1

From Conflict to Cooperation

Norwegian Labor Market Institutions
in the Making

Jon Reiersen
*
Vestfol !ni"ersit# College
$%&% 'o( ))*+, +1-+ ./nsberg
Norwa#

Abstract:
.he signing of the so0calle 1'asic 2greement3 between the Norwegian
4mplo#ers Confeeration 5N2F6 an the Norwegian Confeeration of .rae
!nions 5L&6 in 17+8 marks a turning point in the histor# of labor relations in
Norwa#% .he 1'asic 2greement3 prouce a lasting rop in the le"el of strikes
an lockouts, an it was an important earl# step towars centrali9e wage
bargaining% :hat mae the 1'asic 2greement3 possible; From the earl# 17)-s to
the mi 17+-s Norwa# ha one of the highest le"els of inustrial conflicts in
4urope% Class conflicts were intense an the relationship between emplo#ers an
unions was marke b# wiesprea mistrust% :hat e(plains the transition from
conflicts an mistrust to the kin of uni<ue cooperating relationship that
characteri9es the Norwegian moel of labor relations e"en toa#; .he article
asserts that the situation the parties in the labor market face can be "iewe as
a coorination game, where the ecision to cooperate or not is etermine b# the
parties beliefs about each other% .he article ientifies critical e"ents that
transforme the parties= beliefs in the #ears before 17+8 > beliefs that earlier
mae it ifficult to o"ercome the situation of mistrust%


*
$aper prepare for the conference 12 Noric Moel;3, !ni"ersit# of Flensburg, June ? >
7, )-1+% I thank @alle Moene an .heo Achewe for helpful comments%
)

1 Introduction
.he economic moel that characteri9es the Noric countries has recei"e
a great eal of positi"e attention in recent #ears% :hat has been of
particular interest is the abilit# of the Noric countries to secure high
economic growth an a health# econom# o"er long perios of time
combine with an e(tensi"e e<uali9ation of income an li"ing conitions%
:hat has mae this rather unusual combination of efficienc# an e<ualit#
possible;
Moene an :allerstein 51778a,bB )--C6 argue that coorinate or
centrali9e wage bargaining has been essential in orer to secure both
e<ualit# an efficienc# in the Noric countries% .he# show that man# of
the central features often associate with the Noric moel are a irect
result of how wages traitionall# ha"e been etermine in the Noric
countries% .he# share with man# others the "iew that that centrali9e
wage bargaining has been essential for the e"elopment of the Noric
moel%
1
Moene an :allerstein pro"ie se"eral arguments to Dustif# their
claim% For instance, centrali9e wage bargaining prouces a higher
willingness among the unions to moerate their wage emans, e"en
when unemplo#ment is low% .his has mae it easier for the go"ernments
in the Noric countries to maintain full emplo#ment through their
stanar polic# instruments% 2nother important conse<uence of
centrali9e wage bargaining is wage e<uali9ation% Centrali9e wage
bargaining has mae it possible implement so0calle soliaristic wage
polic#% Aoliaristic wage polic# is base on the iea that that the wages of

1
Aee also Cameron 517E*6, Calmfors an Friffil 517EE6, Moene an :allerstein 5177+6,
I"ersen 517776, La#ar, Nickell an Jackman 5)--86, $ontusson 5)--86 an Mares 5)--C6
among man# others%
+

the lowest pai shoul be lifte while the wages of the highest pai shoul
be hel own > an this t#pe of wage polic# has o"er time prouce a
compression of wages an a highl# egalitarian istribution of income in
the Noric countries% Centrali9e wage bargaining has also mae it
possible to put the e(port inustries 1in front3, meaning that the wage
growth in the econom# as a whole is fi(e to the growth of wages in the
e(port sector% .his has prouce a situation where wages throughout the
econom# has been tie to the conitions in the e(port sector an the
competition the# face on the international market% .his arrangement has
been essential for the Noric countries since the# are small open
economies, hea"il# epenent on securing their competiti"eness% In
aition centrali9e wage bargaining an soliaristic wage polic# has
contribute to high proucti"it# an competiti"eness b# stimulating the
growth of efficient an inno"ati"e enterprises% :hen wages are set on a
centrali9e le"el, firms with high proucti"it# are able to get awa# with
moerate wage premiums, pushing up profits an in"estments in high0
proucti"it# firms% 2t the same time, firms with low le"els of proucti"it#
are pre"ente from sta#ing in business b# pa#ing low wages% 2ltogether
this contributes to a "irtuous circle of structural change in the econom#%
'ase on these arguments it is fairl# safe to sa# that centrali9e wage
bargaining has helpe the Noric countries in achie"ing a fairl# efficient
allocation of resources an a relati"el# egalitarian istribution of income%
2n issue that has been far less stuie, howe"er, is the forces that
initiall# contribute to the formation of centrali9e wage bargaining%
:hat mae the Noric labor market moel possible; !ner what
conitions were the first steps towar centrali9e wage bargaining taken;
In Norwa#, an important step was taken with the signing in 17+8 of the
*

