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NORWEGIAN ECONOMY

WHAT DOES THE NORDIC MODEL HAVE TO DO WITH IT?

Birmingham Business SchoolDept of Political Science, 13th

of December 2010

Eivind Falkum, Fafo institute of applied social science, Oslo

1 Introduction

The Nordic region is like the bumble bee: it flies, against all rules of aerodynamics. (C.

Ketel, Nordic Globalisation Barometer 2008)

The Nordic countries had on average productivity rates 17 per cent higher than the rest of the

OECD states in 2007. They were all in the top 14 of the World Bank ranking for ease of doing

business in 2007 (Quintin Peel 2008). The economic growth and the wealth of the Nordic nations

after World War II are often explained by the special combination of labour regulations,

collaboration between employers and employees and quite generous welfare state offers, all

referred to as elements of the Nordic model.

Norway has been criticized by OECD for having too generous welfare offers and to low income

gaps to be competitive in global markets. Many economists and politicians have turned to the

bumble bee metaphor when the Norwegian economy is discussed after the financial crisis in

2008. The levels of public expenditures should make the Norwegian economy fall during the last

30 years, and not grow to the levels of today according to economic theory. All the Nordic

countries were drabbed by the financial crisis in the autumn of 2008, but Norway came out

almost unharmed during 2009 compared to most other countries, and despite heavy

unemployment forecasts in the beginning of that year. OECD lately defined Norway to have

managed the financial crisis very well compared to other nations. This is partly to be explained

by oil incomes and the governmental funding of oil incomes at the pt amount of about 370

billion.

However, the Norwegian government praises the Norwegian modelas the main reason for the

economic growth and success, including the way to handle large national oil incomes. The

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Norwegian government then makes a distinction between the Nordic and the Norwegian models,

claiming that there are special elements in the Norwegian model that are not present in the other

Nordic countries. Even Norwegian investors and capitalists now embrace the Nordic model by

initiating it to be a major theme on the Davos Economic Forum in 2011. Liberal and

conservative political parties that have opposed most of labour and welfare reforms in Norway

over the years are now hailing the Norwegian practice of the model. Nowadays there is a

political rivalry: who invented and who owns the Norwegian model?

This article will discuss the Nordic model and how it is practiced in Norway. Special attention is

paid to the way it is related to the national political and economic systems. The article has five

parts. First it outlines a theoretic perspective. Second is the analysis of the historic development

of the Norwegian model. The third part is an analysis of the elements in the model that affects

the economy. Part four presents the institutional development of the industrial relations. The fifth

part discusses the potentials for development and economic growth in the Nordic model. The

sixth and final part discusses the findings and analyses the Nordic model 1) as a political and

economic hybrid and 2) as an investment scheme. Data are historical sources and analysis of the

Norwegian labour market and welfare state (Falkum 2008), national statistics from Statistics

Norway, case studies of enterprises (Falkum 2008, Stensaker et al 2011 (in print)) and a labour

market survey in a random sample of employers and employees (Falkum et.al 2009).

2 Theoretic approach

The Nordic model has been identified and discussed by researchers since the late 1960s.

Labour and business research referred to the Scandinavian model with strong unions, strong

employers associations and industrial relations based on collective bargaining and basic

agreements that regulated the labour markets (Reve 1974). During the 1960s and 1970s human

relations oriented concepts of work place democracy were added to the model by employee

participation programs (Trist et al 1963, Thorsrud & Emery 1970).

Welfare research focused on social security programs, health care offers and education systems

as empirical fields. Distribution of public offers, taxation and incomes was related to the

organization and performance of public services (yen). In the 1980s studies focused on social

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justice and equality between social groups and classes (Jacobsen et al 1982). Welfare research

referred to the Scandinavian countries, Finland and Iceland as included in the Nordic model.

Later on the Nordic model was conceptually interpreted as a specific welfare state principle of

democratic and just distributions of national wealth (Hippe 19). More nations than the Nordic

countries, for instance Canada, New Zealand and Netherland were perceived or interpreted as

practicing such welfare state principles. Welfare state researchers then left the perception of a

geographic defined model for a theoretic and conceptual welfare state model based on universal

rights and services.

However, the Nordic model was never a readymade scheme, a political program or a master plan

that in detail described what to do, how to do it and by whom. The idea of a specific

combination of labour and welfare policies evolved separately, but simultaneously over most of

the last century in Denmark, Sweden, Norway and several other European countries. Therefore

there are, and have always been different ways to practice the model. In the 1970s the

Scandinavian model was the term used by researchers (for instance Reve 1974). Later on,

probably through the development of inter Nordic political relations and establishment of Nordic

Council, the Nordic model became a common term. However, it was still not precisely defined or

described. The model consists more of some principles about distribution of rights, participation,

influence and wealth that guides decisions and policies.

