Andreas R. Sanders Dugstad (European University Institute, Florence), Pål Thonstad
Sandvik (NTNU, Trondheim) and Espen Storli (NTNU, Trondheim):
Regulation of Natural Resources in the Nordic countries 188019401
This article examines the different ways in which the four Nordic countries chose to regulate their
natural resources. By studying the laws regulating resource extraction, as well as their
implementation, it becomes clear that the Nordic countries wished to reach three main aims, 1)
secure domestic ownership over national resources, 2) use the resources in order to stimulate
growth and 3) distribute the resource-generated income in ways that would benefit large parts of the
population. However, these aims were to some extent contradictory and the Nordic countries came
to follow somewhat different policies. The article also shows that the trend towards comprehensive
resource regulation started well before 1914. This means that the national regulations were not
primarily reactions to the collapse of the first global economy, but just as much national responses to
the expanding global economy of the prewar years.
The resource curse and the history of resource regulation
The topic of natural resource regulations has garnered much scholarly attention, particularly
from economists and social scientists debating the effects of natural resources on developing
economies. The ‘resource curse’ or ‘paradox of plenty’ in developing states has been a
recurring theme for decades. The apparent declining terms of trade for commodity-producing
developing countries was integral to the literature on dependency theory, which argued that
developing countries were held in a state of economic and political dependency by developed
states which import cheap raw materials in exchange for high value added finished goods.2
This school of thought emphasized the importance of national or state control of natural
resources, and the existing structure of the international economic order, but was less
concerned with identifying weaknesses in the regulatory regimes within the developing world.
1
This article is a work in progress. It should not be cited or quoted without the authors’ permission.
The theory of declining terms of trade for commodities was famously formulated by Rául Prebisch and Hans
Singer, and later expanded upon by structuralist and marxist historians, perhaps most famously by Immanuel
Wallerstein who incorporated it into his world systems theory.
2
1
With the more recent debate on the “resource curse”, a term coined by Richard Auty, 3
the question of resource regulation has received renewed attention. While some political
scientists and economists have highlighted the ‘Dutch disease’ as the most significant factor
for the curse,4 recent studies have focused on institutional shortcomings in resource-rich
developing countries, thus providing internal explanations for the ‘resource curse’. Robinson,
Torvik and Verdier,5 Acemoglu and Robinson,6 and Barma, Kaiser, Le and Viñuela7 have all
convincingly demonstrated that the quality and inclusiveness of political institutions is critical
in determining the capture and redistribution of resource rents.
However, seen from historians’ viewpoint, a recurring weakness in the resource curse
literature is the time frame of the case studies. Most scholars have primarily been interested in
the post-war era, with emphasis on the new states following decolonization. There are very
few studies that explore the historical evolution of resource regulation in what has now
become the developed world. As a result we have limited knowledge of how successful
regimes were established and maintained over time.
This article is a preliminary attempt to analyse and compare the ideology and practice
of resource regulations in the Nordic countries in the formative years between the late 19th
century and up until the outbreak of World War II. The Nordic countries are usually
considered quite similar in character when it comes to political, cultural, legal and economic
institutional factors. The key research questions are the following: Was there a ‘Nordic’ way
of regulating natural resources and – if so – what were the key aspects of this ‘model’ and
how and when did it develop? In order to answer these questions we will investigate the
evolution of the political economy of the Nordic countries, the rise of the national regulatory
regimes and examine how different types of resources were regulated.
3
Richard M. Auty, Sustaining development in mineral economies : the resource curse thesis (London:
Routledge, 1993).
4
Terry Lynn Karl, The paradox of plenty : oil booms and petro-states, Studies in international political economy
(Berkeley, Calif.: University of California Press, 1997), Jeffrey D. Sachs and Andrew M. Warner, "The Curse of
Natural Resources," European Economic Review 45, no. 4-6 (2001).
5
James A. Robinson, Ragnar Torvik, and Thierry Verdier, "Political Foundations of the Resource Curse,"
Journal of Development Economics 79, no. 2 (2006).
6
Daron Acemoglu and James A. Robinson, "The Role of Instritutions in Growth and Development," in
Leadership and growth, ed. David W. Brady and Michael Spence (Washington, D.C.: World Bank, 2010).
7
.Naazneen Barma and World Bank, Rents to riches? : the political economy of natural resource-led
development (Washington, D.C.: World Bank, 2012).
2
The 19th century political economy of the Nordic countries
Like most other European states, the Nordic countries liberalised their economies in the late
18th and early 19th century. By the early 1860s almost nothing was left of the old mercantilist
privileges and regulations. The Nordic countries became liberal societies with strong property
rights. They adhered to free trade, but they never adopted any radical version of Manchesterliberalism or the ideal type night watchman state. 8
In a renowned article Lars G. Sandberg described Sweden as “the impoverished
sophisticate”.9 While lagging far behind Great Britain and the Netherland in terms of wealth
in the mid-19th century, Sweden invested heavily in education. She also had competent and
honest state bureaucracy with a high degree of legitimacy. Sandberg’s epithet could certainly
be extended to Denmark and Norway, and perhaps also to Finland. There was strong belief in
the benevolent potential of state regulation. Especially in Sweden and Norway the state had
embarked on quite ambitious modernization policies during the 19th century. One could say
that the Nordics combined some elements of the Prussian (or German) and the Anglo-Saxon
ways of organising society. They had strong interventionist states as in Prussia, but were at the
same time liberal, open and fairly democratic societies.
Dismantling mercantilist regulations on resource ownership and resource exploitation
was a drawn out process in the Nordic area. The Swedish regulations on the iron and forest
industries were abolished step by step from the mid-1830s. The iron works’ privileged access
to charcoal was terminated in 1846-50. This was a most significant reform as it created free
markets for forestry products, leading to a huge expansion of the forestry industries. Similarly,
export restrictions of iron ore were abolished 1857-1864.10 In Norway, mining enterprises lost
their remaining privileges regarding access to charcoal in 1818. In the same year the so-called
sawmill privileges (securing preferential access to timber) were curtailed and they were
8
For detailed analysis of the political economy of the late 19th Century Nordic countries, see Bo Stråth, Union
och demokrati : de förenade rikena Sverige och Norge 1814-1905 (Nora: Nya Doxa, 2005), ibid. ,Niels Kayser
Nielsen, Bonde, stat og hjem : nordisk demokrati og nationalisme - fra pietismen til 2. verdenskrig (Århus:
Aarhus Universitetsforlag, 2009). and Niels Thomsen, Industri, stat og samfund : 1870-1939 (1991),
Hovedstrømninger 1870-1914 : idélandskabet under dansk kultur, politik og hverdagsliv, Odense University
studies in history and social sciences (Odense: Odense Universitetsforlag, 1998).
9
Lars G. Sandberg, "The Case of the Impoverished Sophisticate, Human Capital and Swedish Economic Growth
before World War I," Journal of Economic History 39, no. 1 (1979).
10
Martin Fritz, Svensk järnmalmsexport 1883-1913, Meddelanden från Ekonomisk-historiska institutionen vid
Göteborgs universitet (Göteborg ,: 1967), Artur Attman, Svenskt järn och stål : 1800-1914, Jernkontorets
bergshistoriska skriftserie (Stockholm: Jernkontoret, 1986), Fredrik Olsson, Järnhenteringens dynamik :
produktion, lokalisering och agglomerationer i Bergslagen ock Mellansverige 1368-1910, Umeå studies in
economic history (Umeå: Umeå universitet, 2007).
