Fjords and Firearms: Military Spending, Economic Growth, and Technological Innovation in Post war Norway

Abstract

Both economists and policy makers disagree on the effects of significant military spending on the economy during peacetime. By looking at Norway, a small but advanced nation with a complex economy and a mixed history of military spending, a case study can be made on the positive and negative influences of military spending. In order to understand this connection, two key national indicators should be analyzed in Norway during the Cold War: military spending and economic growth, as represented by the change in both real gross domestic product (GDP) and GDP per capita over time, while paying particular attention to research and development (R&D). The Norwegian military establishment took a significant turn after the Second World War as military spending increased dramatically and Norway began receiving significant investments by Western nations, specifically the United States. As Norway reached the end of the twentieth century, however, relative military spending began to decrease and the military’s role in technology and innovation shifted to the civilian sector. Arguably, one of the most significant contributions of the Norwegian military sector in the twentieth century has been the slow conversion of military R&D to civilian R&D within the public sector; this conversion has provided firms with a constant flow of human resources and enabled the success of Norway’s technology-driven industries.