Institutional perspective

In Norway the Nordic model is the national sum of political, economic and social outcomes of

long term development of industrial relations, and changes in politics, economy and welfare

programs that were derived from these industrial relations as they emerged. This makes theories

of institutionalization relevant and useful to reveal and explain how the Nordic model evolved

and how it works in the societies. The national industrial relations become a driver of

development. Thus it is reasonable to focus on the work life context as an arena for

institutionalization of the model.

March & Olsen (1995:28) defines political institutions as 1) regulation by rights and rules, 2)

identification and preferences (norms) and 3) meaning and understanding (cognition). This

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definition is in line with Scotts (1995) conceptualization of institutions. Institutions contribute to

stability, security and predictability in social systems (Hernes 1975: 52-58, Mayhew 1982: 11,

March & Olsen 1995: 31, Scott 1995: 49). This theoretic framework can help to understand how

the Nordic model developed and how it works. Labour conditions, labour relations and

distribution of wealth and welfare are regulated by rights, obligations and formal rules. For the

time being the identification with the Nordic model are strong in most social groups, at least in

Norway, and it represents the preferred ways to do things (Falkum 2008). Meanings and

understanding of society are shared to a large extent. The Nordic countries are socially stable,

secure and predictable societies compared with others. Scott (1995:138) describes the

predictability of individual behaviour in institutionalised systems in this way:

As situations become more highly institutionalized, individuals accept and follow social scripts,

routines and performance programsbecause they are accepted as the way things are doneby

persons like me in situations like this.

It is the third element in March & Olsens definition that is important to discuss. How do

opposing actors with very different opinions and interests at stake develop shared understandings

of reality, agreed solutions to problems and consensus on procedures and decisions about the

ways to organize and govern work life and welfare? How does such a truth regime (Foucault1982) develop and how does it work? These are the essential questions to discuss in order to

explain if and how institutions can guide and govern political and economic systems.

Narrowing the scopeeconomy, work and welfare

Norwegian economy has grown constantly for decades. GNP per capita in 2007 was almost 180

percent more than GNP per capita in 1970 (in fixed currency), and almost 2 times more than the

average GNP per capita in EU27. Export of oil & gas contributes substantially to the growth, but

the onshore economy is growing more than the average national growth the last five years

(www.ssb.no).

Employment rate is 72 percent of the workforce aged 15 74 in 2010. Women have entered

work life during the last 30 years and the female employment rate is only slightly lower than the

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male rate. 35 percent of women at the age of 30 years have tertiary education on university level,

compared to 30 percent of men at the same age (www.ssb.no)

Almost 700 000 persons in the work force are excluded from the labour market due to illness,

physical and social malfunctions, or unemployment. They receive economic support by various

welfare state arrangements. In 2005 OECD claimed that the welfare state arrangements were so

generous that they were incentives to reduce participation in the labour market, and that Norway

should cut the support levels. After the financial crisis in 2008 the public share of Norwegian

GNP and consumption has increased, while other countries have reduced them. Norwegian

economy still seems to oppose dominant economic theories. Thus we need to understand the

connections between economic growth and welfare state expenditures.

3 History of the Nordic model in Norway

Modernity finally arrives

Norway was industrialised from the beginning of 1900, much later than for instance England.

The noblesse or aristocracy was wiped out by the plague in 1342 and concentrations of capital

dissolved. Thus feudalism was not common like in Sweden and Denmark. New concentrations of

capital did not develop before the beginning of the 1900s. The modernisation of Norway tookplace within a short frame of time from about 1884 to 1920 and can be described by five

different processes (Falkum 2008):

First: the parliamentary system was introduced in 1884. Both the conservative party (Hyre) and

the social liberal party (Venstre) were established in 1884, while the farmers party

(Bondepartiet), also conservative, was established in 1921. Common suffrage for men was set in

1889 and for women in 1913. In 1905 the union with Sweden was dissolved and Hkon the 7th

was coroneted to be King of Norway.

Second: Labour, in the sense of paid work, became more common from the end of the 19th

century. The labour party was established in 1887. A nationwide trade unions associations

confederation (LO) was settled in 1899. The labour party and the union formed the labour

movement as a strong alliance that bound them together.

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Third: the employers associations national confederationwas organized in 1900 (N.A.F.). They

had support from the conservative and liberal political parties that governed the state from 1884

till 1935.

Fourth: industrialization took speed and expanded significantly from 1905 on. Norsk Hydro

Aktiekvlstofselskab was established that year and soon became the locomotive in industrial

development, especially chemical process industries.

Fifth: The national stock exchange was expanded and reformed in 1911, and capital was

gathered in financial concentrations that allowed for larger investments. (Falkum 2008)

Radical ideas and conflicts of interest

Norway was in a national union with Sweden from 1814 till 1905, and the first labour committee

was established by the Swedish King Oscar II. The first labour market regulation was a legal act

in 1892. It introduced a governmental agency that could inspect labour environments and prevent

unhealthy and dangerous work in manufacturing plants. The committee that developed the act

had two workers representatives. King Oscar II argued in line with Bismarcks first welfare state

arrangements that regulations were necessary to ...keep our growing work force on sound and

reasonable tracks... (Bull 1953:49).

