PART II - THE RISE OF PRIVATE DEPOSIT-TAKING BANKS, 1850–1914

Summary

The quest for monetary stability had been an uphill struggle for the new nation. However, by the early 1850s, despite the severe challenges of the crisis years of 1847–1848, the commitment to currency convertibility appeared firm. In retrospect, the middle of the century represented the start of an unprecedented period of stable monetary values spanning more than six decades. Until the international monetary order fell apart with the outbreak of World War I, Norges Bank honoured its notes in specie without exception. Its commitment to monetary stability was never in question.

The turn to monetary stability, however, is not the only shift associated with the middle of the century. By 1850, Norway was in the process of achieving modern economic growth. Although growth rates continued to be volatile in the short run, reflecting the exposure to international demands for Norwegian raw materials and shipping services as well as the variations in the riches nature rendered, the long-term trend was clearly positive. From 1840 to 1914 annual average real growth per capita ranged between 0.9 and 1.7 per cent per decade. In the same period, the population more than doubled. There was no return to the low-growth economy of the old Norway where new generations were hardly any better off than their forefathers.

The emergence of modern growth in Norway is intimately interwoven with the broad process of economic transformation that took place in Western Europe in the nineteenth century. In 1914, Norway was an altogether different economy than sixty or seventy years earlier. Semi-substance farming had been replaced by more skill-based occupations, time-saving machinery and market orientation. By the turn of the century, mining and manufacturing had replaced farming as the most important sector in terms of production value. From the 1870s, industrial growth, moreover, had become ever more export-led: first through pulp and later paper, thereafter from the late 1890s increasingly based on electrochemical and electrometallurgical industries making use of the newly discovered hydroelectric power potential of Norwegian waterfalls.