3
abolished altogether in 1854/60. Deregulation was delayed as the sawmill privileges could not
be liquidated without due compensation to the mill owners. 11 How to deal with established
property rights was a fraught issue, both when abolishing regulations in the mid-19th century
and – as we shall see – when (re-)introducing them around 1900. In Finland, the sawmill
privileges were dismantled in 1859/1861.12
Denmark was a different case than her Scandinavian neighbours as her only significant
natural resource was farmland. While the Danes had liquidated most mercantilist regulations
(trade, crafts etc.) by the mid-19th century farm ownership remained strictly regulated. For
reasons which will be discussed below, a free market for farmland was never introduced.
Similarly, the Ancien Régime forestry regulations remained in place until 1935.
In the Nordic countries, laissez faire was not only embedded, it was also highly
transitory. From the late 19th century onwards state intervention increased significantly, this
included veterinary and health measures, social insurance and basic regulations of the labour
market as well as more active trade policies. This was of course an international phenomenon,
but the Nordic countries were probably in the forefront of this development. The state
assumed increasing responsibility for the health, welfare and prosperity of its inhabitants. The
relationship between state, society and the economy was thus slowly changed. Given the
resource dependence of the Nordic economies one should therefore not be surprised that the
question of resource regulation became a burning political issue in the decades around 1900.
Before delving into the details of resource policies some words must be added on the
economic development in the Nordic countries. The economies were in many respects
strikingly different. The resource endowments, wealth and economic sophistication varied.
According to Angus Maddison13 Denmark was Europe’s fifth richest country in 1900
measured by GDP per capita. Swedish, Norwegian and Finnish GDP per capita were 85%,
66% and respectively 55% of the Danish level. However, all Nordic countries, and especially
the laggards Norway and Finland, grew considerably faster than the European average in the
following decades. By 1939 the Nordic area was one of Europe’s most prosperous corners.
11
Francis Sejersted, Den vanskelige frihet : Norge 1814-1850 (Oslo: Pax, 2001), pp. 179-180. Fritz Hodne,
Norges økonomiske historie 1815-1970 (Oslo: Cappelen, 1981).. Pål Thonstad Sandvik, "En mer demokratisk
kapitalisme? : Økonomi og samfunnsutvikling i Trøndelag 1750-1920," Historisk Tidsskrift 86, no. 1 (2007): pp.
44-45.
12
D. G. Kirby, A concise history of Finland, Cambridge concise histories (Cambridge: Cambridge University
Press, 2006), p. 110.
13
Angus Maddison, The World Economy: Historical Statistics (Paris: OECD Publishing, 2003), Table 1c.
4
Property rights vs. equality, Danish farmland regulations
Farmland, Denmark’s most significant resource base has always been regulated. The Danish
state was much more interventionist with regard to farmland than the other Nordic states. This
regulatory regime had a long prehistory as the Danish state had been engaged in some sort of
social engineering (protecting farmers against estate owners) since the late 18th century.
Danish agriculture was at that time totally dominated by noble estates, but this dominance was
increasingly challenged during the 19th century as the farmers started to claim moral
ownership to the land.14 The Danish Constitution of 1849 (when absolute monarchy was
abolished) blocked, as well as stimulated, these claims. The Constitution guaranteed the
sanctity of property rights, thus protecting the estates. At the same time the Constitution
introduced universal male suffrage for the lower, chamber of parliament (Folketinget).
Universal suffrage made land reform a burning, but unresolved, political issue in Danish
politics right up to 1919.
The key question was whether farmland was a type of commodity which could be sold
or purchased without any restrictions or whether moral or social considerations should limit
its marketability. Farmers demanded that estate owners should be compelled to sell their
tenant farms (a huge number) to the tenants or their families. However, every attempt to
enforce this stalled in Parliament due to respect for established property rights. But neither
were the estate owners allowed to incorporate the tenant farms in their estates. The laws,
dating from the Ancien Régime, protecting the tenants were upheld after 1849.15 In contrast,
in the ‘neighbouring’ German provinces of Mecklenburg traditional tenant farming was wiped
out as the land was incorporated in the estates. The Danish development was much more
‘Scandinavian’ as most estate owners voluntarily sold off most of their tenant farms during the
second half of the 19th century.16 By the 1890s the estates’ landholdings were thus reduced to
only 15%.17
The Danish parliament also upheld 18th century laws prohibiting absentee farming
and restricting mergers of independent farms. The aim was to prevent the rise of new large
14
Hans Jensen, Dansk Jordpolitik 1757-1919, Skrifter / udg af Institutet for Historie og Samfundsøkonomi 4
(København: Gyldendal, 1945), pp. 275-276, 297, 453-254. Claus Bjørn et al., eds., Det Danske landbrugs
historie III, 1810-1914 (Odense: Landbohistorisk Selskab, 1988), p. 121.
15
Jensen, Dansk Jordpolitik 1757-1919, pp. 274-350.
16
Jensen, Dansk Jordpolitik 1757-1919.
17
Thomsen, Hovedstrømninger 1870-1914 : idélandskabet under dansk kultur, politik og hverdagsliv, p. 127. .
5
landholdings at the expense of small independent farmers. However, many small or medium
sized farms were merged in order to create viable farms. The provisions requiring that the
farmers resided on their farms were enforced with more rigour. Absentee landownership as in
Ireland could thus not develop. In a famous ruling in 1871 the Danish Supreme Court
compelled a Jutland farmer to sell a newly acquired allotment because he did not comply with
the residence clause. In 1897 the laws on merging farms were revised. Farmers could merge
up to three farms as long as the total value did not exceed 40 ‘Tønder’ (barrels, i.e. a standard
size of measure). In 1906 the upper limit was reduced to 24 ‘Tønder’.18 While a 24 or 40
‘Tønder’ farm was much larger than average-sized farms the provision nevertheless thwarted
the creation of new estates or large scale agriculture as in parts of the New World. The
provisions thus sustained the long tradition of social engineering in Danish farmland
regulation.
In the late 19th century the crofters (the traditional rural underclass) gained political
strength and demanded ownership to farmland. This was crowned with success in 1899 when
crofters were given the right to establish farms on state-owned land and got access to
subsidised loans.19 The democratisation of the Danish regulatory regime of farmland reached
its zenith in 1919 as the parliament abolished some quite rare types of estates (len, stamhus
and fideikomisser) and sold the land cheaply to farmers. In addition, a new tenancy law forced
the estates to sell remaining tenant farms to the tenants (on advantageous terms for the latter).
The legality of these laws was only with some doubt accepted by the Danish Supreme Court,
as they infringed on the constitutional guarantees of property rights. 20
Forestry was also strictly regulated. The Danish Ancien Régime authorities strongly
believed forests to be a limited resource which had to be protected. Danish regulations were
therefore stricter and more long lasting than in the other and much more heavily forested
Nordic countries. The 1805 forest regulations (Fredsskovforordningen) aimed at securing a
rational forest management and to prevent deforestation. It was illegal to let cattle and other
animals graze in private forests as well as to cultivate areas designated to forestry.21 When a
forest was sold, the new owner had to accept restrictions on logging for ten years in order to
18
Jensen, Dansk Jordpolitik 1757-1919, pp. 276-282, 372-377, 394-395.