1'asic 2greement3 between the Norwegian Confeeration of .rae !nions
5L&6 an .he Norwegian 4mplo#ers= Confeeration 5N2F6% .he 'asic
2greement establishe the labor markets peak organi9ations right an
obligations, an it sat own rules for collecti"e bargaining at the inustr#
le"el% .he establishment of the 'asic 2greement represente an
important contribution towars an e(tensi"e collaboration between two of
the main actors in the Norwegian labor market > a collaboration that has
been essential for the e"elopment of centrali9e wage bargaining in
Norwa#, an for the Norwegian labor market moel in general% 2lthough
the 'asic 2greement has been altere throughout the #ears in orer to
respon to new circumstances, the agreement still pla#s a ke# role in the
regulation of the relationship between the parties of the Norwegian labor
market%
It was not, howe"er, gi"en that the parties of the labor market in Norwa#
woul e"elop a collaboration between labor an capital that was as
e(tensi"e as the one outline b# the 'asic 2greement of 17+8% It is a
general "iew among Norwegian historians that the signing of the 'asic
2greement marks a turning point in the histor# of labor relations in
Norwa#% It prouce a lasting rop in the le"el of inustrial conflicts% .he
#ears prior to 17+8 are often referre to as the 1perio of crisis an
struggle3 in Norwa#% !nemplo#ment was at a recor high, as was the
le"el of labor conflicts% Furing the perio from 17)1 to 17+8, 1,1-- labor
conflicts took place > almost the same amount of conflicts that ha"e taken
place in Norwa# in the entire postwar perio 5see Figures 1 an ) below6%
Furing the same perio, )+ million work a#s were lost in strikes an
lockouts > an e(tremel# high number for a small countr# with Dust uner
three million inhabitants 5at that time6% 2long with Aween, Norwa# ha
8

one of the highest le"els of labor conflicts in 4urope uring the interwar
perio% .he relationship between the parties of the labor market was in no
wa# characteri9e b# trust, cooperation an compromises > concepts that
are emphasi9e toa# when the Noric moel is escribe%
:iesprea conflicts an lack of trust are of course not a goo starting
point for establishing cooperation% .he high le"el of conflicts between the
unions an the emplo#ers contribute in shaping the parties= beliefs about
each other > beliefs that inicate that the opposite part# was not
prepare to cooperate% It was not, howe"er, onl# the numerous an
e(tensi"e conflicts that shape the parties= beliefs about each other% 2
significant prouction of ieas took place that further eepene the
mutual mistrust% .he emplo#ers an the labor process were interprete b#
the labor mo"ement using Mar(ist0inspire concepts like 1conflict3 an
1struggle3% From the beginning, the labor mo"ement built upon a
worl"iew in which the struggle between the working class an the
capitalists ser"e as its basis% .his was "iewe as being a struggle that
woul not en before the unDust class societ# was abolishe, an a new
social orer base on socialist organi9ations of prouction was
establishe% :ithin this interpreti"e framework, cooperation with the
emplo#ers implie a legitimi9ation of an opposing part# whose remo"al
was actuall# esire% .his ob"iousl# mae the strateg# Gcooperation=
ifficult to think of for the unions% 2t the same time, it was ifficult for
the emplo#ers to accept an opposite part# that belie"e their e(istence
was unesirable, an in aition create inDustice%
.he relationship between the parties of the labor market uring the
interwar perio was inee problematic, an these problems was relate
C

both to the struggle of how "alues shoul be istribute an to how the#
percei"e the other part#=s long0term goals% 2s pointe out b# Moene an
:allerstein 5)--C6 trust, cooperation an mutual respect were in no wa# a
prere<uisite for the Noric moel, as man# international obser"ers seem
to belie"e% .rust, cooperation an mutual respect shoul instea be
regare as being a result of the Noric moel%
)
'ut this begs the <uestion
of how it was possible to make the transition from eep ieological
conflicts an open class struggle to the trusting cooperati"e relationship
that emerge in the Norwegian labor market uring the interwar #ears;
:hat le the parties, both of which carrie a historical e(perience of 1the
other3 as the enem#, to begin to seek out cooperation; How i L& an
N2F manage to unite behin a broa cooperati"e agreement in 17+8 > an
agreement that lai out the founation for an e"en more e(tensi"e
cooperation in the perio that followe;
+

.he central argument of this paper is that cooperation is ifficult to
achie"e if the parties in"ol"e ha"e a belief that opponent is not willing to
cooperate > an this was the situation in the Norwegian labor market in
the interwar perio% 2fter se"eral #ears with intensi"e conflicts the
parties in the labor market carrie with them the beliefs that the other
part# was not intereste in cooperation% .his le both to choose 1conflict3
as their main strateg#% .he outcome was conflict, which in turn confirme
the parties= beliefs that the opposite part was not intereste in
cooperation% .he parties were caught in a situation where istrust an

)
.he relationship between the unions an the emplo#ers in the interwar perio in
Aween share man# of the same features as in Norwa#% Aween got their 'asic
2greement in 17+E%
+
Rothstein 5)--86 asks the same <uestion with reference to Aween% M# anal#sis is
hea"il# influence b# the wa# Rothstein frame the <uestion, e(cept that m# empirical
case is Norwa# an not Aween%
?

lack of cooperation le to reinforce istrust an lack of cooperation% 'ut if
#ou ha"e ene up in a situation like this, how o #ou get out of it; I
argue that uring the interwar perio se"eral e"ents took place which
contribute to a graual change in the parties= beliefs about each other%
.hese e"ents where relate to changes in both internal an e(ternal
factors, changes that that transforme the parties= 1mental maps3 an le
them to change their main strateg#%
.he rest of the paper is organi9e as follows% In the ne(t section, I gi"e a
short escription of the Norwegian labor market uring the interwar
perio% .he obDecti"e is to emonstrate that this perio was marke b#
problematic inustrial relations an e(tensi"e conflicts% .hese conflicts
shape the beliefs of the emplo#ers an the members of the trae union
mo"ement > beliefs that mae it ifficult for the parties to reuce the le"el
of conflict an to seek out compromises% In section +, this iea is
formali9e within a simple game theoretical framework% I argue that the
situation the parties face has the character of a coorination game > an
that the beliefs the parties carr# with them are critical for the outcome of
this game% In section *, I ientif# se"eral e"ents that were important for
the graual change in beliefs both among the emplo#ers an in the trae
union mo"ement% .hese changes in beliefs were necessar# in orer for the
parties to mo"e awa# from conflict as their main strateg# an to seek
cooperation% .hese cooperating efforts calumniate with the signing in
17+8 of the famous 'asic 2greement%




