Øystein Olsen: The Norwegian economy and the sea
Speech by Mr Øystein Olsen, Governor of the Norges Bank (Central Bank of Norway), at a
business sector seminar, in connection with the launch of the new 100-krone and 200-krone
banknotes, Lofoten, 30 May 2017.
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Accompanying slides
This is a day I have been looking forward to for a long time - it's not every day a new banknote
series is put into circulation. The last time was in 1994. And being able to hold the launch here in
the Lofoten islands is an added bonus. The sea and the Lofoten islands are inextricably linked -
the sea is a defining feature of the landscape and a key source of food, employment and
recreation.
Norway's coastline is embraced by the sea from the northernmost point to the southernmost tip.
The sea has shaped our history and our economy, and from today onwards, it will also feature on
Norwegian banknotes. Norges Bank has been governed by our elected representatives since
1816 under a clear mandate: to safeguard the monetary system and the value of our money.
Norges Bank's banknotes and coins are the community's money, and our trust in the value of our
banknotes is closely linked to our trust in each other. With this in mind, it was important to design
banknotes that would tell a story about us as a community of people. As the sea is a key
dimension in that story, it was chosen as the theme of the new banknote series.
Chart: The 50-krone banknote (The Lighthouse)
As Norwegians, we carry with us a long and rich history of living from and with the sea - from the
seafarers of the medieval Saga Age to today's international shipping companies. For centuries,
the shipping route along our coast was our lifeline. Goods from all over the country were ferried
via inland waterways out to the coast and from there to other parts of Norway and to other
countries. From near and far, other goods came in return.
But the coastline of Norway is also dangerous. Without seamarks and lighthouses, safe travel
along the coast or through narrow coastal channels would be impossible. A total of 21 000
lighthouses and seamarks safeguard navigation along our coast.
Chart: The 100-krone banknote (The Gokstad Ship)
Seamarks have a long history in Norway. As early as the year 869, Vikings on their way home
were able to steer their ships towards the mouth of the Hardangerfjord guided by a bonfire built
on a clifftop cairn.
The Vikings were not only plunderers and pillagers, but boatbuilders and, not least, skilled
seamen. They built Norway's reputation as Europe's leading sea power, while the sea took them
out into the world and into contact with other cultures.
The Vikings were also traders, and they knew that the sea was a versatile resource. Ever since
the end of the Ice Age, when the glaciers retreated and the very first Norwegians made their
homes near the seashore, we have harvested food from the sea. But we also learned early on
that fish was valuable as a form of currency. As early as in the medieval era, dried cod from
Norway was a sought-after product further south in Europe. With their ships laden with dried cod,
the Vikings were able to trade the fish for beautiful cloth, exotic spices and precious metals.
Chart: The 200-krone banknote (The Cod)
Fishing has been a key source of income and an integral part of the coastal culture in Norway for
centuries. For many people, fish has been a crucial part of their diet. Some crops do not thrive in
Norway's climate of long winters and cool summers. Cod and herring, trout and salmon, on the
other hand, have flourished. Sturdy boats designed to cope with the rough waves and
unpredictable winds of the open sea enabled us to bring the catch to shore. And before more
modern transportation routes became available, cargo ships were needed to transport the catch
to customers at home and abroad.
Chart: Distribution of exports 1835
The possibility of storing and transporting fish over long distances generated jobs and foreign
exchange income. In 1835, 39 percent of Norway's export revenues came from the sale of fish.
Shipping provided 25 percent of Norway's export revenues.
Consequently, it has always been important for the country's economy to ensure market access
for Norwegian seafood exports, as was the case during Norway's prohibition period in the 1920s.
A referendum held in 1919 resulted in a majority vote to ban the import and sale of fortified wines
and spirits. However, the ban on fortified wine imports soon had to be lifted. Fortified wine
producers in southern Europe were important recipients of Norwegian fish. In the trade war that
ensued, Portugal retaliated by imposing high tariffs on Norwegian dried fish. To avoid these
tariffs, Norway eventually had to accept the import of large quantities of Port and Madeira wines.
Chart: Rise of Norwegian shipping
Trade and the cross-border exchange of goods allow countries to exploit their comparative
advantages more efficiently. But - as we experienced during the prohibition period - this requires
a mutual understanding of the need for open markets.
As a small open economy, Norway has always stood to gain from liberal trade regimes. The
upswing for Norwegian shipping that began in the mid-1800s is a good example. Shipping had
long been an important export industry for Norway, but freight transport mostly comprised goods
exports from or imports to Norway. This changed in the mid-1800s. In 1849, England repealed its
Navigation Act. Trade with English colonies would no longer be restricted to English ships. Freer
world trade led at the same time to higher demand in the shipping freight market. The Norwegian
shipping industry made good use of the opportunity: we had good ships, skilled crews and
experience of ocean transport. Over the course of the next 25 years, the Norwegian merchant
fleet increased four-fold.
Chart: Distribution of exports - 1835 and 1950
The foundations of a modern shipping nation had been laid. Soon, most of the ships in the fleet
were travelling between foreign ports, generating important export revenues. A hundred years
after the repeal of the Navigation Act, shipping accounted for almost half of Norwegian export
revenues. The era of the sailing ship had passed, but we had been able to utilise new shipping
technology, both as shipbuilders and as sailors.
Shipping and the maritime sector are still important drivers of the Norwegian economy and a
significant source of livelihood for many Norwegians. Norwegian shipping technology still ranks
among the best in the world, and a large proportion of Norway's imports and exports are
transported by ship. In Tokyo, Japanese sushi chefs go to the fish market every morning to buy
Norwegian salmon. Delicious dishes made from Norwegian dried cod are served in the
backstreet restaurants of Barcelona. And in Norway, Bacalhau, a Portuguese dish based on
dried cod, has been adopted as a dish for festive occasions.