Jensen, Dansk Jordpolitik 1757-1919, pp. 405-414, Torben W. Smith, Vi vil rejse nye huse :
statshusmandsloven af 1899 (Auning: Landbohistorisk Selskab, 1999).
20
Jensen, Dansk Jordpolitik 1757-1919, pp. 415-416. Jensen, p. 415-416.
21
Bo Fritzbøger, Kulturskoven : dansk skovbrug fra oldtid til nutid (Copenhagen: Gyldendal i samarbejde med
Miljøministeriet, Skov- og Naturstyrelsen, 1994), pp. 69-71, 80-81, 132-133, 380-382.
19
6
limit deforestation.22 The 1805 provisions came under increasing attack after 1849 and several
politicians called for a liberalisation of Danish forestry. However the parliamentary majority
blocked all attempts at market-oriented reforms. The laws were only revised in 1935 when
environmental protection of forests was in fact strengthened.23
It is worth highlighting four important aspects of the Danish regulatory regime. 1)
There was a widespread notion that the farmers (i.e. the people) had some kind of moral
property rights to the farmland. This was – as we shall see – in many ways similar to popular
perceptions in the other Nordic countries about the ownership to forests, minerals and
hydropower. 2) The Danish resource regulations remained in place even when most other
mercantilist era regulations were abolished. 3) The state combined resource regulation and
social engineering even in the golden age of laissez faire. There were more restrictions on
farmland ownership than in Sweden and Norway. 4) Even though the parliament sought to
improve the position of ordinary tenant farmers it never trampled on the property rights of the
estates (with the above-mentioned minor exception in 1919).
Iron ore and the emergence of ownership restrictions in Sweden
By the turn of the 20th century Sweden was the largest economy of the Nordic countries. In
comparison to Denmark, land ownership has historically been less concentrated, and estates
were rarer.24 By the middle of the 19th century, the percentage of Swedish farmland owned by
farmers had risen to 60%, after both the crown and the nobility had voluntarily sold large
tracts of land.25 Regulation of land ownership never became as comprehensive or as contested
as in Denmark
Sweden’s exports were dominated by non-agricultural resources. In the last decade of
the 19th century, the most important Swedish exports were wood based products, with butter
and iron goods coming second and third. Over the first three decades of the 20th century, the
22
Hanne Serup, "Forstordning, skovordning og forstplanlægging, treforsyningen fra de danske skove ordnes," in
Skovhistorie for fremtiden, ed. Bo Fritzbøger and Petter Friis Møller (Hørsholm: Skovhistorisk Selskab, 2005), p.
50.
23
Fritzbøger, Kulturskoven : dansk skovbrug fra oldtid til nutid, pp. 80-81, 387-392, 395-398.
24
Bo Stråth, 1830-1920 (2012), p. 178.
25
Brynjulv Gjerdåker, Kontinuitet og modernitet : 1814-1920, vol. III, Norges Landbrukshistorie (Oslo: Det
Norske Samlaget, 2002), pp. 107-108.
7
relative importance of butter and sawn timber declined, while the share of mineral ores, pulp
and paper and manufactured goods grew26 .
Both for its strategic, economic and historic importance Swedish iron ore, and the
Swedish iron and steel industry held a special place in the Swedish economy. It had formed
the backbone of much of Swedens economic and military strength in the 17th and 18th
century. In the 19th century, both laws and practice regarding ownership and mining rights
were liberalized. While the Swedish state could by law demand 50% ownership of any iron
ore deposit found on the extensive crown lands, the state had in practice abandoned this right.
The capital intensive Swedish iron ore mines also attracted considerable foreign investments.
In 1899 27% of total iron ore production came from foreign owned companies.27
However, foreign involvement in the mining industry began to foster political
opposition towards the end of the 19th century. Particularly the British ownership of rich iron
ore deposits in in Gällivarre and Kiruna, located in the far north of Sweden, garnered
particular controversy for several reasons. The main organized opposition towards foreign
investment in iron ore extraction came from the Swedish ironworks owners who feared that
foreigners would export iron ore to other European countries and thus increase competition
for Swedish iron and steel exports,28 as well as diminish ore reserves which could be used by
the Swedish industry in the future. However, outside the ironworks lobby there were also calls
to restrict foreign ownership, but allow ore exports as long as the profits remained on Swedish
hands.
The issue was further exacerbated by the fact that the ore was located in northern
Sweden. The north was rich in natural resources, but was scarcely populated and big (foreign)
companies could easily become dominant actors in the north and according to the antagonists
could effectively overpower political authorities. The protectionist Swedish press was eager to
point to the political consequences of British mining operations in Spain and British railway
26
Lennart Schön, En modern svensk ekonomisk historia : tillväxt och omvandling under två sekel, 2. [revid.]
uppl. ed. (Stockholm: SNS Förlag, 2007), 237-239.
27
Sven Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 1895-1945, Umeå studies in
economic history (Umeå: Umeå universitet, 1989), Table XIX.
28
Sweden had a long tradition for iron export, but the advent of the Bessemer process and the low price for coal
as opposed to Swedish charcoal had hurt the Swedish iron industry's competitiveness. Sweden could only cover
about cover about 6, 5% of its annual consumption from domestic coal mines (1913). See Schön, En modern
svensk ekonomisk historia : tillväxt och omvandling under två sekel, pp. 175-176. and Timo Myllyntaus and
Eerik Tarnaala, "Economic crisis in Finland and Sweden, 1914-1924," in Economic crises and restructuring in
history : experiences of small countries, ed. Timo Myllyntaus (St. Katharinen / Germany: Scripta Mercaturae,
1998), p. 44.
8
companies in Portugal, and later to the consequences of British mining operations in
Transvaal. There was also the ever present fear that Sweden’s traditional nemesis, Russia,
fostered secret ambitions to gain control over the resource rich northern Sweden.29
In the end the Swedish state was brought to intervene. The British company filed for
bankruptcy after cost overruns and increasingly vocal calls for restrictions in Sweden
shattered the company’s standing in the international capital markets. The yet unfinished
railroad linking the mine to the coast was bought by the Swedish state at a fraction of the
money invested, and Swedish investors obtained the ore deposits. However, the various
Swedish companies who successively owned the deposits had weak economic foundations
and the possibility of a foreign takeover was always present. After years of political
wrangling, the Swedish state made a deal with the mining company Trafik AB GrängesbergOxelösund (TGO) in 1907. The state bought half of the Kiruna and Gällivare ore fields, and
was given considerable control over the other half – thus ensuring future Swedish ownership
and control over the richest ore fields.30
While the state had intervened to keep the Norrland ore out of foreign hands, the
legislation regulating ownership of mines remained more or less unchanged until the outbreak
of World War I. Ever since 1829 foreign citizens needed a royal license to obtain property and
from 1872 foreigners also needed a royal license to engage in mining operations31. But there
were no restrictions foreign stock ownership of a Swedish company. Proposals to revise the
law were put before the parliament as the debate over the Norrland ore field raged, in 1895,
1899 and 1905. All proposals were defeated. Sweden was a large importer of foreign capital,
and opponents argued that nationalist ownership restrictions would damage the Swedish
business access to capital. While the majority of both chambers of parliament were eager to
keep the Norrland ore fields on Swedish hands, they were seen as a special case, there was no
majority for creating a whole new regulatory system.32
The issue of regulating foreign ownership was raised once more in 1912. This
happened in spite of the fact that the production share of foreign owned mining companies
29
See for instance Bo Jonsson, Staten och malmfälten : en studie i svensk malmfältspolitik omkring sekelskiftet,
Skrifter / utgivna av Statsvetenskapliga föreningen i Uppsala (Stockholm: Almqvist & Wiksell, 1969), pp. 16,
28, 30-31, 83-85, Nils Meinander, Gränges : en krönika om svensk järnmalm (Helsingfors: 1968), pp. 72-73,
Stråth, 1830-1920, p. 352.