The first collective agreement was established in 1902, and the first collective agreement that

covered a complete industry was set in 1907. Governmental labour conflict mediation

arrangements was launched from 1906 and defined by law from 1915 (Bergh et al 2010).

The labour party was at its most radical from 1919 when they joined the third communist

international movement led by Lenin. However, they left the Communist International in 1923

after controversies with the Russian leaders on sovereignty of national member parties

(Langfeldt). The labour union was more sceptical to the alliance already in 1919, and the party

lost about two thirds of their members from then till they left the movement in 1923 (Maurseth).

Party strategies were changed. The labour party and the trade union now revitalised the strength

of their alliance. The new and joint strategy was to win political power in parliament by

democratic means.

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The labour union confederation (LO) demanded workers participation and codetermination in the

management of private companies for the first time in the national wage negotiations in 1918

(Debes 1918, Falkum 2008). The employers confederation (N.A.F.) characterisedthe demand as

obnoxious, and the liberal Prime Minister Gunnar Knudsen guaranteed to protect the employers

private property rights towards revolutionary workers in 1919, if necessary with military forces

(Bjrnson 1990:550).

However, the idea of workers participation in company management was already in 1919

interpreted as an idea of economic democracy that would serve the development of enterprises

and business in general. Debes (1919) showed that the idea was debated in governmental and

parliamentary arenas in Germany, England, Finland and America at that time. Even the US

capitalist J. D. Rockefeller supported the idea according to Debes (ibid:8).

Basic agreement and the birth of the Nordic model in Norway

However, economic democracy was not the common interpretation of the idea of workers

participation at that time. It was mostly anticipated as a threat to private property rights and to

the administrative prerogative of company owners. The LO demand of codetermination in 1918

can be seen as the start of more than ten years of heavy labour conflicts. Employers decided

lockouts, followed by trade union strikes in seemingly endless series (Ousland). In the end of the

1920s the impact of the all the conflicts was low productivity rates, severely damaged national

competitiveness and pressure on national economy. Thus the government suggested in 1930 the

trade unions confederation (LO) and the employers associations confederation (N.A.F.) to join

a committee on labour peace in order to restore peaceful labour relation, increase productivity

rates and to meet the severe economic crisis that developed in the beginning of the 1930s. In

spite of political turbulence, shifting governments from conservative to liberal domination and

use of military forces towards striking workers in a major industrial conflict in 1931, the work

peace committee was revitalised in the end of 1934. LO and N.A.F. signed their first basic

agreement in March 1935. It was to some extent based on texts and experiences in previous

collective agreements and discussions on legally defined labour regulations.

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In 1935 the Labour party won the election for Stortinget (equivalent for Parliament) and entered

government offices. Except for the World War II (1940 1945) the labour party held the

government till 1965. New principles of social security legislation were also decided in 1935

connecting the welfare state offers to the employment rates (Skeie 2003). Employment rates

would determine national value creation (GNP), tax incomes and thereby levels of welfare

arrangements, while the welfare arrangements should support participation in labour markets, for

instance by free and universal education programs, economic housing programs, child care

support and so on. This is labelled the labour line (arbeidslinja) in welfare politics.

This starts the development as well as the practice and institutionalisation of the Nordic model in

Norway:

1. the Basic Agreements settled rights, obligations and rules to regulate relations between

employers and unions. It first and foremost defined rules of wage formation, collective

bargaining and employee participation at the work places as a matter of representative

democracy.

2. the labour line was introduced and decided as principle for development of welfare

arrangements. It connected national productivity and work life directly to the welfare state

and vice versa: the welfare state arrangements should support productivity.

The stories of industrial relations developed simultaneously in the Nordic countries. Rules of

industrial negotiations and the first labour party government were introduced in Denmark in the

mid 1930s (Due & Madsen 2010). In Sweden labour peace negotiations took place in the early

1930s, while the basic agreement was settled in 1938 (Lundh 2010). The Scandinavian countries

also introduced their welfare models about simultaneously. The labour parties were all based on

social democratic ideas and the unions communicated across the national borders, exchanged

ideas and experiences and developed policies and politics based on the same ideas and principles

(Sejersted 2005, Bjrnhaug & Halvorsen 2009).

