ABSTRACT
Introduction and overview The chain of events is well known: by the end of September 1931, a week after the British decision, Norway and the other Nordic countries followed the lead of sterling and abandoned the gold standard.1 The reintroduction of the gold standard in Norway had been a painful process which was not accomplished until the spring of 1928. This prolonged deflationary policy, in Norwegian referred to as paripolitikk, led to a distinctive Norwegian downturn (1925-28) in a period characterised internationally by economic growth. Thus, in the case of Norway, the interwar gold standard lasted for merely three and a half years. The turmoil of September 1931 strengthened the disintegration of the international economic order: monetary blocs centred on the great powers emerged. Currency fluctuations replaced foreign exchange stability. Trade policy – tariffs and increasingly quantitative regulations – gained in importance. ‘Beggar thy neighbour’ became the order of the day as the development made it impossible to distinguish between foreign exchange and trade policy as two separate arenas of politics with different instruments and aims. In such an eroding landscape Norway had to find its path. As a consequence, monetary policy after September 1931 differed considerably from the one pursued in the 1920s. Freed from the external anchor, there was no return to the deflationary policies of the previous decade, but rather a policy of moderate monetary expansion. After a period with strong fluctuations in the exchange rate (between 16.50 and 20.75), the krone was stabilised vis-à-vis sterling in June 1933 at a rate of 19.90. The stabilisation, known as ‘the system 19.90’ or the ‘shilling-krone’, implied a 10 per cent depreciation of the currency. Until August 1939 sterling served as external anchor for Norwegian kroner. Foreign exchange policy was, thus, informally connected to that of the sterling bloc. The verdict on monetary policy in the 1930 both with regard to contemporary accounts and the historical legacy, differed from that of the previous decade. While the latter has been vilified, the former has been seen as one of the foremost sources for modifying the domestic impact of the international depression. The choices Norway faced in the 1920s and 1930s reflected a worldwide deglobalisation following the Great War and intensified by the Great Depression.