30
The Swedish state bought the remaining half in 1957, and LKAB remains wholly state owned to this day.
31
Albert Kôersner, Lag om vissa inskränkningar i rätten att förvärva fast egendom eller gruva eller aktier i vissa
bolag given den 30 maj 1916 jämte tilhörande författningar med utdrag ur förarbetena, anvisningar och vissa
formulär (Stockholm: I distribution: Aktiebolaget Nordiska bokhandeln, 1916), p. 6.
32
Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 1895-1945, pp. 44-52.
9
had fallen considerably, from 26,6% in 1899 to 10,9% in 1913.33 The new matter of
contention was German investments in the mining industry of southern and central parts of
Sweden. By 1913, Germans owned 1/6 of all shares in the mines in these districts, and ore
exports to the German steel industry had skyrocketed. This lead the Swedish parliament to
pass the so-called Restriction Act (Swe. Innskränkingslagen) in 1916. The new law required
companies to obtain a government license to obtain property or engage in mining if more than
20% of its shares, or more than 20% of the voting power, were in the hands of foreigners.
Increasing unease over tighter economic integration, particularly after the outbreak of World
War I, made the potential damage to access to foreign capital was in 1916, unlike in 1905,
considered to be a risk worth taking. The proponents of the law also noted that stricter
regulations on natural resource extraction in neighbouring Norway had not led to capital
flight. They also emphasized that the new law did not bar foreign investors from taking part in
mining or other economic activity, but that rather it would ensure national control before
foreign ownership of Swedish companies got out of hand.34
The impact of The Restriction Act of 1916 would to a large extent depend on how it
was implemented. Unfortunately, as of yet there is literature that examines this issue. The
historian Sven Nordlund states that the law marked an abrupt end to further foreign
acquisitions of Swedish mining companies, but does not reveal whether this was a result of
government intervention or low prices of iron ore in the inter-war era. Nordlund mentions
however that several of the already foreign owned mining companies were bought by other
foreigners.35
Mining was not the only resource sector where there were increased calls for state
regulation. Swedish forests were also an immensely important resource in the Swedish
economy, and sawn timber, pulp and paper accounted for around 40% of Swedish exports
before the First World War.36 A Swedish government report from 1901 examined foreign
ownership in 192 of the most important timber companies. 46 of them had foreign
33
This figure ist taken from Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 18951945, Table XIX.. Another estimate can be found in Fritz, Svensk järnmalmsexport 1883-1913, pp. 93-97.. Fritz
estimates that the percentage of foreign share ownership was higher in ore exporting companies, peaking at 35%
in 1904, before declining to less than 20% in 1913.
34
Kôersner, Lag om vissa inskränkningar i rätten att förvärva fast egendom eller gruva eller aktier i vissa bolag
given den 30 maj 1916 jämte tilhörande författningar med utdrag ur förarbetena, anvisningar och vissa
formulär, Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 1895-1945, p. 54.
35
Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 1895-1945, p. 121.
36
Mats Larsson, En svensk ekonomisk historia 1850-1985, 2:a uppl. ed. (Stockholm: SNS, 1993), p. 61.
10
shareholders, mostly from Norway and Great Britain. Altogether, 26% of the shares in the 46
companies were in foreign hands.37
The reasons for stronger regulations were somewhat different in the forestry than in
the mining sector. Unlike the Swedish iron and steel industry, the Swedish timber companies
objected to stricter regulation. Instead it was Swedish smallholders and crofters – backed by
urban radicals, socialists and liberals – who demanded state intervention. They wanted to
secure access to forest resources for crofters and smallholders and were therefore opposed to
large corporate acquisitions of woodlands. The question of forest ownership also played into
the larger Swedish debate on emigration, which was perceived as a major national problem at
the time. Better conditions for smallholders in Norrland could hopefully divert the emigration
of young Swedes from North America to northern Sweden. As well as on the issue of mining,
foreign companies were singled out as being the most exploitive and the least concerned with
the long term well-being of the Swedes.
In 1907, a new set of laws was passed which severely restricted further acquisitions of
forests for all private companies (including domestic companies) in the northern counties. In
1917 and 1926 the law was extended to encompass the whole country. The resulting
legislation opened for increased state control (and local ownership by farmers), but
interestingly investments by both foreign and private Swedish forest product companies were
halted.38
The third major natural resource which Sweden had in abundance was hydropower. In
this sector state involvement was triggered by the need to revise the old water laws, which
were ill-suited for hydropower development. By archaic law, the Swedish crown owned 1/3 of
navigable rivers, with strong protection of natural flow of water. As the law placed fewer
restrictions on state intervention in natural water flow, the Swedish state itself undertook the
construction of the large39 power plant in Trollhättan in 1909. The project was carried out in
close cooperation with Swedish industrialists and primarily aimed at providing Swedish
industry with cheap electricity. The offensive state-led electrification continued in the
following years, partly spurred by coal shortages during the First World War, partly by
37
Nordlund, Upptäckten av Sverige : utländska direktinvesteringar i Sverige 1895-1945, p. 49.
This paragraph is based on Jan Jörnmark, Skogen, staten och kapitalisterna : skapande förstörelse i svensk
basindustri 1810-1950 (Lund: Studentlitteratur, 2004), p. 54, Nordlund, Upptäckten av Sverige : utländska
direktinvesteringar i Sverige 1895-1945, pp. 106-114, Sverker Sörlin, Framtidslandet : debatten om Norrland
och naturresurserna under det industriella genombrottet, Kungl. Skytteanska samfundets handlingar
(Stockholm: Carlsson, 1988).
39
The Olidan plant had an installed capacity of roughly 80 MW by 1914, and 130 MW by 1921.
38
11
ambitious plans to develop hydropower based steel and fertilizer production. However, as the
price for fertilizer and steel plummeted after the war, the intended power consumers pulled
out and the economic rationale for the hydro power plants disappeared. While this dampened
the enthusiasm for further large scale state led hydroelectric developments, these early power
plants formed the foundation of the huge – and still state owned – Swedish energy company
Vattenfall.
At the same time there was a continuous debate on reforming the water laws. While
there were calls in Sweden for tighter regulation and taxation of private power companies and
better terms for household and small scale industry consumers, the water law of 1918 for the
most part favoured the Swedish industry. The law made the process of obtaining building
permission and expropriation both easier and more predictable, and would be handled by an
independent Water Court. The establishment of an independent water court was particularly
promoted by conservative politicians with strong links to Swedish industrialists. By making
regulation and development permissions the purview of an independent court rather than the
government, it was thought that these questions would be safe from meddling by future left
leaning governments who might regulate and tax development in a way more akin to
neighbouring Norway (see below).40
The main outcomes of the Swedish debates on resource ownership were the following
1) The state was given new powers to regulate and participate in the national economy. 2) The
state promoted domestic ownership of its most valuable resources, both for national security
reasons and to ensure domestic resource capture. 3) The state cooperated closely with
domestic industrialists, both by promoting domestic ownership and developing
hydroelectricity for industrial use. 4) The cooperation between state and industry also had its
limits. The forest laws had a strong element of social engineering as they protected
smallholders’ access to land against large forestry companies.
