Introduction

The first decade after the war had been one of unfettered ambitions and high hopes for a new world. By 1955, many of the aspirations formulated ten years earlier had been met. Reconstruction had taken place at a much swifter pace than anticipated, the growth record had been impressive, full employment had been maintained and a high investment level had put Norway on the path to economic transformation. At the same time, however, it was acknowledged that vital elements of the postwar economic policy had run their course. In the face of trade and payments liberalisation, the direct regulations of foreign trade had slipped through the fingers of the ruling Labour Party. The devaluations of 1949 showed the futility for a small open economy of attempting to maintain price stability by decree and shelter the domestic price formation from that of the outside world.

The postwar planners had dreamt of a world freed from ‘unenlightened financialism’. This never quite came through. Even under a system of extensive public regulation of the flow of goods and prices, money trickled through, influencing profitability, incentives and economic dispositions. Often these influences tended to distort government plans by stimulating parts of the economy that were not high on the list of political priorities, such as the ashtray industries referred to in Section 11.3. Following the loss of key direct regulation instruments, by the early 1950s, money had returned to forefront of economic policymaking as well. However, the return of money came with a distinct twist. Although the preferred instruments had gone, the ambitions for the future were still intact. There was no return to the alleged unfettered monetary orthodoxy of the interwar variety. Rather, the return represented a change from steering through the physical command posts of the economy to steering through credit aggregates. From a monetary point of view, financial repression became the key characteristic of the following decades.

What came to be referred to as money and credit policy rested on three pillars. First, the persistent commitment to low interest rates in place after the war was retained in order to support further growth and social redistribution.