Annual EBHS Conference, 39th Annual Economic and Business History Society Conference

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Economic experts, Norwegian exchange rate policy and the fate of the social-democratic order 1971–86
Eivind Thomassen, Christoffer Kleivset

Last modified: 2014-03-10

Abstract


The article examines the role of experts and different expert communities in determining Norwegian exchange rate policies over the period 1972–86.

As was the case in most Western European countries, Norwegian monetary authorities had to relate to two major developments over this period. The first was West Germany’s successful attempt at limiting inflation and balance of payments deficits following the oil shock of 1973–74, relying on independent central bank-led monetary policy. The second was the thrust towards further European monetary integration from 1972. Further integration meant pegging exchange rates between the Western European currencies. Germany’s increasing strength meant this was in effect a question of pegging to the Deutsche Mark and following its appreciation against other floating currencies. Pegging to the Deutsche Mark in turn, in one way or another, required emulating Germany’s emphasis on fighting inflation and improving the balance of payments.

These developments posed a threat to time-honored principles of Norwegian economic policy. High growth and employment had been paramount goals to the Labor dominated political establishment since 1945. In addition, credit markets were heavily regulated to achieve below equilibrium interest rates. Obviously, at least in retrospect, joining the European exchange rate cooperation posed an implicit threat to an entire economic policy regime.

No wonder the question of Norway’s association to European exchange rate cooperation projects triggered a lengthy political conflict. Curiously however, the struggle was hardly ever touched upon in public. The struggle over Norway’s exchange rate policies in the 1970s and 80s was instead fought, for most of the time, only between a handful of economic experts located in the Ministry of Finance and Norges Bank, the Norwegian central bank. As the article will show, association to the European integration process was mainly advocated by Norges Bank officials, emphasizing Norway’s interest in a committing international cooperation. A clean break with European monetary integration was advocated by a clique of economists emphasizing sovereignty in policymaking, mainly located in the Ministry of Finance. Who were these experts? Where did their views come from and how did they eventually influence the decisions of the government?