E

2. Struggle, conflict and mistrust
.he Norwegian labor market ha been through e(ceptionall# conflict0
fille #ears before an important change took place with the signing in
17+8 of the 'asic 2greement between L& an N2F% .his is illustrate in
Figures 1 an )% Furing the ten0#ear perio between 17)8 an 17+8,
there were, for e(ample, Dust as man# work conflicts in Norwa# as in the
fift#0#ear perio from 17*8 to 177C% .he conflicts in the interwar #ears
often laste long an in"ol"e man# people% .his is reflecte in the loss of
worka#s in this perio 5see figure 16% In the ten0#ear perio from 17)1 to
17+1, an entire )) million worka#s were lost ue to strikes an lockouts%
.he corresponing number for the ten0#ear perio between 1781 an 17C1
was Dust uner two million, while uring the perio from 17C) to 17?),
onl# *--,--- worka#s were lost%
*

Howe"er, it was not Dust the relationship between the parties in the labor
market that was turbulent uring the interwar #ears% .he entire
Norwegian econom# was affecte b# powerful up0an0own swings% In
17)-, an international recession struck the Norwegian econom#, with
falling prices an loss of Dobs as an immeiate effect% !nemplo#ment
among union members increase from )%+I to 1?%CI from 17)- until
17)1% In subse<uent #ears, there was "irtuall# no growth in the
Norwegian econom#% In 17)?, unemplo#ment among unioni9e workers
was )8%*I 5AA', 17C76%


*
.he 'asic 2greement inclue a so0calle peace obligation that prohibite strike an
lockouts after a central agreement was signe% .his peace obligation helpe in proucing
a lasting rop in the le"el of inustrial conflicts in Norwa# > as illustrate in figure 1 an
)%
7

Figure1 Millions of workdays lost due to labor conflicts

Source: Atatistics Norwa#

Figure ) Number of labor conflicts


Source: Atatistics Norwa#

1
2
3
4
5
6
7
8
1920 1930 1940 1950 1960 1970 1980 1990 2000
0
50
100
150
200
250
300
1920 1930 1940 1950 1960 1970 1980 1990 2000
1-

In 17+-, Norwa# was hit har b# the international recession following the
:all Atreet crash of 17)7% $rouction stagnate again an uring the
perio from 17+1 to 17+8, unemplo#ment in Norwa# was on a"erage at
)7I among union members 5AA', 17C76%
Atagnating prouction, high unemplo#ment an falling prices were the
main sources behin man# of the labor conflicts in Norwa# uring the
interwar perio% In particular, falling prices an emans b# emplo#ers to
make cuts in nominal pa# represente an essential source of conflict% :ith
the e(ception of the #ears from 17)+ to 17)8, the prices in Norwa# fell
continuousl# from 17)- until 17+* > the #ear before the 'asic 2greement
was reache%
.he #ear 17+1 was particularl# fille with conflict > create precisel# b#
the emplo#ers= eman for eep cuts in wages% :hen L& i not compl#
with this, the emplo#ers announce a big lockout% .he lockout laste for
fi"e months, an le to the loss of ?%C million worka#s% .he actual
intention of the lockout has been much ebate, but L& interprete it at
that time as being to 1() force the entire union movement to its knees.3
5'D/rgum, 17E86% .he economic ownturn with recor high unemplo#ment
ha weakene L&% .he strike funs were almost empt#, something that
the emplo#ers were full# aware of% In aition, the emplo#ers were in a
politicall# strong position% .he political right ha secure a maDorit# at
the election in 17+-, an in the ominant conser"ati"e press there was a
massi"e agitation against 1the union monopol#3 an 1union t#rann#3%
.hus, the great lockout of 17+1 was at that time interprete as if the
emplo#ers were looking for a final confrontation with the unions
5'D/rgum, 17E86%
11

.he #ear 17+1 was also characteri9e b# one of the most ramatic e"ents
in moern Norwegian labor histor#, the so0calle 'attle of Mensta% .he
incient starte with se"eral thousan union members emonstrating
with emans to stop what the# consiere to be strike0breaking at the
warehouse an offloaing place, Mensta% .he police were calle to stop
the emonstration, but were chase awa#% .he go"ernment therefore
ecie to sen in arme militar# forces against the workers% .his
ecision was mae e"en though the go"ernment knew that fi"e workers
ha been kille b# militar# troops calle in as backups for the police in a
similar incient in Jalen in Aween, Dust four weeks prior to the
Mensta conflict% .he 'attle of Mensta garnere huge s#mbolic
importance 5as i the Jalen shootings in Aween6% For man# within the
trae union mo"ement the e"ent ser"e as a confirmation that the
workers= interests coul not be secure through cooperation with the
emplo#ers% Funamental changes in societ# were neee% .his stanpoint
was also publicl# e(presse b# the Labor $art#, who were 5an still are6
L&=s closest all#% .he Labor $art# aopte the following statement at its
part# conference in 17+-K 1The labor movement must have complete
freedom to act toward the capitalist class and the capitalist state. The
party is therefore an opponent of every form of cooperation between classes
()3% It is worth noting that this statement was written an appro"e
onl# a few #ears before the 'asic 2greement was negotiate between L&
an N2F%
.here were also se"eral large conflicts in the #ears prior to 17+1, conflicts
that make it ifficult to e(plain how the parties in the labor market coul
unite behin a comprehensi"e cooperation agreement in 17+8% .he #ears
from 17)1 until 17)E were particularl# turbulent% Large segments of the
1)

