Dealing with globalisation: the Nordic countries and inward FDI, 1900–1939

Abstract

This article examines the different ways in which the four Nordic countries chose to regulate the inflow of foreign direct investments (FDI). By studying the laws regulating foreign ownership, as well as their implementation, it becomes clear that the four countries followed a pragmatic and tolerant policy towards inward FDI, but that the resource rich countries actively tried to prevent foreign ownership of their most important natural resources. The article also shows how the countries’ stricter policy on foreign ownership in the early twentieth century was not a casualty of World War I, but more predominantly a reaction to the increasing international economic integration before the war.

Keywords:

• Foreign direct investments (FDI)
• Scandinavia
• globalisation
• natural resources
• national ownership

Acknowledgements

We would like to thank the following people (in no particular order) for their valuable comments and suggestion to our article: Per Olof Grönberg, Mikael Lönnborg, Lars Fredrik Øksendal, Harald Espeli, Harald Rinde, Hans Kryger Larsen, Per Boje, Matti La Mela, Niklas Jensen-Eriksen as well as the two anonymous referees.

Notes

1. Bordo, Taylor and Williamson, Globalization.

2. Bairoch, “European Trade”; Castles, de Haas and Miller, The Age of Migration.

3. Jones, Multinationals, 203–206.

4. See for instance Sandvik and Storli, “Confronting Market Power” and “Big Business.”

5. Jones, Multinationals, 203–206.

6. Maddison, The World Economy, Tables 1a and 1b.

7. Strandskov and Pedersen, “Foreign Direct Investment,” 639.

8. The First World War is often highlighted as a crucial turing point setting of a lasting deglobalisation of the world economy. See for instance Jones, Multinationals; Lipson, Standing Guard; Findlay and O'Rourke, Power and Plenty.

9. For detailed analysis of the political economy of the late nineteenth century Nordic countries, see Sejersted, Sosialdemokratiets; Stråth, Union og demokrati; Kayser Nielsen, Bonde; Thomsen, Industri and Hovedstrømninger.

10. Lund, Det norske, 93–110; Stråth, 1830–1920, 164–167; Thomsen, Industri, 179–180; Henriksen, Lampe and Sharp, “The Strange Birth,” 770–785.

11. While there is no data on the level of inward foreign investments, the four Nordic countries had significant trade balance defecits before World War I. According to Riitta Hjerppe’s data, the annual Finnish trade deficits (goods and services) amounted on average to around 6% of GDP 1890–1913. The deficits equalled around half of total investments. The Norwegian annual trade deficits amounted on average to almost 4% of GDP 1890–1913. This equalled around one sixth of estimated gross domestic capital formation. Net foreign liabilities in 1913 were calculated to be 800–850 million Norwegian kroner, i.e. one third of GNP. State and municipal loans constituted almost two thirds of net foreign liabilities whereas roughly one-third (c.12% of GDP) was direct investment in Norwegian companies. Sweden had deficits from 1898 to 1910, averaging at about 2.5% of GDP and 21% of total investments. Lennart Schön has calculated that total foreign liabilities amounted to 2.800 million Swedish kroner in 1910, that was, as in Norway, around one third of the GDP. Even Denmark, the most affluent of the Scandinavian countries, ran trade deficits before 1914, and had net foreign liabilities of about a fifth of GDP. All the Nordic countries improved their balance of trade during the interwar era, making them less dependent on foreign capital. See: Hjerppe, The Finnish Economy, Table 3A1; Stonehill, Foreign Ownership, 16–17; Det Statistiske Centralbyrå, Finansstatistisk, 20; Schön and Krantz, “Swedish Historical,” Table VI; Schön, “Kapitalimport,” 230–233, 44–45, 68; Hansen, Økonomisk 1720–1914, 233, 310 and Økonomisk 1914–1975, 28, 38.

12. Lipson, Standing Guard, 53–54.

13. Wilkins, The History, 579–587.

14. “Oplysninger om de fremmede lande gjældende bestemmelser”; McKay, Pioneers for Profit, 276–290.

15. See for instance: McMaster, “The Takashima Mine.”

16. Schön, En modern svens 237–239.

17. The following paragraphs are based on Jonsson, Staten och; Meinander, Gränges.

18. 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, 175–176; Myllyntaus and Tarnaala, “Economic Crisis,” 44.

19. See for instance Jonsson, Staten och, 16, 28, 30–31, 83–85; Meinander, Gränges, 72–73; Stråth, 1830–1920, 352.

20. Swedish National Archives, Civildepartementet, Konseljakt, 29.06.1888: Nr. 19. The company could theoretically circumvent this decision by founding a Swedish subsidiary, but this was not attempted.

21. Jonsson, Staten och, pp. 54–55.

22. Emellan svenska staten samt Loussavaara-Kiirunavaara aktiebolag, aktiebolaget Gellivare malmfält och. trafikaktiebolaget Grängesberg-Oxelösund är följande öfverenskommelse träffad. Appendix A of. Riksdagsproposition 107, 1907. The deal included the possibility for the state to buy the whole company after 25 years for a set price, which it eventually did in in 1957.