40
Swedish hydropower legislation is described in K. H. Högstedt, Vattenlagen av den 28. juni 1918 med däri den
19. juni 1919 och den 11. juni 1920 vidtagna förändringar, 2. uppl. ed. (Stockholm: 1923), pp. 145-166, Eva
Jakobsson, Industrialisering av älvar : studier kring svensk vattenkraftutbyggnad 1900-1918, Avhandlingar från
Historiska institutionen i Göteborg (Göteborg: Historiska institutionen, 1996).
12
Hydropower and the rise of ownership restrictions in Norway
Norway was a rather autonomous part of the kingdom of Sweden and Norway until she
achieved full independence in 1905. Norway had a somewhat different socio-economic
structure than the other Nordic countries and this had undoubtedly some implications for her
resource policies. Historically Norway had had very few estates. By 1850, the large majority
of Norwegian farmers were freeholders. Land ownership was therefore not a contested issue
as in Denmark or Finland and there were no calls for any comprehensive land reform. Norway
was for a long time the most democratic of the Nordic countries. The centre of gravity in
Norwegian politics tended to be further left than in her neighbouring countries.
By 1900 Norwegian exports were dominated by shipping services, fish and wood
based products. Norway had followed fairly liberal policies on both trade and resource
ownership in the 19th century. The last remnants of the sawmill privileges were removed in
1860. By the turn of the century the Norwegian exports were dominated by shipping, fish and
wood based products, with shipping accounting for as much as 39% and wood based products
accounting for 20% in 189541. There was significant foreign ownership in the wood
processing industry, as well as in the rapidly expanding mining industry. For most of the 19th
century, foreign ownership and control over natural resources was largely uncontroversial.
The major turning point in Norwegian natural resource regulation came with the
advent of the electrochemical and the electrometallurgical industry. The heavy rainfall in the
Norwegian mountains had suddenly become an economic asset as it provided the country with
a huge hydro power potential. The most promising waterfalls were rapidly purchased by
speculators and foreign-owned electrochemical companies. By 1906, 77% of all hydroelectric
plants with an installed capacity of over 3000 horsepower (hp) were owned by foreign
citizens42. The high level of foreign ownership of a highly valuable natural resource caused
alarm in the newly independent country. In the spring of 1906 the Norwegian parliament
reacted by passing a law which stated that all acquisitions of hydro power by foreigners or
limited companies needed a government concession.
The new laws opened a Pandora’s box of government regulations and over the
following years the reach of the so-called Concession Laws was considerably extended. The
first law only concerned the acquisition of riparian rights, but the following summer the law
41
42
Hodne, Norges økonomiske historie 1815-1970, p. 160, Table 166.
Lars Thue, Statens kraft 1890-1947 : kraftutbygging og samfunnsutvikling (2006), p. 75.
13
was expanded to include the acquisition of forests and mineral claims. In 1907, the law was
extended once more to also include companies who leased more than 250 hp of hydroelectric
power.
It also became government practice to include terms on natural resource concessions.
The first concessions given in 1906 were only concerned with the numbers of Norwegian
nationals on the company board of directors, but it quickly became common practice to also
include terms which gave preference to Norwegian made materials and machinery. Later it
also became common to include concession taxes, clauses requiring power companies to sell
power to the local municipality at a low set price, as well as minimum conditions on workers
housing and welfare. These particular developments stands in stark contrast to the Swedish
development, and illustrate how the state power to regulate the industry was used somewhat
ad-hoc by liberal reformers who aimed to reduce the hardships and stifle discontent among
the working classes and rural farmers.
Another radical new principle, the Right of Reversion (Hjemfallsrett), was introduced
in 1907. This clause stated that the waterfall in a concession, as well as the dams, buildings
and machinery would pass to the state without remuneration when the concession expired
(usually after 60-80 years). The right of reversion became mandatory for all hydro power as
well as mining concessions in 1909.43 Proponents argued that this would prevent long term
monopolization of power by a private company, and ensure that the benefits and profits of
cheap hydroelectricity would come on Norwegian hands in the end. When challenged over the
prospect of a future state monopoly, Prime Minister Knudsen – one of the important architects
of the concession laws – responded that he did not see that as a problem as “The state is all of
us. It is not just a company of a few”.44
As in Sweden, the Norwegian concession laws reflected both a continuation of policy
as well as a radical new principle on government domain. As it was obvious at the time that
electricity would become an important of Norwegian infrastructure, a policy which favoured
government ownership and control could be said to be in line with the established Norwegian
policy on railways (all the trunk lines were state owned). But as in Sweden the Concession
Laws also reflected a desire to ensure that the benefits of Norwegian natural resources came
43
Olaf Amundsen, Lov om erhvervelse av vandfald, bergverk og anden fast eiendom : koncessions-loven av 14
december 1917 : med kommentar (Kristiania: Aschehoug, 1918).
44
Anders Haaland, Fra konsesjonslov til "midlertidig trustlov"- norsk konkurransepolitikk 1905-1926, SNFrapport (Bergen: Stiftelsen for samfunns- og næringslivsforskning, 1995), p. 72.
14
on Norwegian hands, both through future state ownership of power production and by
introducing measures intended to ensure spill over effects to the rest of the economy.
However, the Norwegian legislation on foreign ownership of natural resources makes an
interesting contrast to the Swedish. While the Swedish laws were a tool to block unwanted
foreign investments, the Norwegian law created a compromise where foreign ownership could
be accepted, but under terms set to prevent possible negative consequences. Part of the reason
why Norway opted for such an approach was probably due to the high levels of foreign
ownership in the country and lack of viable domestic owned alternatives. Barring foreign
owned companies from operating in the country would easily be the same as barring growth
and development.
It must be emphasised that the concession laws did not block foreign investment in
hydro power and mining. The concession laws only applied to new concessions, and existing
foreign owned hydropower plants and mines were not confiscated or nationalised. On the
contrary the level of foreign ownership continued to rise in both sectors. By 1909, 85% of the
share capital in the electrochemical industry was foreign owned, while 80% of the mining
companies were in foreign hands.45 Foreign investments continued to pour in until the
outbreak of the Great War.
A key question in the contemporary debate on the concession laws was whether
domestic investors were to be favoured or whether all investors should be treated equally,
irrespective of their nationality. The radicals opted for the latter option, which became the
guiding principle in the first permanent concession laws on hydropower and mining of 1909.
They wanted to ensure state control over the exploitation of the natural resources, to prevent
all forms of private monopolization of hydroelectricity and to secure basic levels of worker
safety and welfare. Treating foreign and domestic investors equally also had practical
advantages. It was often hard to establish exactly who were in possession of which shares, and
once a concession was given it was difficult to ensure that the ownership situation didn’t
change.
It is however interesting to note that government policy on foreign ownership of
forests was stricter than hydropower and mining. A substantial part of the Norwegian timber,
pulp and cellulose companies were owned by foreigners – predominantly British citizens. But
45
Arthur Stonehill, Foreign ownership in Norwegian enterprises, Samfunnsøkonomiske studier (Oslo: Statistisk
sentralbyrå, 1965), p. 36.