Norwegian working class ha been highl# raicali9e after the Ao"iet
re"olution in 171?% In this political setting, the emplo#ers= main goal was
to fight own the raical opposition within L&% N2F strongl# feare the
conse<uences of an increasingl# politici9e labor mo"ement, an the#
were therefore in close contact with the go"ernment to gain assurances
that the militar# woul inter"ene in an# illegal actions taken b# unions%
.he go"ernment ga"e this assurance% .he# publicl# state that the#
woul inter"ene with force an that the# were well prepare for a full
confrontation with the labor mo"ement if necessar# 5@nutsen, 17E86%
Feeling that the# ha the go"ernment on their sie, an with steail#
growing unemplo#ment, the emplo#ers got on the offensi"e% .he#
emane huge cuts in wages > cuts that were impossible for the unions
to accept% In 17)1, for e(ample, seamen were face with a eman for a
++I nominal wage cut, which espite falling prices, meant a substantial
reuction in real wages% L& was con"ince that other groups of workers
woul face similar emans if the seaman ha to gi"e in% .hus, the# took
1)- --- workers out on strike, a number that was nearl# the e<ui"alent of
L&=s entire membership% Howe"er, the emplo#ers ha no problems with
recruiting strikebreakers, an "iolent confrontations arose between the
strikers an strikebreakers in se"eral places in Norwa#% .he police an
soliers were calle in to protect the strikebreakers, an later the
go"ernment also passe new laws that were intene to protect the
strikebreakers% .he general strike ha to be broken off after se"eral
weeks an ene with an absolute efeat for L&% Man# i not get their
Dobs back after the strike, an L& lost +CI of its members% .he conflict le
to intensifie bitterness, not Dust between L& an N2F, but also between
L& an the go"ernment%
1+

.he tension between L& an N2F was maintaine with more strikes an
lockouts throughout the 17)-s% .he source for these conflicts was in most
cases N2F=s eman for substantial reuctions in wages% Amall local
conflicts were often e(pane to wie0ranging lockouts, which se"erel#
raine L&=s strike funs% N2F hope that the pressure woul be so great
that L& woul e"entuall# capitulate an accept the cuts in wages%
Howe"er, L& emonstrate a greater abilit# to refuse the cuts than the
emplo#ers ha initiall# counte on 5Fahl, 17E16%
In 17)?, a new imension was introuce into the relationship between
L& an N2F, an between L& an the go"ernment% N2F=s lockout that
#ear was interrupte b# a state0impose resolution% .he resolution was
clearl# in the emplo#ers= fa"or% For the first time in Norwa#, force
arbitration was use to ri"e own the worker=s real wages 5Fahl, 17E16%
L& felt too weak to fight 5that is, engage in an illegal strike6 against the
resolution, which thereb# etermine the wages that #ear% .he wage
settlements in 17)E were also etermine b# force arbitration% 2gain the
emplo#ers ha e"er# reason to be satisfie% .he ruling in"ol"e a wage cut
b# 1)I, which meant a reuction in real wages b# *I 5Fahl, 17E16%
Howe"er, this time the workers i not accept the ruling% 2 number of
illegal strikes broke out > an these were Dust as much irecte towars
the go"ernment=s ruling on wage etermination as the# were against the
cuts in real wages% .he emplo#ers e(pecte that the authorities woul
inter"ene in orer to put a stop to the illegal strikes% Howe"er, the
antagonism, bitterness, an mistrust between the parties ha intensifie
to a point where the go"ernment wante to withraw entirel# from the
wage bargaining process% .he# seeme to ha"e reali9e that the# were
practicall# powerless in pre"enting conflicts to e"elop% 4ntering the
1*

17+-s the parties in the labor market were left more or less alone to
ecie future agreements%

3. The problem with cooperation
How i the parties within the Norwegian labor market manage to mo"e
out of a state characteri9e b# open conflicts an istrust to a situation in
which labor peace an cooperation emerge is the ominant picture;
Aome concepts from game theor# will help to illustrate that stepping out
of conflict is not an eas# task, e"en when the parties is well aware that
the# ha"e much to gain b# establishing an agreement without going to
conflict%
2ssume for simplicit# that L& an N2F ha"e two strategies a"ailableB
Gconflict= 56 an Gcooperation= 5!6% .he matri( in Figure + specifies the
pa#off for the two parties for the ifferent strateg# combinations, where
o > b > c > J 5an the pa#off for L& on the left in each s<uare6% .he
game illustrate in Figure + is an 2ssurance game, or a Coorination
game as it is also sometimes labele% .his game has two Nash e<uilibria
in pure strategiesK !"! an ". If L& chooses !# it is best for N2F
to choose !% If N2F chooses # it is best for L& to choose . .he same is
true if we consier the situation from N2F=s perspecti"e% .he game oes
not sa# an#thing about which e<uilibrium the parties actuall# en up in,
an this is true e"en though both parties prefer !"! to "% If both
parties initiall# belie"e that the other pla#er will choose , both will chose
, an the e<uilibrium !"! will be out of reach%


