Public or private, cooperatives or hierarchy?

The early history of the Norwegian electricity sector provided the industry with a number of specific structures which became locked in as durable patterns. On of these was the separation of the industry into a dominantly public sector cooperative system in general supply structured in accordance with federative organizational principles, and a private large scale industry sector.

Through out the period a state hierarchical alternative challenged both, without significant success. In fact, a severe breakdown for the hierarchical program in 1922 led to a radical set back for the state-hierarchical program through out the period. At least one important reason for this breakdown was the highly rationalistic and complete reform strategy which prevented the reformers from establishing links and alliances needed to carry suggested reforms through the political system. In its absence, the cooperative system gradually developed a cross-regional organization with both bottom-up federative structures and strong hierarchical capacities and competencies, which forced through the ability to also direct NVE power plants. This provided the cooperative approach with an important instrument for sector coordination and governance.

The small scale cooperative program reinforced its position in between 1922 and 1935, but also experienced a gradual undermining of one of its core institutional elements; municipal autonomy. During the German occupation, the cooperatives once again reinforced its legitimacy in the role as a national defense line. Until the end of the war, the Norwegian general supply electricity sector remained predominantly cooperative in structure, headed by a still ambitious cooperative entrepreneurial collective with Samkjøringen in command position.

The third element which became an important durable part of the system, was the Concession Law system, which represented the national resource control issue. Important to note, is that apart from providing the state with a strong regulatory capacity, it also provided municipalities and counties with substantial institutional advantages both towards private national interests and towards state domination. National resource control and local and regional electricity sector collectives were thereby tied closely together, and private interests to a major extent became locked-out from the general electricity supply industry .

6 Re-shaping the electricity sector. State dominance, emerging complexity and unresolved controversies

Both war experiences and international political and economic developments were essential to the major transformation of the Norwegian electricity sector during the post World War II period. In particular to those who had been actively involved in the international warfare activities, the war left an overwhelming impression of the resource mobilizing and logistical capacity of the warfare states, as well as of the powers of and necessity of international political and economic cooperation. But, the war had also created an atmosphere of national unity and collective political values, a willingness to overcome traditional conflicts and to create a better society.

All of this transformed into a new active role of the Norwegian state in the civil society economy.

In the 1930’s, impressions from the rapid industrial growth and full employment in the Soviet Union had added political legitimacy and enthusiasm for economic planning and political governance of the economy – also among scientific economists. But, the new policy had even deeper roots in developments in the US in the post World War I period, were

“Fordism” and “Taylorism” came to dominate industrial organization thinking and practices. One example of a specific American project which came to represent a new model for large scale economic modernization, was the Tennessee Valley Authority (TVA) project decided by Congress in 1934.

It differed from traditional large scale industry projects by allocating an active role to public institutions and governments. The TVA was a huge public corporation which constructed dams and generated electricity, established fertilizer plants, controlled floods, restored forests etc. for the purpose of regional industrialization and economic growth in economically underdeveloped Tennessee (Yergin and Stanislaw, 1998:54).

In the wake of a dramatic bankruptcy in 1934 for the huge privately owned Edison Chicago Company headed by Samuel Insull, the TVA through its largeness and its public interest orientation became immensely popular by the Roosevelt “new deal” administration as a different approach. Despite vigorous counter forces within the US electric utility sector (Hughes, 1983:221-226) – the TVA became the more influential political model through its popularity with the government and the federal administration. It also made a substantial influence on the new generation of engineers through David Lilienthal’s best selling book: “TVA: Democracy on the March“

(1944). Large publicly owned companies and industry projects became the

completely dominating model in Europe after the war - with substantial support also from the American government.

The entrepreneurial collective which came to take power and to remake the Norwegian society with substantial force after the war, had been educated and trained under these international impressions and had been pulled together during the war by the exile government in London. It emerged out of ideas developed within the Labor Party in the 1930’s, out of war impressions, out of initiatives to take leadership after the war, out of developments within economic theorizing and out of close associations with international political allies, who directed and coordinated the new political and economic order in Western Europe. In an important sense, it also came to represent a continuation of the developmental approach of Gunnar Knudsen, which had come to a halt between 1921 and 1935.

Contrary to for instance in Great Britain and France, where the state nationalized a number of large industries including the entire electricity industry, the local cooperative collectives had strengthened their political legitimacy within the Norwegian electricity sector during the war. The exile government and state administration which arrived back in Norway in 1945, accordingly faced a strengthened small scale cooperative rival to their large scale industrial modernization program back home.

By taking control of the “commanding heights” within the state administration and by establishing tight relationships with the Oslo School of Economics and the many new groups of professionals within various sectors of society, the new Labor Party regime managed to establish a system which to a great extent balanced and integrated the large scale program with the traditional cooperative. Politically and professionally governed sector hierarchies were combined with popular and democratic participation in cooperative organizations. Rather than confronting the cooperative program, the new entrepreneurial collective sought to enroll the cooperative governance systems by giving them specific roles within its own hierarchical model. When observed from the point of view of the cooperative organizations, the roles they were given provided opportunities for influence and exploitation of the regulatory capacity of the state for their own purposes. This mutual transformation and enforcement of state hierarchy and cooperative programs is broadly seen as the trademark for the Norwegian post-war corporate governance model.

In sectors of the economy with strong cooperative traditions, national cooperative organizations had already before the war been given substantial political roles and responsibilities. In many instances they came to represent something in between a state directorate and an open membership

association – or rather a mix of both. In the electricity sector, the corporate system was primarily based on a combination of an active direct state engagement represented by the NVE and the cooperation of generators (including NVE) in various regional cooperatives similar to Samkjøringen, which gradually merged into one national organization as the regional electricity networks became linked to one national transmission network in 1970.

6.1 Hierarchy or markets? Rival collectives in economic