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4 Three parts sharing power

The basic agreement is called the constitution of the Norwegian work life (Bergh ed. 2010). It

defined the workersand unionsrights to participate and codetermine. By asking LO and N.A.F.to solve the disputes, define the industrial relations and thus decide on how to regulate the work

life in 1930 the government gave away political power to them. They have eagerly tried to keep

this power to define labour politics without interference from the government or the parliament

(Falkum 2010). The union and the employers confederation wanted to solve problems by

agreements and deals between them, while the state tried to introduce labour laws and

regulations by parliamentary decisions. The government made efforts to withdraw the political

power from the work life organisations from 1945 on, and had some success with that in the

1970s. However, labour politics are now mostly decided in collaboration between the two

confederations and the state in what is called tripartite relations. This system has emerged and

evolved since the end of World War II. This tripartite collaboration is consensus making and a

core driver in the interplay of work and welfare and thereby the practice of the Nordic model in

Norway.

Developing industrial relations

Norway was restored after war damages from 1945 on. The union and the employersconfederation made the production agreement (Produksjonsoverenskomsten). Moderate wage

demands were exchanged with increased investments in more work places and modernisation

programs. Production committees with union representatives were established in some large

plants and factories. Management and unions should cooperate for increased productivity. These

committees were developed into company committees and department committees by a revision

of the basic agreement in 1966. Workers rights to participate and union rights to codetermine

was developed and extended in this revision.

In the negotiations on the revision of the basic agreement in 1966 the employers followed

liberalist ideas and would give the individual workers more freedom and influence on their own

individual work situations. They hoped for employee responsibility in business development and

rise in productivity in return. The union would have more influence for shop stewards and

members in representative democratic arrangements should be defined in the revised basic

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agreement. They wanted influence on the business strategies and organisation in line with more

socialist inspired ideas. The revision was made under heavy political pressure. The government

worked to define the workers rights to participateby political decisions and laws, and not by

agreement between the work life partners alone. Thus the partners speeded up the process and

fulfilled the revision in a hurry in order to settle the industrial relations before the political

system could act. Then both partners got their way: the new agreement stated individual

workers rights to participate in business development and trade union representatives got their

right to codetermine. Two democratic principles were introduced simultaneously to the work

places: individual direct participation and collective representative codetermination. Political

control over industrial relations was avoided and the social partners kept their political power

from the process in 1930. (Falkum 2010).

The 1970s is the only decade where laws dominated over party based agreements. The act of

limited companies was decided in 1972 and defined rights to demand one third of the company

board members to be employee representatives. The work environment act from 1977 defined

Health and safety (H&S) rights, H&S officers and H&S committees to be elected from and by all

employees, not only union members. Most other rights to have work place democratic

arrangements are defined by agreements between the labour market actors, even the Including

Work Life reform since 2001 that try to reduce illness leaves and to make labour available for

disabled reduce levels of early retirement, and that in essence tries to get people that are

excluded from the labour market back to work. This is based on an agreement between all

unions, all employers associations and the state.

The labour politics in Norway are now based on collaboration between the social partners and

the state. The power battles are more or less replaced by dialogue, discussions and consensus on

how to create values and how to spend them. The work life and the development of industrial

relations have changed the political system.

Democracy and corporatism

Norway is governed by democratic political elections for parliament by the citizens. However,

corporatism has grown Since World War II as well. After the war the labour government wanted

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to establish a national industrial advisory board of coordination with members from the union,

employers confederation, the government and other important organisations. Also branch

advisory boards were suggested. The third part of this corporate structure was the production

councils at work place level. This very hierarchic and firm structure was to give control over

economic development. All three levels were implemented, but both the national advisory board

and the branch level boards failed and turned into more or less informal networks. The lowest

level was developed into company councils that still work as mentioned above. (Falkum 2008).

Rokkans (1975) famous analysis of corporate pluralism explains how strong interest groups

participate and influence the political democratic system through numerous public councils,

boards and committees that are set up to investigate, explore, describe and advice governmental

agencies. Participation in the corporative system gives political influence and power that exceeds

the power of the ordinary citizens by far. As Rokkan (1975) concluded: votes count, but

resources decide. The corporative arrangements are developed a lot since the 1960s and are in

use in most sectors and fields of politics. This dual system of democratic and corporate

arrangements is a basic condition for tripartite relations. The wage formation process is an

illustrative case.

Tripartite wage formation

LO, NHO (the modernised employers associations confederation, earlier N.A.F.) and the

government, no matter party in office, meet informally at the Prime Ministers office every

spring to discuss the possibilities and challenges in the annual wage negotiations. Normally they

will come to a shared understanding of sustainable levels.

To create such shared understanding of the economic situation is also the aim of Council of

(Teknisk Beregningsutvalg) headed by a high rank officer in ministry of finance and with

members from LO, NHO, the government and researchers. They set up a public document that

describes the economic values to be negotiated. The conclusions in the report is discussed and

agreed upon before publishing. By agreeing on how to interpret the economic situation the

negotiations will principally concentrate on LO demands and NHO offers

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LO and NHO will base their negotiations on this report. They will discuss alternative solutions

and try to sort the opposing interests in give and take balances that can be supported by the union

members in the end. It is always the wages in the most competitive industries that are negotiated

first. The result of this negotiation sets the levels for all the later negotiations among all unions

and employers associations. The intention is to avoid rises that will give increase in prices and

inflation.