18

Figure + The $ssurance %ame


.he 2ssurance game formali9es a t#pical situation where the rational
thing to o is conte(t epenent% .hat is, it can be rational to cooperate
but it can also be rational not to cooperate% .he choice of strateg# epens
on how the pla#ers percei"e the probabilit# that the other5s6 will
cooperate or not% .he 2ssurance game also illustrates that it can be "er#
ifficult for the parties to mo"e out of the e<uilibrium " when the
parties fin themsel"es in that situation% 2s Figure + shows, there is a
clear risk associate with choosing !. In choosing !# when the other
pla#er chooses # the first pla#er will recei"e the lowest pa#off J. .he
ilemma for both pla#ers is thus that ! gi"es the opportunit# of
recei"ing the highest pa#off o, but also a possibilit# of recei"ing the lowest
pa#off J% In other wors, in choosing # a pla#er safeguars itself against
the worst outcome% In orer for the parties to be willing to choose !# the#
must ha"e a clear unerstaning 5an assurance6 that the opposite part#
will also choose !. Viewe in the light of the 2ssurance game it is
therefore not ifficult to e(plain wh# L& an N2F, as soon as the# foun
themsel"es in a situation characteri9e b# constantl# open conflicts, acte
NA
!"
Cooperation Conflict
o , o
Cooperation
Conflict
J , b
b , J c , c
1C

in a wa# that reprouce that same situation% .he parties= belief of realit#
was that the opposite part# ha no intention of cooperating, beliefs that
were forme b# se"eral #ears of conflict% Holing this belief it mae no
sense for them to choose the strateg# Gcooperation=%
.his reasoning can be mae more e(plicit b# efining p as pla#er $&s belief
about the probabilit# that ' will cooperate% Cooperation gi"es an e(pecte
pa#off of po + (1 p)J# while conflict gi"es an e(pecte pa#off of pb +
(1 p)c% $la#er $ chooses cooperation if po + (1 p) J > pb + (1 p)c,
which gi"es
(1) p >
c J
o b + c J
p

516 sa#s that if $ percei"es the probabilit# that ' will cooperate as less
than p

, $ will choose conflict% 2lternati"el# put, $ will onl# cooperate if $

trust that ' will reciprocate cooperation, where the parties= trust is
reflecte in the belief the# ha"e about the probabilit# that the other sie
will cooperate% .he situation is also illustrate in Figure *% .he e(tensi"e
labor conflicts in the 17)-s an +-s were costl# for both the emplo#ers an
the emplo#ees% Atill, none of the parties ha an# incenti"e to refrain from
threatening with continue conflict in orer to get their emans met as
long as the opposite part# use the same strateg#% 2s note, refraining
from conflict woul easil# impl# getting a worse outcome than the# coul
ha"e otherwise manage to push through 5J instea of c6% Howe"er, when
both parties threaten with conflict, such conflicts are also constantl# going
to arise, since the threat of conflict is onl# creible o"er time if a part#
actuall# chooses to carr# out what it has threatene%
1?


Figure * The willin(ness to cooperate depends on the level of trust

.he e(tensi"e labor conflicts in the 17)-s an +-s were costl# for both the
emplo#ers an the emplo#ees% Atill, none of the parties ha an# incenti"e
to refrain from threatening with continue conflict in orer to get their
emans met as long as the opposite part# use the same strateg#% 2s
note, refraining from conflict woul easil# impl# getting a worse outcome
than the# coul ha"e otherwise manage to push through 5J instea of c6%
Howe"er, when both parties threaten with conflict, such conflicts are also
constantl# going to arise, since the threat of conflict is onl# creible o"er
time if a part# actuall# chooses to carr# out what it has threatene%
If we relate this reasoning to Figure *, we can sa# that in the interwar
perio in Norwa# the parties in the labor market carrie with them beliefs
about the probabilit# of the opposite part# to cooperate that lie to the left
of the critical point p

. Conflict thereb# became a self0reinforcing process,

where the pla#ers= beliefs shape the pla#ers= actions, which in turn
affecte the pla#ers= beliefs, etc% .he parties ha beliefs telling them that
the other part# was not prepare for cooperation% .his le both to choose
conflict% .he outcome was conflict, which in turn confirme the parties=
beliefs% L& an N2F were trappe in a situation where istrust an a lack
p
0 1
p
)

Conflict Cooperation
Mistrust brees mistrust
?
.rust brees trust
1E

of cooperation le to reinforce istrust an lack of cooperation% .his leas
us to the <uestion of how the parties manage to mo"e out of this state%
:hat irecte the parties, both of which carrie with them a belief about
1the other3 as enem#, to seek out cooperation;

#. $hanges in beliefs
It is possible to pin own a number of e"ents that le the parties of the
labor market to grauall# change their beliefs about each other, changes
that finall# le them to agree on the famous 1'asic 2greement3 in 17+8%
.he fight against unemplo#ment an the <uestion about how the
economic crisis that characteri9e Norwa# shoul be met, was particularl#
important% 'ut, as illustrate in Figure 8, there were also other e"ents
that contribute to a change in the relationship between L& an N2F,
an the beliefs the# ha of each other% .hese e"ents will be further
iscusse below%








