiest in the world. The main reason for the long-term growth seems to have been the ability to meet international demand by utilizing rich natural resources, adopting efficient technology, and drawing on the labor force in order to gain high productivity. Historical national accounts reveal that Norway’s wealth was close to the Western European average during the early 19th century. From the 1840s to the mid-1870s, Norwegian growth rates were clearly better than average. This period was followed by relative stagnation until the 1890s, when the country saw rapid industrialization based on 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 21st century, despite a slowdown in growth after the financial crisis in 2008.