Sometimes the state plays a major role in the wage formation. After the crisis in economy in

1986/1987 the parliament passed a wage law that forbid rise in wages above specific levels,

especially for high educated and high waged groups. This was done to support the national

economy. The law was withdrawn the next year, but it was the start of a compression of wage

levels in Norway. Still today academic and high educated employees have lower wages than in

other comparable countries. Highly educated labour is cheap, while the low educated work force

is quite expensive in Norway compared to other countries in Europe. Thus it is profitable to

establish technological advanced production in Norway compared to neighbour countries, and

quite unprofitable to establish or run simple and low technology production. This has reduced

numbers of low technology enterprises and increased production of commodities and services

that needs educated staff.

This logic has been supported by education programs. In times of economic downturns the

government has increased student numbers and arrangements for tertiary education. The

education system is held to be the most successful part of the Norwegian welfare arrangements

by politicians (Steen 1999).

In the early 1990s the labour party introduced what they called the Solidarity alternative for the

wage formation. Instead of high rises in wages the state introduced new welfare arrangements

like early retirement programs, lifelong learning programs and policies for developing new work

places. Tax rates, sick leave compensation and pension program may be discussed and play a

role in the negotiations. What the employers gained from moderate union wage demands was

supposed to be invested in new work places. This program was developed and agreed upon by all

the political parties in the parliament and the social work life partners. The Including work life

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program in 2001 is a further development of the logics of the Solidarity alternative and signed by

the same actors.

In these ways the wage formation connects the price of labour directly to the public welfare

programs. Business and value creation is supported by welfare state politics. Economy and

politics are interwoven and directly interconnected. In this respect the welfare state is not only to

be defined as public expenditures. There are arguments to define the welfare state arrangements

as investments in a sustainable economy. This perspective will be further outlined in the final

discussion.

Labour conflicts

The wage formation processes is where Norwegian labour actions can take place. If the social

partners do not agree they have to contact the neutral and independent public mediator

(Riksmeklingsmannen) appointed by the government since 1906. The negotiations then continue

through the mediator who will try to find solutions that ends the conflicts of interest. This has to

be reached within 48 hours, if not there will be strike, and the union will select a sample of work

places to start the strike. The partners can approach each other via the public mediator in order to

end the strike and find solution that is agreed.

If the partners reach agreement the solution has to be voted over by all the union members. There

are some examples that such solutions are turned down by the voting members, and a strike is

then implemented.

Strikes and labour conflicts may be stopped by a governmental wage council, normally

legitimated when a strike may endanger health and life for a third part, for instance patients in

hospitals under nurse strikes.

Normally 3 15 strikes take place annually. They are all results of disagreement during wage

negotiations. It is not allowed to strike or implement lockouts during the period of the collective

bargained agreement. The last lock out from NHO members was in 1986. Political strikes are not

allowed. Norwegian work life is quite peaceful compared to for instance Denmark and France

that have more than 1000 labour conflicts some years. The public mediator, the labour court and

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the different tripartite councils all contribute to peaceful solving of opposing interests and

consensus among the social partners.

5 Sustainability of the work life

high road development

The compressed wage levels, the many welfare arrangements and the direct connection between

production and welfare arrangements have over the years made the work life flexible and

dynamic.

Organisational change and enterprise development

There are weak rules on collective dismissals in labour laws and agreements, while the

protection towards individual dismissals is in line with other European countries. Thus it is quite

easy to downsize or close down enterprises compared to most European countries. If the

employer can argue and prove that major organisational changes have to be implemented to save

the business, there are minimal obstacles to do so. Normally the employer will have to pay the

employees three months wages as compensation. Unemployment after those three months will

give the workers economic support by the social security system. However, most employers that

downsize will normally give compensations that exceed these standards pretty much.

Downsizing, closing down work places or moving business to low cost countries will often be

opposed by unions, politicians and sometimes result in massive protest marches, but they will

nevertheless be implemented as planned (Falkum 2008). There are only few cases where such

plans have been stopped, and in those few cases the union at the work place have come up with

some kind of offer to contribute to the enterprise business.

Norwegian companies are developed and changed in dynamic ways. They may move across

branches, enter new businesses, change production methods or implement new technologies

quite easily. This is accepted as normal also by the unions. A former second head of LO

explained why they never demand strong rules towards collective dismissals in this way:

We always thought it more important to create new and modern work places than to keep the

old ones going by all means.(Jan Balstad, former head of LO)

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A survey in a recent random sample drawn from the public national employers employee

register we found that 29 percent of Norwegian employees had shifted job during the last two

years (Falkum et al 2009). In 1993 the equivalent figure was 21 percent (Salvanes 2003). The

Norwegian employees are mobile and flexible, adapt to work place development and labour

markets and in these ways contribute to the structural and functional flexibility needed in

globalising economies. The mobility and flexibility seem to be growing, as it has increased from

1993 to 2009. However, some industries and branches increase the amount of part time labour in

recent years, mostly in service sectors and especially in public health care and shopping malls.