17

Figure 8 *evelopment of trust

#.1 The partnership of the top leaders
Fespite all the conflicts uring the interwar perio, there was clearl# a
willingness among L& an N2F to cooperate an compromise% Let this
willingness was primaril# e(presse though informal contacts an
meetings between the top leaership of the two organi9ations 5'ull, 17E*B
@nutsen, 17E86% It has been ocumente that these informal meetings
affecte the outcome of se"eral of the conflicts in the 17)-s 5@nutsen,
17E86% Atill, the inirect effects of these meetings were probabl# more
important% .he# contribute to the graual establishment of trust
between the top leaership of the two organi9ations%
$artnership of
the leaers
:ithrawal of
the go"ernment
Rationali9ation
$ower balance
Mrowth of
fascism
Fights against
unemplo#ment
Crisis plans
New alliances
.R!A.
)-

2n earl# e(ample of contact between the leaership of L& an N2F is
relate to the struggle against the s#nicalist an communist opposition
groups within the union mo"ement% :ith an increasingl# raicali9e labor
mo"ement, the leaership of N2F took the initiati"e to cooperate with the
leaership of L& in the earl# 17)-s% .he# wante to support an
strengthen the position of the more moerate leaers within L&%
Howe"er, the leaership of N2F i not get support for such a
collaborati"e strateg# within its own organi9ation% .he emplo#ers in
general thought there was no reason to show eference to L&% .he# were
con"ince that the go"ernment woul inter"ene resolutel# on an# illegal
actions on the part of unions% 4"en so, the e"ent illustrates a certain
change in attitue, particularl# among the leaers of the two
organi9ations% 2 new form of trust was establishe%
2 somewhat later e(ample of the fact that there was a willingness to
compromise throughout the conflicts is the contact that L& an N2F ha
prior to the wage settlement in 17)8% .his was negotiations at the highest
le"els between the two organi9ations, negotiations that took place in the
utmost secret 5@nutsen, 17E86% Aimilar negotiations also contribute to
ening the e(tensi"e an illegal construction workers= strike of 17)E
5'D/rgum, 17E86% Let this time, it was not a goal to keep secret the fact
that the leaership of the two organi9ations ha reache a compromise%
For the first time, the parties publicl# e(presse a esire to cooperate, an
that this coul be of benefit to both parties% .he L& chairman officiall#
referre to the occasion as 1() a victory for both or(ani+ations.3
5@nutsen, 17E8K *-?6% 2 clear unerstaning of the benefits of ialogue,
negotiations an compromises seeme to ha"e been e"elope%

)1

#.2 The withdrawal of the go%ernment
2s note, se"eral arbitration rulings throughout the 17)-s were clearl# in
the emplo#ers= fa"or, an these ser"e as confirmation that the emplo#ers
ha the go"ernment on their sie% Howe"er, this situation change towar
the en of the 17)-s% .he go"ernment seeme to be increasingl# powerless
with regar to the man# of the labor conflicts that were t#pical uring this
perio% In 17)?0)E, the conser"ati"e go"ernment ga"e increasingl# clear
signals that the# wishe to withraw from the wage bargaining process
an lea"e the wage settlement to the parties of the labor market% .his
position was affirme b# subse<uent go"ernments% :ithout guarantees
from a powerful thir part# who coul enforce a particular resolution
5often in the emplo#ers= fa"or6, it became increasingl# clear that the
emplo#ers ha to make a ecision between continue confrontation, an
greater efforts towar cooperation% .he last strateg# seeme to grauall#
gain internal groun among the emplo#ers%

#.3 &ationali'ation
.he 17)-s were also a time uring which the <uestion of moerni9ation
an rationali9ation of the prouction process became increasingl# more
rele"ant% .echnological changes an the impro"e efficienc# of the work
process force the labor mo"ement to take a stan to the <uestion of
whether rationali9ation was a goo or an e"il% :oul rationali9ation lea
to increase prouction with fewer Dobs > or is rationali9ation necessar# in
orer to make space for increase wages an the creation of Dobs; Leaing
actors within L& e"entuall# got behin the last "iewpoint% 2 belief sprea
throughout the union mo"ement that increase proucti"it# an higher
earnings for the companies coul be more effecti"e in achie"ing the goals
))

of work for e"er#one, increase wages an better work conitions, than
strikes an class0struggle% Impro"e proucti"it# an increase
prouction also implie that the cost of prouction stops grew% Lockouts
therefore seeme less an less attracti"e for the emplo#ers% Cooperation
with the unions looke more appealing in orer to hiner prouction
stanstills%

#.# (ower balance
In 17+1, the most wie0ranging labor conflict in Norwa# to that ate took
place% .here is a wiesprea "iew among Norwegian historians that this
conflict ene 1in a raw3 > but with great financial losses on both sies%
N2F ha built up significant ebt an L&=s strike funs were nearl#
empt#% 2 power balance appeare to ha"e been establishe% It ha been
seriousl# emonstrate to N2F that the organi9e labor mo"ement ha
come to sta#, an L& unerstoo from its perspecti"e that if it was going
to safeguar the members= income an Dobs, the# ha to seek out solutions
that i not threaten the companies= e(istences% 'oth parties seeme to
reali9e that labor an capital were tie to one another whether the# like
it or not% Hence, the massi"e conflict of 17+1 was an important
contribution in promoting an unerstaning among both parties that
conflict an struggle were neither in the workers= nor the emplo#ers=
interest% Cooperation o"er moerni9ation an a reasonable istribution of
the profits was necessar#%