15
in contrast to the ownership structure in the energy intensive industry Norway also had a
competitive domestic-owned forest industry.46 The concession law on forests passed in the
autumn of 1909 categorically ruled out further acquisitions of forests by companies with as
much as a single share on foreign hands. However, new the legislation was not exclusively
aimed at foreigners. It also contained elements of social engineering in order to protect
farmers against industrial interests. The law prohibited the sale of forests owned by farmers
(no. gårdsskog) to non-local residents.47 In this regard the Norwegian forest law bears some
similarity with the Swedish law.
When the final concession law on hydropower and mining was passed in 1917
resource nationalism was given a more profound presence. Both preferences for public
ownership as well as discrimination against foreigners were strengthened. Foreign companies
were only allowed to invest in Norwegian hydro power under “singular circumstances”.48 The
First World War had now turned the pre-war situation on its head. Revenue from the
Norwegian shipping industry and other export industries had created a vast surplus of capital,
much of which was used to create the first major Norwegian owned electrochemical
companies. Some important foreign owned companies were also “repatriated” by Norwegian
investors.49 During the war and in the immediate aftermath, the Norwegian government
adopted a strict concession policy. New foreign direct investments in hydro power and energy
intensive industry were discouraged.50 The Norwegian state also purchased Glomfjord, a large
unfinished Swedish-owned hydropower plant in northern Norway. Less is known about the
concession policy on mining. But it is not unlikely that the Norwegian policy on mines were
radicalised in a similar fashion as hydropower. In 1918, the Norwegian government forced a
French-owned aluminium company to sell its large pyrite ores deposits in central Norway to
the Norwegian state as part of a power lease concession for a new aluminium smelter.51
46
Haaland, Fra konsesjonslov til "midlertidig trustlov"- norsk konkurransepolitikk 1905-1926, p. 62.
Per Augdahl, Skogkoncessionsloven : lov om erhvervelse av skog av 18. september 1909 med ændringslove av
13. august 1915 og 26. juli 1916 : med kommentar (Kristiania: Cappelen, 1920).
48
Amundsen, Lov om erhvervelse av vandfald, bergverk og anden fast eiendom : koncessions-loven av 14
december 1917 : med kommentar, p. 93.
49
Stonehill, Foreign ownership in Norwegian enterprises, pp. 41-43.
50
Andreas R. S. Dugstad, "Chasing waterfalls : foreign direct investments and Norwegian watercourse
concession policy, 1916-1926" (NTNU, 2011), pp. 52-54.
51
Espen Storli, Out of Norway falls aluminium : the Norwegian aluminium industry in the international
economy, 1908-1940, Doctoral theses at NTNU (Trondheim: Norwegian University of Science and Technology,
Faculty of Humanities, Department of History and Classical Studies, 2010), pp. 99-102, Dugstad, "Chasing
waterfalls : foreign direct investments and Norwegian watercourse concession policy, 1916-1926", pp. 28-37.
47
16
As the state of the Norwegian economy changed over the course of the 1920s, the
restrictive policy on foreign investments was relaxed. The post-war depression which began
in the autumn of 1920 hit Norway hard. The energy intensive industries were especially
afflicted and some had to cease production for large periods of time, while others verged on
the edge of bankruptcy. Several Norwegian commercial banks faltered and were placed under
receivership and unemployment rose dramatically. The downturn also affected the pyrite mine
and the hydropower plant that the Norwegian state bought during the war. Both turned out to
be spectacular economic failures and became a permanent stain on the legacy of the Liberal
wartime government. State investments in resource development or resource based industries
were not repeated until the post 1945-era. The interwar governments reluctantly chose to give
concessions to foreign investors willing to refinance the Norwegian hydroelectric and energy
intensive industry.52 Similar developments took place in the in forest related industries where
several Norwegian owned sawmill and paper companies were sold to foreign investors.53
As in Sweden, the rising demand for its non-agricultural natural resources before the
First World War created a new principle for state intervention in the economy. However, the
Norwegian regulatory system was far more comprehensive than the Swedish system. By
introducing the practice of adding terms to hydro power and mining concessions, the
Norwegian governments introduced an altogether different system of rent capture than their
Swedish neighbours. One crucial difference here is the comparative financial weakness of the
Norwegian industrialists. Few Norwegian owned companies had the financial strength to
compete in the international electrochemical and mineral industries. The attempts of state
ownership of industrial hydro and minerals attempted during the First World Wars were
quickly abandoned. This meant that the only way to use the country’s ample resources was to
allow foreign investments. Through the terms system the government was given the option to
compromise between denying and allowing unrestricted foreign ownership in these sectors.
Another crucial difference between the Norwegian and the Swedish system, was the
willingness to also put private Norwegian companies to strict terms. All in all, the Norwegian
regulation system had a stronger pro-public ownership and decentralized rent redistribution
element than the Swedish.
52
Pål Thonstad Sandvik, Multinationals, subsidiaries and national business systems : the nickel industry and
Falconbridge nikkelverk, Studies in business history (London: Pickering & Chatto, 2012), 32-33.
53
Stonehill, Foreign ownership in Norwegian enterprises, pp. 45-55.
17
Finland and the regulation of natural resources
Historically, Finland had close links to Sweden. It was a part of Sweden until 1809 when
Finland was transferred to Russia as an autonomous Grand Duchy. However, the Finns were
allowed a relative large degree of independence in terms of domestic policies and Swedish
legislation and institutional setting remained largely intact after 1809. Like Norway and
Sweden, Finland had both important mineral ores and hydropower resources, yet just as in
Denmark it was the question of ownership to agricultural land which first became a burning
political issue in the country. However, after Finland gained full independence in 1917, the
question of foreign ownership over natural resources soon became as important as the
predominantly social question of ownership to land.
Finland was a country of small farmers, and increasingly so during the 19th century.
Estate farming was never widespread in Finland, and farm sizes were historically relatively
small.54 In addition, the country had a large number of tenant farmers. In 1895 there were
70,000 crofts in the country.55 The crofters leased land from a landlord for a certain period
which he paid rent for either in money, in kind or by labour. Yet, the increasing number of
crofts, impressive as it was, could not match the general population growth, and since Finland
was late to industrialise and had very little emigration compared with Sweden and Norway,
the country had a large population of cottagers. The cottagers lived on tiny scraps of leased
land insufficient to sustain their families, and made their living through seasonal work in the
forests or on the watercourses.56
While the crofters grew in numbers towards the last half of the 19th century, the lease
conditions for the crofts generally deteriorated. After the liberalisation of the sawmill
privileges in the years around 1860, Finnish exports of wood products increased
exponentially. As a consequence, the forests became more valuable. Landlords were now less
willing to give the crofters the right to free use of the forests, and in addition they often had to
pay for the privilege of taking out wood for burning. Many of the crofters also had only verbal
lease contracts with their landlords, and the agreements were frequently with no set
timeframe.57 The crofters could therefore be evicted at short notice. At the turn of the 20th
54
Jari Ojala and Ilkka Nummela, "Feeding Economic Growth: Agriculture," in The Road to prosperity : an
economic history of Finland, ed. Jari Ojala, Jari Eloranta, and Jukka Jalava (Helsinki: Suomaleisen
Kirjallisuuden Seura, 2006), pp. 76-77.
55
Matti Klinge, Kejsartiden (Helsingfors: Schildts, 1996), p. 97.