Standing (2010) shows that precarious work increases in the globalizing economies. That seems

to drab even highly regulated work lives like the Norwegian to some extent.

The oil and gas industry an example of high road development

Norwegian economy has depended on export of raw materials from mining, woods and fishery.

The production of commodities has concentrated on low degrees of fabrication like aluminium

and artificial fertilizers. Knowledge of methods and technologies has been imported to some

extent. The oil and gas production is an exception.

The oil and gas fields were discovered in the North Sea in the 1960s. Politicians proposed that

multinational oil companies should operate the fields and that the national economy should only

receive bargained incomes. Some other politicians opposed to that and defined the explorations

and field operations to be national tasks. A state owned oil company, Statoil, was established in

1972 in order to handle the national oil and gas properties and to develop the industry. Several

other nations nationalised their oil reservoirs in this period (Ryggvik ).

The nationalisation made it necessary to develop knowledge, technologies and supply chains

needed. Natural and technological sciences got strong supports and tertiary education systems

like universities and business schools oriented towards oil exploration, production and economy.

Not only those employed in oil industry, but many other industries were affected.

Ship yards turned from building ordinary ships to production of oil rigs, supply ships and highly

specialized boats need for very special North Sea operations. During the last decade they have

outsourced the building of shells to low cost production sites abroad, and towing them home to

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do the most advanced labour and technical installations by themselves. Ship building in Norway

is now based on innovative design, engineering expertise and high competence vocational

training. Norway has now leading competence and experience in deep water oil production.

Extreme technology makes it possible to drill and produce at 3000 meters depths with all

operations executed in on shore installations and without any diving.

Statoil was merged with the other national industrial actor, the Hydro oil & gas division in 2006.

This was part of a restructuring of national industrial interests. The merger should give Statoil

the capacities and competences needed to become a recognized operator on international oil

fields. Results so far are shares in Russian and Brasilian oil and gas fields.

In a small country like Norway it is hard to find parts of the society that are completely

untouched by the national oil production. It is an example of high road development:

opportunities are used to develop knowledge and competencies in constant innovative

development in several areas.

The nationalisation of the oil industry was done in harmony with core ideas in the Nordic model:

shared efforts should result in fair distribution of results. The high road development in the oil

and oil related industries was conditioned by the public education system, public research and

development funding and collaboration and consensus between the social partners. The funding

of oil incomes since the late 1990s was established to carry increasing welfare future

expenditures. The oil politics in Norway is in line with the intentions of the Nordic model.

Status of work place democracy

The survey (Falkum et al 2009) was made to mirror the state of work place democracy. A

random sample of 8000 was drawn from the national employee/employer register. We had 3362

answers. This net sample was tested if representative along key dimensions like gender, age,

education, sectors, industries, location and number of employees at the work places. Work places

with 10 employees or less was left out, but we still have some of the smallest workplaces in the

sample since some of them were reduced after the data was obtained in the national register. We

lack data from the informal sector and companies that are not represented in the register.

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The survey was obtained in the spring 2009 when the forecasts about unemployment rates were

at the darkest. 91 percent of the employers and 93 percent of employees supports the labour

regulations as the claim the labour laws, the basic agreements and the collective bargaining to be

very important to recognize, follow and obey by all actors in the labour market. We interpret this

to express strong support to the national work life regime.

TABLE 1 THE RESPONDENTS EVALUATION OF THEIR OWN INFLUENCE ON OWN WORK SITUATION, WORKORGANIZATION AND GOVERNING AND RUNNING OF BUSINESS AFTER WORK PLACE POSITIONS.AVERAGE SCORE ON

A SCALE WHERE 1=LITTLE INFLUENCE AND 5=MUCH INFLUENCE

Respondents position Own work

situation

Work

organisation

Governing and

organisation

N

Manager 4,7 4,0 3,6 542-427

Shop steward 4,4 3,5 2,7 782-585

H&S officer 4,5 3,5 2,7 459-347

Ordinary employee 4,3 3,4 2,3 2493-1789

Total average 4,4 3,5 2,6 3071-2244

The variables Influence on own work situation is an index of three di fferent variables in the

survey. Influence on work organization is likewise put together with four different variables on

this issue. In on governing and organization consist of alltogether 12 related variables in the

survey. The use of indexes makes the analyses more robust towards coincidences.