#.) Shift to the right
.hroughout the 17+-s, the international political climate was increasingl#
characteri9e b# a rightwar shift in state an societ#% Fascism=s growth
)+

in particular represente a serious threat to the organi9e labor
mo"ement% In countries like Ital#, Apain, Merman# an 2ustria, a
eliberate polic# was carrie out in orer to estro# an split up the union
mo"ement% Incients throughout 4urope in which union leaers ha been
imprisone, abuse an kille were continuall# reporte in the press% In
Norwa#, the Farmers $art# took o"er the go"ernment in 17+1% .his
marke a transition to a polic# that was more hostile towars unions, an
a clearer right0wing acti"ism in the rest of the societ#% .his shift in
politics le to it being increasingl# more important for the leaership in
L& to a"oi big conflicts with the emplo#ers an the go"ernment > which
coul then lea to the labor mo"ement being grauall# left essentiall# on
its own% 2n escalation of the conflicts coul threaten the labor mo"ement
e"en in Norwa#% It became more an more apparent to the leaership of
L& that cooperation o"er pragmatic solutions was necessar# > precisel# to
a"oi ening up in the same esperate situation that the labor mo"ements
in man# other countries foun themsel"es in%

#.* ighting unemplo+ment
.he fight against the recor high unemplo#ment also pla#e an important
role for bringing L& an N2F closer together% .he official an most
utili9e unemplo#ment statistic shows an unemplo#ment rate at ++I in
Norwa# in 17++% :ith unemplo#ment at this le"el there is reason to
belie"e that L& unerstoo that it ha a responsibilit# in the efforts to get
unemplo#ment own, an that the constant labor conflicts represente an
obstacle to this% .he statement mae b# the L& chairman at the L&
congress in 17+) can be interprete as being an e(pression for such an
unerstaningK 1The Norwe(ian ,ederation of Trade -nions must now
)*

take political and social factors into consideration based on the collective
workin( class& interest%3

#., $risis plans
In an attempt to aress the high unemplo#ment an economic recession,
the Labor $art# launche their so0calle 1Crisis plan3 in 17+*% .his plan
marke an initial cautious alternati"e to the ominant economic thinking
at the time% In orer to increase prouction an emplo#ment, the state
was ascribe a more acti"e role in the effort to stimulate eman% .he
1Crisis plan3 was inspire b# moern economic theor#, which was also
introuce aroun this time% Let it was ifficult to formulate an effecti"e
reco"er# polic# as long as the parties of the labor market were unwilling
to cooperate% In particular, the challenge was that increase go"ernment
spening woul increase the bargaining power of those who were alrea#
emplo#e, especiall# those emplo#e in firms sheltere from international
competition% If increase eman shoul result in rising wages of insiers
in the labor market, this woul not onl# limit growth in emplo#ment, but
also affect firms that compete on the international market% In orer for
the @e#nesian policies to work as intene, local militant unions ha to be
brought uner control 5Moene an :allerstein, )--C6%
.he emplo#ers were the first to seek out a solution to this problem
5'D/rgum, 17E8B 'owman, )--)6% In orer to take the wages out of the
hans of local unions, N2F worke har for a centrali9ation of the wage
bargaining process% .heir approach was not, howe"er, to ban unions in
orer to hol wages own% .heir strateg# was to gi"e more power to the
leaers of the labor mo"ement as a whole, an thus strengthen unions as
institutions% .his was an iea that the leaership of L& coul easil#
)8

support% .hus, both N2F an L& seeme to grauall# reali9e that without
inustrial peace the reco"er# polic# woul not work% 'ut e"en more
important, the# seeme both to unerstan that increase go"ernment
spening woul work best if wage bargaining were structure in a
centrali9e manner% Let, such an arrangement re<uire e(tensi"e
cooperation between the parties of the labor market%

#.- New alliances
:ithin the labor mo"ement, it was especiall# labor unions who
represente workers in the e(port sectors that supporte the iea of a
more centrali9e s#stem of wage setting% .hese unions feare that
militant unions within the sheltere sectors of the econom# 5e%g% unions
organi9ing construction workers6 woul ri"e up wages if aggregate
eman shoul go up as a result of increase go"ernment spening% High
home0market wages woul make it "er# ifficult for union leaers in the
e(port sectors to maintain the wage moeration re<uire for international
competiti"eness% 2s a result, an implicit coalition consisting of unions in
the e(port sectors, in particular the union representing metal workers,
an the emplo#ers arose 5Awenson, )--)6% 'oth parties consiere
centrali9e wage coorination as essential for controlling wage growth in
firms sheltere from international competition%
In practice, the e(tent an effect of the crisis polic# that was put into
effect in Norwa# the 17+-s was moest 5Hone an Mr#tten, )--)6%
Howe"er, the implicit coalition between the emplo#ers an the unions
organi9ing workers in e(port oriente firms represente an important
institutional response to problems that coul threaten the effects of a
more acti"e stimulation of eman > an economic polic# that became more
)C

rele"ant after the Aecon :orl :ar 5Moene an :allerstein, )--C6%
2gain, it seeme increasingl# apparent that L& an N2F ha share
interests%

). .eliefs, trust and cooperation
Furing the 17)-s an +-s a series of e"ents took place which le to a
mental reorientation among the parties of the labor market in Norwa#%
.his mental reorientation was necessar# in orer to mo"e the parties out
of the ifficult situation the# foun themsel"es in% .here are reasons to
belie"e that the parties of the labor market were well aware of the high
costs relate to the man# strikes an lockouts that were initiate% Atill,
this fact is not enough in itself to e(plain wh# the parties manage to
mo"e on from conflict to cooperation% .he basic problem was that the
parties i not ha"e trust in each other in the first place% .he# were in
conflict, the# ha been in conflict o"er a long perio of time an the#
therefore hel the belief that the opposite part# i not ha"e the intention
to cooperate% 2s long as these beliefs remaine, the parties ha no reason
to change their strateg#% Rather, the contrar# was true, since the# riske
getting the short en of the stick if the# 1backe off3 when the opposite
part# continue to 1stan firm3% 2 change in beliefs was neee% 'oth
sies neee to be assure that the opposite part# woul choose
cooperation in orer for the# themsel"es to o the same%
If we again relate the iscussion to Figure *, we can interpret the e"ents
iscusse in section * as essential for bringing the parties= beliefs abo"e
the critical "alue p