The nature of work at sea has changed. Norwegian sailors are in the minority in the merchant
fleet, and large factory ships have taken over from traditional fishing boats. Shipping and fishing
generate far fewer jobs now, and for those who still have the sea as their workplace, work is less
arduous and less dangerous than it used to be.
Chart: From fishing to fish farming
The nature of the fishing industry has also changed. The fish farming industry is one of our
newest growth industries, and more than two-thirds of the supply of seafood now comes from
fish farming. Through collaborative efforts in research and product development, fish farming
methods have been developed to supply consumers with good-quality farmed salmon, available
straight from the supermarket.
But fortunately, many Norwegian consumers would say, the traditional tinned fish produced by
the factory here in Lofoten for the past 100 years, is only a couple of shelves away. With rich
fishing banks right outside the factory door, there is an ample supply of fresh fish.
Historically, fishing in Lofoten has been an important source of income for the coastal population.
The traditional fishing season at the beginning of the year still attracts fishermen from all over the
country, but in numbers far lower than the up to 30 000 who used to take part. For three hectic
months from mid-January each year, a variety of visitors, from fishermen and traders to
watchmakers, travelling musicians and the odd snake oil salesman used to make their mark on
this island community.
Lofoten continues to attract visitors today - but now the fishermen's cabins are filled with
tourists. In just a few years, the number of tourist overnight stays in Nordland county has
increased by 25 percent, with many visitors making the journey from faraway countries, tempted
by the prospect of deep-sea fishing, sea kayaking and hiking. The sea and the coastal landscape
are still a resource that generates jobs - albeit of a different kind today.
Chart: The 500-krone banknote (reverse)
The sea proved to have even more to offer the Norwegian nation. A new turning-point in our
history was reached when the first barrel of oil was pumped up in 1971. In the years that have
followed, the oil and gas industry has been a fundamental mainstay of the economy.
Chart: From shipbuilding to platform construction
For Norwegian manufacturing, the discovery of North Sea oil came at a convenient time. The
shipping industry was being hard hit by the international tanker crisis. At one point, a quarter of
the Norwegian tanker fleet in terms of tonnage was laid up. New shipbuilding orders ground to a
halt, and workers were laid off. But shipping industry labour and real capital in the form of docks,
machinery and equipment were easily adapted to the production of oil platforms and other goods
and services needed in the offshore oil sector.
The Norwegian business sector has made good use of the opportunities provided by the
discovery of oil. The extraction of oil at extreme ocean depths required the development of new
technology. The specialised expertise that has been built up has secured contracts - and not just
off the shores of Norway. Offshore activity has had substantial spillover effects on other
industries. An advanced oil service industry has emerged, and small local communities have
been able to broaden their economic base.
Chart: Distribution of exports - 1835, 1950 and 2016
The oil sector has generated substantial revenues for Norway. And we have extracted large
quantities of oil and gas at favourable prices. From the end of the 1990s and up to 2014, the price
of North Sea oil rose from about USD 10 to more than USD 100 per barrel. In spite of the fact that
oil prices have fallen by about half compared with a few years ago, sales of oil and gas still
provide a third of the country's export revenues.
The substantial profits generated by the petroleum sector have been managed efficiently. Our
economy is in good order. Well-functioning institutions and a high degree of trust between the
various social groups provided a solid foundation. It was established at an early stage that
Norway's oil and gas reserves belong to the people. The system of taxation and framework
conditions for the petroleum industry were designed so that the large profits from this sector
would accrue to the state. We have been able to enhance public welfare and prosperity.
Chart: From natural resources to financial wealth
At the same time, Norway's subsea petroleum wealth has to a large extent been transformed into
foreign financial assets. With the oil fund, not only current but also future generations will benefit
from our oil and gas reserves. The capital in the oil fund is more than two and a half times the
size of mainland GDP. As oil and gas production gradually dwindles, Norway's petroleum wealth
will continue to generate profits in the form of income from the fund.
Chart: Per capita GDP. Norway and other countries - 1970 and 2015
The discovery of oil marked the beginning of an extraordinary era for the Norwegian economy.
Before oil was discovered, the income level in Norway was low compared with other western
countries. Today, the picture has been reversed. We have gradually caught up with the
wealthiest countries. Norway's GDP per capita is one of the highest in the world.
Chart: The 1000-krone banknote (The Ocean Wave)
For over a thousand years, the sea has been the source of our wealth and the basis of our
contact with the rest of the world. New industries and new technology are redefining our coastal
and maritime economy. When the Norwegian economy has been hit by waves, we have used
the force of those waves to move forward. And we will continue to do so in the years ahead. The
shipping industry is one of the world's most advanced in terms of developing energy-efficient
vessels. The pharmaceutical industry is conducting research into the effect of marine-derived
products on a variety of diseases. Wind and wave power will be sources of clean and renewable
energy.
At the same time, climate change and the loss of biodiversity present challenges that must be
met. A continued commitment to maritime and marine research in the years ahead will be an
important contribution to maintaining sustainable development. With new knowledge and new
solutions, the sea will continue to be a force that carries us forward.
Chart: The new banknotes
More than a thousand years ago, the Vikings brought home the idea that Norway should have its
own monetary system. Olav Tryggvason was to be the first Norwegian king to have his name
stamped on Norwegian coins. Our methods of payment have changed since then - from coins
via banknotes and plastic cards to online and mobile payments. But banknotes and coins will
stay with us. Norges Bank's responsibility is to ensure that they are safe to use - based on the
most advanced modern technology. And they should be beautiful - as beautiful as the sea that
surrounds us.
Thank you for your attention.