The table shows that the respondents perceive their influence on their own work situation as very

high. The liberalist and managerial intention of work place democracy as individual influence on

own work situation, or autonomy, seem to be highly fulfilled. Managers have some more

autonomy than the other groups, as expected, but the differences are small. The average

influence on the organization of work at the work place is less than influence on individual work

situation, but still on the positive side of the median (3 on the scale from 1 5). Managers have

more influence than the others, but organization of work is a managerial task and the difference

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is expected. The respondents perceptions of their influence on governing and organisation of the

enterprise are much lower than the other two. On one hand this is what unions and shop stewards

are supposed to influence in collaborative representative councils, and the single employee

influence on this is supposed to be lower than their influence on work organisation and own

work situation. However, we expected the shop stewards and H&S officers to have more

influence than they report in the survey. The representative democracy seems to have potential

for improvements. The survey also shows that to have collective bargaining, trade unions and

shop stewards improves the practice of democratic work place arrangements.

FIGURE 1 DEMOCRATIC ARRANGEMENTS AT PLACE IN WORK PLACES WITH AND WITHOUT UNIONS (N=3262

PERCENT)

This figure shows that a large majority of work places with union members have established

democratic arrangements according to laws and agreements. A surprising amount of work places

without unions have also established such arrangements. We have interpreted this as an

indication of institutionalization: the labour regulations have been established for so long that

they have become work life norms that influence on employers and employees behavior despite

formal approvals of unions, collective bargaining or basic agreements.

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Work place changes

If the Nordic model works according to its intentions it should help work places to adapt to

market situations and help business development. The survey shows how the Norwegianemployees are exposed to work place changes and how they react to that. These are figures of

major changes during the two last years.

29 percent of the respondents got new CEO/Top managers

19 percent was in a work place that was merged with another enterprise

14 percent was transferred to another organisation unit

11 percent got new owners and

7 percent worked in a unit that was outsourced

These figures describe the level of change in the Norwegian work places. It seems quite

turbulent, but comparable data from other countries are needed to make more subtle analyses. On

the other hand it is interesting to see how employees react to change. We asked the question in

the figure heading below.

FIGURE 2HOW DID YOU REACT TO THE IMPLEMENTATION OF THE LAST CHANGE DECIDED BY MANAGEMENT AND

THAT YOU DISAGREED IN?(N= 968,PERCENTS)

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Almost half of the respondents would support the change that they were against. 32 percent

would react indifferently while 22 percent would oppose the managerial decision by resistance to

change. A majority of 77 percent would actively or passively support the change process despite

disagreement. This finding can indicate that also individual participants in the Norwegian work

life are most likely to avoid conflicts. Loyalty is more likely than voice or exit on individual

levels.

6 Institutionalisation of the Nordic hybridThe empirical findings will be discussed in the institutional theoretic framework

From conflicts to regulations

The first element in institutionalisation theory was the establishment of rules to regulate relations

and actions. Labour regulating rules was developed from 1885 on and culminated with the basic

agreement in 1935 as a first stage of institutionalisations. Conflicts and conflict arenas were

calmed down and replaced by dialogue, exchange of information, negotiations and bargaining.

The labour movement was an alliance of the trade union and the labour party. On the other side

the liberal and conservative state formed an alliance with the employersassociations. Many of

the rules were introduced to settle ways to handle conflicts and balance out differing interests

more peacefully: laws to reduce unreasonable exploitation of workers, establishment of conflict

mediators and labour court, agreements on collective bargaining, wage formation and working

conditions. Regulation by rules finally succeeded in 1935.

From rules to norms

The rules and regulatory mechanisms were developed further from 1945 till the early 1980, and

are still adjusted or modified from time to time. By the beginning of the 1980s most employers

and employee rights are defined and formally agreed and decided. Most of them were practiced

from the 1960s and forwards, and they were slowly internalised as norms that guided actions and

work life behaviour. The industrial relations showed to be reliable. The social partners could

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trust each other to an extent that made it possible to predict actions and reactions in different

situations that might occur. These are the basic functions of social norms. They developed slowly

by dialogues, incidents, events and incidental in incremental ways. This development was not

planned or decided. It emerged and evolved.

From norms to truth regimes

The third part of the institutional perspective was cognitive: the development of shared

understandings of reality. There were many elements implemented to prevent conflicts and press

the social partners towards consensus: the labour court, the public mediator, the wage formation

council, the formal wage formation procedures and the governmental welfare contributions to

agreements and balance of originally differing interests. Even conflicting interests became

predictable and possible to prevent in this system. Mutual trust, respect and conflict solving

procedures were finally established as a shared understanding of how the industrial relations

work and are connected to the various welfare arrangements. Norms may develop into a truth

regime that governs the perceptions and interpretation of almost any occurring situation:

Whatever happens, society will know how to handle it. The findings from the work life survey

confirm this impression to some extent. Norwegian work life seems to be dominated by rules and

regulations, norms and social identifications and by understandings of realities that are shared by

all the actors.