56
Kirby, A concise history of Finland, p. 113.
57
"Torpväsen," in Uppslagsverket Finland, ed. Henrik Ekberg (Helsinki: Schildts Förlags AB, 2007).
18
century there were a number of conflicts between landlords and crofters, and some cases of
large-scale evictions of crofters.58 In 1909, the Finnish state intervened through an imperial
resolution and decided that all crofters should have a minimum tenancy of fifty years. The
1909 Act also provided a temporary ban on all evictions, which was renewed again in 1915.59
The crofter question was given a more permanent solution in 1918. After the Finns
gained full independence in December 1917, following the Russian revolution, the national
assembly was already in January 1918 presented with a proposal concerning crofters’ rights.
Yet before the proposal could be debated, the country descended into a short, but violent civil
war between the forces of the Social Democrats and socialists, commonly called the reds, and
the forces of the non-socialist, conservative-led Senate, commonly called the whites. The
whites won the war, but the victors realised that it had to do something about the widespread
rural poverty to minimise the political attraction of the socialists. It did not go unnoticed that
in parts of the country the crofters had joined the red side during the civil war. The
Leaseholder’s Act of October 1918 gave crofters the right to purchase up to 10 ha of farmland
and 20 ha of forest. The state paid compensation to the landowners, and the former crofter,
now farmer, paid back the state over several years. The price was established according to the
pre-war level. Up until the end of the 1930s more than 46,000 crofts were converted into
independent farms. In 1922, a new law, the Land Acquisitions Act, made it possible for the
state to expropriate land to sell to cottagers so that they could establish independent farms. In
the years up to 1940, more than 40,000 cottagers converted their small leased plots of land
and expanded them into new farms. Although the new laws opened up for expropriations,
most of the new farms were created through voluntary sales. More than one eight of all
agricultural land in the country thus changed status from leased land to farmland.60
The development in Finland has several similarities with the situation in Denmark, but
whereas the Danish parliament’s attempt to improve the position of ordinary tenant farmers
did not lead to widespread challenges to property rights on land, the Finnish state, with its
new legislation put in place between 1918 and 1922, did not shy away from challenging the
sanctity of private property. This must be understood against the backdrop of the Finnish civil
war, which made it imperative to do something forceful with the widespread rural poverty.
58
Klinge, Kejsartiden, p. 98.
Kirby, A concise history of Finland, pp. 154-156.
60
Klinge, Kejsartiden, pp. 98-99, Ojala and Nummela, "Feeding Economic Growth: Agriculture," p. 77,
"Torpväsen," p. 182.
59
19
At the same time as the young Finnish state was involved in social engineering, it also
approached the question of foreign ownership over natural resources. The most important
natural resource in the country has always been the forests – Finland’s “green gold”. Two
thirds of the country consists of forests – mainly coniferous trees - and other wooded land. In
1920 as much as 93,7% of Finnish exports were wood based products.61 In the latter half of
the 19th century, especially the 1870s, there were quite large foreign investments in the forest
industry. This came predominantly through Norwegian companies supported by British,
Belgian, French and German capital. The foreign-owned operations came to dominate the
Finnish industry, owning large tracts of forested land.62
Given its paramount position in the Finnish economy, it is unsurprising that foreign
ownership of forests became a controversial political issue after independence. In the 19th
century Finland had licence laws comparable to the pre-Restriction Act Swedish laws which
required government permission for land ownership and engaging in mining, but the state
does not seem to have used this stipulation actively..63 However, in 1915 Finland passed a law
which limited further acquisitions of forests by companies. The aim of the new law was not to
target foreign owned forest companies, but must be understood in connection with the crofter
question. The government wanted to avoid a situation where large companies purchased all
forest areas, which would leave no possibilities for cottagers and crofters to become
independent farmers.
After the end of the civil war, the Finnish government intervened directly and bought
several of the largest foreign owned wood processing companies, like Gutzeit and Tornator. 64
These companies owned large forests, as well as the riparian rights to some of Finland’s most
important watercourses. Other foreign owned wood processing firms, like Salvesen and Halla
were acquired by private Finnish investors.
61
Karl-Erik; Kuisma Michelsen, Markku, "Nationalism and Industrial Development in Finland," Business and
Economic History 21, no. 2 (1992).
62
Riitta Hjerppe and Jorma Ahvenainen, "Foreign enterprises and nationalistic control: the case of Finland since
the end of the nineteenth century," in Multinational enterprise in historical perspective, ed. Alice Teichova,
Helga Nussbaum, and Maurice Lévy-Leboyer (Cambridge: Cambridge University Press, 1986), p. 288.
63
Riitta Hjerppe and Jorma Ahvenainen, "Foreign enterprises and nationalistic control: the case of Finland since
the end of the nineteenth century," in Multinational enterprise in historical perspective, ed. Alice Teichova,
Helga Nussbaum, and Maurice Lévy-Leboyer (Cambridge: Cambridge University Press, 1986), pp. 286-287,
Ojala and Nummela, "Feeding Economic Growth: Agriculture," pp. 16-18.
64
The Norwegian interests in Tornator is described in Knut Sogner and Sverre A. Christensen, Plankeadel :
Kiær- og Solberg-familien under den 2. industrielle revolusjon (Oslo: Andresen & Butenschøn for
Handelshøyskolen BI, 2001), pp. 93-95, 134-135.
20
The state acquisitions were part of an effort to prevent foreign ownership of Finnish
hydropower. In addition to acquiring the wood processing companies, the state also acquired
the ownership of the Imatra falls on the Vuoksi River in Finnish Karelia. There had been
several attempts by foreign investors to develop the falls and sell the electric power to nearby
St. Petersburg, which the Finnish government had done its best to thwart. Such plans would
both link Karelia uncomfortably tight to the imperial capital, as well as using what might
become a useful source of cheap energy for the Finnish population. After gaining
independence, the Finnish government banned all export of energy from Finland and
expropriated the remaining, primarily French-owned parts of the watercourse in 1920. With
the Imatra falls, the Finnish government owned all the major hydro power resources in
southern Finland. The original owners were not satisfied with the compensation scheme, but
despite protests from the British and French government, the Finnish were unwilling to pay
more. This practically marked the end of foreign direct investments in Finnish hydropower.65
There were two main considerations behind the large state takeovers in the period.
First of all the government wanted to increase the state’s influence on the development of the
country, both in industrial and in other respects. The new-won independence in the political
sphere would be worthless if the country did not also take control over its own natural
resources to gain economic independence. Second, the companies that the state took over
owned large tracts of agricultural land and forests which could be distributed to crofters and
cottagers.66
Finland’s independence from Russia in 1917 was also followed by new legislation
which limited the scope of operations for foreign entrepreneurs and foreign capital. . The
Finnish government was especially reluctant to allow foreign ownership of natural resources.
The history of the copper mining company Outokumpu can serve as an illustration. The
Outokumpu mining company was established before the First World War as a joint venture
between Finnish private interests and the Finnish state. However, in 1917, a NorwegianFinnish company took over the operations of the mine on a lease. After three years, the tenant
company was facing bankruptcy, and the Finnish state bought the majority of the shares in
1920. The state soon received offers from Swedish, British, German and American companies
65
Timo Myllyntaus, Electrifying Finland : the transfer of a new technology into a late industrialising economy,
Series A / ETLA, the Research Institute of the Finnish Economy (Basingstoke: Macmillan in association with
ETLA, 1991), pp. 61f, Victor Hoving, Enso-Gutzeit Osakeyhtiö 1872-1958, vol. 1 (Frenckellska Tryckeri
Aktiebolaget, 1961), pp. 166-172.
