Introduction

In the previous chapter the volatile interplay between the international business cycle and domestic monetary development played centre stage. This chapter has a different setting. By the mid-1890s, the deflationary tendencies that had marred the economy for two decades were broken and a mild inflationary climate set in. The economic cycles became less volatile. In retrospect these years became one of the most stable periods of the long nineteenth century, a stability that would turn with a vengeance as the ambitious posturing of the great powers led to war. For the European generations that came to be marked by the Great War, these decades became ‘La Belle Époque’, embraced as a time of peace, progress and prosperity. The transformation of the monetary scene that started in the 1870 continued with the last remaining stragglers joining the gold standard. By 1908 only China, Persia and few other Asian countries still retained silver as a monetary standard.

Although the rise of protectionism from the 1870s continued, international trade still grew at a more rapid rate than world production. The world became more closely knitted together, but was at the time same changing. The economic predominance of the United Kingdom, taken for granted fifty years earlier, was in decline. London was by 1913 still the financial and trading capital of the world, but Britain had been surpassed by both Germany and the United States in terms of industrial production. Perhaps as a symbol of the American ascendance the epicentre of the major international financial crisis of the period, that of 1907, was New York.

Compared with both the long depression and the interwar debacle, these decades became a period of growth and stability for Norway as well. With a better international climate, conditions improved for traditional export industries. More important, technological advances unleashed the hydroelectric power potential of Norwegian waterfalls and triggered comprehensive industrial transformation: first with advances in pulp and paper in the 1890s, then in electro-chemical and electro-metallurgical industries after the turn of the century. Particularly the decade after 1905, the year of the amicable dissolution of the union with Sweden, became one of rapid industrialisation. Although Norway continued to export raw materials and semi-finished goods, the new export industries were much more capital and knowledge intensive.