From truth regimes to dynamic economy

This truth regime makes the rules for actions to be taken and behavioural procedures:

that unions and employers must collaborate,

that shop stewards must codetermine,

that individual employers must participate

that the government will contribute to the solving of problems and

that the welfare arrangements are there when the work life fails

Simultaneously this regime defines and is the key to understand the appointed dynamics and the

opportunities for high road development. The dynamics of economy is embedded in well defined

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industrial relations, organisational structures and human behaviour. Hence the Nordic model is a

competitive advantage in global economies.

The hybrid Nordic model

The Nordic model was never a fixed plot. It was developed under influence of many differing

directions. It is a true hybrid in the sense that it combines opposing ideas and interests in an

almost Hegelian way: thesis and antithesis are developed into synthesis in various respects as the

opposing ideas, understandings and interests are successively played out by the actors as

windows of opportunity incidentally pass by. These synthesis and combinations of ideas forms

the Nordic model as characteristics of the social, political and economic system emerge in

society by events and incidents over most of the last century. It ends up in a steadily firmer

structure that eventually guides decision making, implementation and governance in work life,

welfare state and society. The figure below presents this development from contradictions and

conflicts to consensus on synthesis.

FIGURE 3THE COMBINATION OF OPPOSING IDEAS IN THE NORDIC MODEL

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The first work life conflicts developed in some small production plants already in the end of

1800s. Opposing interests of labour and capital developed to contradictions that were almost

antagonist in 1918. The social partners had organised and played out their differences especiallyduring the 1920s. This ended in the basic agreement, employers accept of the union as economic

counterpart, labour movements accept of the private property rights and liberal parties accept of

the labour party as a legitimate player in the parliamentary system. The law of social security

was introduced to provide economic aid to those in need, but was not accepted by the

conservative party until the principle was to support the work life as well. These are the synthesis

developed from labour and capital contradictions, and they formed the basic rules that regulate

the work life.

This body of regulations implemented the political system for decision making. The labour

movement had to leave the socialist refusal of private property rights in order to be a legitimate

parliamentary actor. Social democracy combined some of the values and analysis in socialism

with the methods of political decision making in liberalism. This is the basic synthesis of liberal

thesis and socialist antithesis along the line. New meanings and understandings of reality was

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derived from the agreements on how to regulate and end labour conflicts. This social democratic

pragmatism came to dominate politic and the complete society to the end of the 1960s.

The third contradiction is between plan economy VS market capitalism after WWII. The social

democratic government implemented heavy price and production restrictions and intended to

implement a soft socialisation of enterprises in a kind of states capitalism (Bergh 198 ). The US

Marshall plan demanded removal of these regulations. The government gave way for

liberalisation of markets in order to have the economic benefits of the plan, and thereby accepted

capitalist production systems in 1948 (Bergh 2009). The liberalist thesis became the synthesis

while the socialisation policies, Lex Brofoss, were left behind.

The fourth synthesis is tripartite decision making: the three part collaboration between the state

and the social partners derive from democratic VS corporative methods. Rokkans pluralist

corporatism is the scientific synthesis of the same contradiction.

The last synthesis combines the productivity thesis with welfare state ideas. According to

economic theory the welfare state arrangements forms a body of antithesis towards the

productivity thesis when they become too generous, but the level that turns welfare policies to

contradicting antithesis is dubious and blurry. Norway offers a case where that line is drawn

much longer than economic theories recommend. This is where all the other synthesis come

together in one that now guides economy, politics and social life. To discuss the welfare state

arrangements as investments may help us out of the confusion.

The Nordic model as investment scheme

The previous outline has pointed to developed praxis in Norway in frame of the Nordic model.

The interconnections of work life and the welfare state, of politics and economy and labour and

capital make it relevant to identify and discuss the Nordic model as an investment scheme. We

can identify investors, their investments and the returns of investments on all levels in the work

life. The welfare state compares to a bank or an investment fund that control, expand and provide

resources in shared manners according to needs. So far this is a sketch for further discussions.

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TABLE 2INVESTMENTS AND PROVIDED RETURNS

Individual investment Provided returns

labour autonomy, good work environment

taxes free education and services, pensions

union participation rights, predictable economy, influence

enterprise development participation job improvements, personal development

Work place investments Provided returns

economic capital autonomous work force, cheap competencies

taxes educated work force, welfare state supportemployers association member network, employer rights, political influence

tripartite industrial relations predictable ecomomy, high road development

union collaboration support for agreed development

National investments Provided returns

welfare expenditures high road development

tripartite arrangements stable, predictable and growing economy(governmental investment funds future wealth for generations to come)

This table presents an analysis of the Nordic model as it is played out in Norway. It may

represent a path for new perspectives and theories in labour and welfare research. In this

perspective the Nordic model becomes a context for economic growth, not a virtually hopeless

and helpless insect. The hybrid Nordic model combines economy and politics as two aspects of

the same intentions, decisions and implementation that govern of the society. That is what makes

an investment perspective relevant, and simultaneously confuses liberal economic theories based

on the ancient sharp distinctions between politics and economy.

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