66
Hoving, Enso-Gutzeit Osakeyhtiö 1872-1958, p. 170.
21
to take over the copper company, but even though the country needed both modern mining
technology and capital, the nationalist considerations prevailed when the parliament decided
the issue. There was widespread fear that foreign interests would plunder the Finnish deposits,
and then walk away from an exhausted resource. The argument that foreign capital should be
excluded from Outokumpu because of the copper deposit’s critical importance to the domestic
defence industry was especially persuasive. Instead of selling out, the Finnish state bought out
the remaining private investors. From early 1925, Outokumpu was a fully state-owned
enterprise.67
However, when it came to the other significant metal that Finland possessed, the large
nickel deposits in the Petsamo region, the Finnish government eventually did seek foreign
investments. The rich Petsamo nickel ore bodies were discovered in the early 1920s, and
although the Finnish state initially tried to develop the nickel mines by way of the domestic
Outokumpu, the government realised by 1930 that the company lacked the capital and the
technological know-how to do it successfully. Instead, the Finnish government now actively
encouraged foreign companies to take an interest in the deposits to drive up the price, and in
1934 the state sold the mining rights to the world’s dominant nickel company, the CanadianAmerican International Nickel Company (INCO).68
In the late 1930s, the Finnish political debate again turned against foreign investments.
The country prospered during the second half of the decade and there was less need for
foreign capital. Towards the end of the decade there was also clear signs of growing foreign
interest in Finnish natural resources again, especially timber, copper and the recently
discovered large nickel deposits in Petsamo. New and more restrictive laws were passed in
1939. Henceforth, no foreign citizen or foreign company could acquire or have long term
lease of real estate in Finland without government permission. The law also applied to Finnish
joint stock companies where foreign citizens had more than twenty per cent ownership.69
In Finland as in Sweden and Norway foreign ownership was particularly controversial
when it came to natural resources. The Finns took a different approach to solving these issues
67
Markku Kuisma, A history of Outokumpu (Jyväskylä ,: Gummerus kirjapaino OY, 1989), pp. 3-45.
Matt Bray, "INCO’s Petsamo Venture, 1933-1945: An Incident in Canadian, British, Finnish and Soviet
Relations," International Journal of Canadian Studies 9 (1994): pp. 175-177, Jari Eloranta and Nummela Ilkka,
"Finnish nickel as a strategic metal, 1920-1944," Scandinavian Journal of History 4, no. 32 (2007): pp. 328-331.
69
Jukka Luukkanen, "How to deal with the legislation concerning the rights of foreigners to own shares and real
estate in Finland – especially concentrating on voting agreements" (Harvard Law School 1991), pp. 1-4, Hjerppe
and Ahvenainen, "Foreign enterprises and nationalistic control: the case of Finland since the end of the
nineteenth century," p. 290.
68
22
than neighbouring Sweden and Norway. Rather than passing wide-reaching laws which
regulated all ownership of natural resources the Finnish state instead took an active role in
appropriating the most important natural resource owning companies from foreign investors.
This is somewhat similar to what took place on a smaller scale in Norway. But in Finland
there seems to have been less of a political backlash to state ownership, when losses were
incurred due to falling raw material prices. Instead Finland continued its policy of state
ownership for most of the interwar period.
Conclusion
When studying the regulations of natural resources in the Nordic countries, it is possible to
identify three policy goals, which to varying degree affected the regulation of the different
resources. Firstly, the Nordic countries all strove to secure domestic ownership of their
natural resources. Even Denmark, where hydropower played no significant economic role,
introduced strict provisions against foreign ownership for her only major hydro-power plant.70
In a nationalistic era, domestic ownership was perceived as an important goal in itself,
especially so for natural resources which were viewed as some kind of a collective good for
the countries’ citizens. However, in some cases ownership issues and national security was
intertwined, most notably the Swedish fear of Russia prior to 1914 and the Finnish fear of the
Soviet Union after 1917. In general policy makers feared foreign political domination which
was thought might follow in the wake of economic influence. This was not necessarily an
immediate fear of hostile neighbours, but more a caution against the longer term effects of
being too closely integrated in another country’s economy.
The second objective was to exploit natural resources to foster economic growth. This
growth policy could manifest itself in different ways. One way was the state initiated hydro
power projects, as seen in Sweden and Finland. It also manifested itself in rent capture
policies aimed to increase spill over effects of natural resource extraction. Promoting
domestic ownership can also be explained as a policy for rent capture, as it was thought that
domestic owners more inclined to plough their profits back into the national economy.
The first and the second objective were at times be at odds with each other, if private
domestic companies were not able to fully utilize the natural resources in question. This led
the three non-agriculture resource rich countries to choose quite different policies. In Sweden,
70
Lov om Udnyttelse af Vandkraften i Gudenaa, 20.03.1918.
23
private Swedish owned companies were the main “harvesters” of resource rents, with the state
acting as a guardian against unwanted foreign ownership through state ownership and/or
regulation. Norway solved this issue through a comprehensive and complex system of
government concessions with specific terms. Substantial foreign investments were thus
allowed. In post-independent Finland the state maintained national rent capture and control
through widespread government ownership. However, even the Finns welcomed foreign
ownership of the huge nickel deposit in Finland, which could not be developed by domestic
investors. The Nordics were pragmatists, they were willing to sacrifice some growth in order
to achieve domestic ownership over natural resources, but if the costs were too high foreign
ownership was tolerated.
The third objective the Nordics strove for to ensure that natural resources would
benefit or be accessible to a large part of the population. This is particularly apparent in the
land reforms enacted in Denmark and Finland, but it is also an important aspect of the
Swedish and Norwegian forest laws. The Norwegian concession laws for hydro power also
ensured that household consumers in municipalities with private hydropower ownership
would have access to electricity at reasonable rates. It also ensured that a certain percentage of
fertilizers produced by hydroelectricity would be made cheaply available to Norwegian
farmers.
Private property rights were also respected in nearly all cases. Natural resources
owned by domestic or foreign companies were not forcefully nationalized or confiscated. The
only cases in which property rights were clearly infringed involved agricultural land in the
social turmoil following the Great War and the Russian Revolution. It is furthermore
important to note that the comprehensive Norwegian concession laws did not apply to mines
or hydropower plants built before the laws were passed. These plants were allowed to operate
without restrictions. The government also did its utmost to appear as a trustworthy and
reliable partner when it negotiated natural resource concessions with foreign owned
companies. However, regulations came at a cost; there were examples where long processing
time and uncertainty over final concession terms put potential investors off investing in
Norway.71
71
Dugstad, "Chasing waterfalls : foreign direct investments and Norwegian watercourse concession policy,
1916-1926", pp. 107-109.
24
To sum up: Is it possible to find a common Nordic natural resource regulation policy?
While the resource endowments and the policy details differed the countries aimed at fairly
similar objectives, namely domestic ownership, economic growth, economic redistribution. In
all four countries the state became increasingly interventionist, not the least because of the
comprehensive resource regulations. However, as the regulatory systems themselves were so
different, it is perhaps more prudent to talk about a Nordic approach than a Nordic regulatory
system.
25
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