23. Kôersner, Lag om vissa, 6.

24. Nordlund, Upptäckten, 44–52.

25. In 1911, Wood products, pulp and paper accounted for around 42% of Swedish exports; Larsson, En Svensk, 61.

26. Nordlund, Upptäckten, 49.

27. This paragraph is based on Jörnmark, Skogen, 54; Nordlund, Upptäckten, 106–114; Sörlin, Framtidslandet.

28. This figure ist taken from Nordlund, Upptäckten, Table XIX. Another estimate can be found in Fritz, Svensk järnmalmsexport, 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.

29. Kôersner, Lag om vissa, 21–23.

30. Ibid., 22. Author’s translation.

31. Ibid.; Nordlund, Upptäckten, 54.

32. Justitiedepartementet Koncept 1918, 12.04.1918: Nr. 50 and Justitiedepartementet Koncept 1919, 07.02.1919: Nr. 26, Swedish National Archives.

33. Nordlund, Upptäckten, 121.

34. Rydbeck, “Utländsk kapitalplacering,” 73.

35. Hougen, Lov om aktiebanker 1924, 39–41.

36. See “Lov om Banker, 15.04.1930” in Danmarks Love 1665–1937. See also Hansen, “Bank Regulation,” 56–62.

37. Trolle, Om tobak, 11–23; Hellner, “Det svenska.”

38. Nordlund, Upptäckten, 206.

39. Ibid., 203–204.

40. Steckzén, Bofors, 455–476; Fransson, Bofors, 128–130.

41. Glete, Kreugerkoncernen, 199–219; Nordlund, Upptäckten, 56–57.

42. Hodne, Norges, 160, Table 6.

43. Mitchell, International, 546–547.

44. Thue, Statens kraft, 75.

45. Amundsen, Lov om erhvervelse.

46. Stonehill, Foreign Ownership, 36.

47. Haaland, Fra konsejonslov, 62.

48. Augdahl, Skogkoncessionsloven.

49. Amundsen, Lov om erhvervelse, 93.

50. Stonehill, Foreign Ownership, 41–43; Bergh and Lange, Foredlet virke.

51. Dugstad, “Chasing Waterfalls,” 52–54.

52. Storli, “Out of Norway,” 99–102; Dugstad, “Chasing Waterfalls,” 28–37.

53. Sandvik, Multinationals, 32–33.

54. Dugstad, “Chasing Waterfalls,” 107–109.

55. Stonehill, Foreign Ownership, 45–55.

56. This paragraph is based on Sandvik “Såpekrigen 1930–31”; Sandvik and Storli, “Confronting Market Power” and “Big Business.”

57. Michelsen and Kuisma, “Nationalism.”

58. Hjerppe and Ahvenainen, “Foreign Enterprises,” 288.

59. Ibid., 286–287; Eloranta, García-Iglesias, Ojala and Jalava, “On the Road,” 16–18.

60. The Norwegian interests in Tornator is described in Sogner and Christensen, Plankeadel, 93–95, 134–135.

61. Myllyntaus, Electrifying Finland, 61f; Hoving, Enso-Gutzeit, 166–172.

62. Hoving, Enso-Gutzeit, 167–169.

63. Hjerppe and Ahvenainen, “Foreign Enterprises,“ 289–290.

64. Hjerppe, “Svenska företag,” 328.

65. Hjerppe and Ahvenainen, “Foreign Enterprises,” 290.

66. Kuisma, A History of Outokumpu, 3–45.

67. Eloranta and Ilkka, “Finnish Nickel,” 328–331.

68. Hjerppe and Ahvenainen, “Foreign Enterprises,” 291–292.

69. Hjerppe, “The Significance,” 12, Table 3.

70. Luukkanen, “How to Deal,” 1–4; Hjerppe and Ahvenainen, “Foreign Enterprises,” 290.

71. Boje, Danmark.

72. Strandskov and Pedersen, “FDI into Denmark.”

73. Larsen, “Det nationale synspunkt.”

74. See Arbejdsudvalget, “Betingelser,” 51–67; Hodne, God handel, 100–101, 80–81.

75. Feldbæk, Løkke and Jeppesen, Drømmen om, 253–254. The Danish restrictions only encompassed life insurance, there was free competition in non-life insurance until 1930.

76. Lönnborg, “Skandiakoncernens,” 239–243; Larsson and Lönnborg, “The History,” 205–206.

77. Lov om Banker, 15.04.1930. See also Hansen, “Bank Regulation,” 56–62.

78. Thomsen, Industri, 208. The Danish quote is “vildt uenig.”

79. Herschend, Lov om Aktieselskaber 1917. When the law was revised in 1930 restrictions on foreign ownership were somewhat expanded and included banking and shipping. See Krenchel and Jacobsen, Haandbog.

80. Glamann, 75-foreningen.

81. Thomsen, Industri.

82. Boje, Danmark, 76–79, 106, 40–46.

83. “Lov om Udnyttelse af Vandkraften i Gudenaa, 20.03.1918” in Danmarks Love 1665–1937.

84. Pedersen, Danmarks, 117, 57; Fellman, Iversen, Sjögren and Thue, Creating Nordic Capitalism, 263.

85. For a detailed exposition on Danish regulations of agricultural property, see Jensen, Dansk Jordpolitik.

86. When Denmark lost the war against the German Federation in 1864 the border was moved north. As a result, a number of Danish citizens became German citizens. Some of these people owned estates north of the border. Their ownership rights were protected by peace treaty of Vienna. German ownership of Danish estates continued until 1945. This encompassed however a minimal share of Danish farmland. See Boje, Danmark, 80–84.