, making Gcooperation= the rational strateg# to

)?

implement% 'oth e.ternal an internal e"ents were important for the
graual change in beliefs% 2mong important e(ternal e"ents were the
go"ernments= withrawal from the wage negotiations, the growth of
fascism an economic crisis, while important internal e"ents were a trust
between the top leaership, balance of power between L& an N2F an
new alliances across the two organi9ations% :ith the start of the 17+-s, a
situation emerge where all these e"ents Doin together with rationali9ation
an impro"e proucti"it# which make the rewars of cooperation
increasingl# greater% .ogether, this creates a state in which the parties
step awa# from conflict as their main strateg# an start working for more
peaceful inustrial relations%
Viewe in this wa#, the signing in 17+8 of the 'asic 2greement in Norwa#
was not a result a spontaneous eclaration of trust among the two main
parties of the labor market% 2 graual change in beliefs ser"e as the
ecisi"e factor% Let when the 'asic 2greement was in place, it le to the
further e"elopment of mutual trust between the parties% :ithout this
trust, the 'asic 2greement woul not ha"e achie"e the significance it
ene up ha"ing for the s#stem of centrali9e wage bargaining, an for
the Norwegian moel of labor relations in general%





)E

&eferences
2nersen, .%M%, '% Holmstrom, A% HonkapohDa, A% @orkman, H%.%
Aoerstrom an J% Vartiainen% )--?% The Nordic Model. /mbracin(
(lobali+ation and sharin( risk. HelsinkiK .he Research Institute of the
Finnish 4conom#%
'D/rgum, J% 17E8% L& og N2F 1E77017*-% Tidsskrift for
arbeiderbeve(elsens historie% )K E8011*%
'owman, J% )--)% 4mplo#ers an the $ersistence of Centrali9e
'argaining% .he Case of Norwa#% omparative 0olitical Studies, +8576K
77801-)C%
'ull, 4% 17E*% .oppfolkenes partnerskap > h"oran ble et til; Sosiolo(i i
da(, )K +01E%
Calmfors, L% an J% Friffil% 17EE% 'argaining Atructure, Corporatism, an
Macroeconomic $erformance% /conomic 0olicy, CK 1+0C1%
Cameron, F% R% 17E*% Aocial Femocrac#, Corporatism, Labor Nuiescence
an the Representation of 4conomic Interest in 2"ance Capitalist
Aociet#% In J%H% Molthorpe 5e6 !rder and onflict in ontemporary
apitalism% &(forK &(for !ni"ersit# $ress%
Fahl, A% 17E1% Norsk 2rbeisgi"erforening 17)?O)E% .ilbaketog og
re"urering% 1istorisk Tidsskrift% 1K 10)8%
Hone, F% an Mr#tten, &%H% )--)% Norsk 2konomi i det 34 5rhundre%
FagbokforlagetK 'ergen%
I"ersen, .% 1777% ontested /conomic 6nstitutions: The 0olitics of
Macroeconomics and 7a(e 'ar(ainin( in $dvanced *emocracies.
CambrigeK Cambrige !ni"ersit# $ress%
@nutsen, $% 17E8% Norsk arbeisgi"erforening, re"olusDonsfr#kten og e
korporati"e tenenser% 1istorisk Tidsskrift% *K +C70*1+%
)7

La#ar, R%M%, A%J% Nickell an R% Jackman% )--8% -nemployment:
Macroeconomic 0erformance and the 8abour Market% &(forK &(for
!ni"ersit# $ress%
Mares, I% )--C% Ta.ation# 7a(e 'ar(ain# and -nemployment% CambrigeK
Cambrige !ni"ersit# $ress%
Moene, @% an M% :allerstein% 177+% 'argaining Atructure an 4conomic
$erformance, in Flanagan, R%J%, @% Moene an M% :allerstein 5es%6 Trade
-nion 'ehavior# 0ay 'ar(ainin( and /conomic 0erformance% &(forK
Clarenon $ress%
Moene, @ an M% :allerstein% 1778a% How Aocial Femocrac# :orke,
0olitics 9 Society, )+K 1E80)11%
Moene, @ an M% :allerstein% 1778b% Aoliaristic :age 'argaining,
Nordic :ournal of 0olitical /conomy, ))K ?707*%
Moene, @% an M% :allerstein% )--C% Aocial Femocrac# as a Fe"elopment
Atrateg#, in 'arhan, $%, A% 'owles og M% :allerstein 5es%6 %lobali+ation
and /(alitarian ;edistribution. New LorkK Russel Aage Founation%
$ontusson, J% )--8% 6ne<uality and 0rosperity. Social /urope vs. 8iberal
$merica. ItachaK Cornell !ni"ersit# $ress%
Rothstein, '% )--8% Social Traps and the 0roblem of Trust% CambrigeK
Cambrige !ni"ersit# $ress%
AA'% 17C7% N&A PII )*8, Historisk Atatistikk 17CE% Atatistisk
Aentralb#rQK &slo%
Awenson, $%2% )--)% apitalists a(ainst Markets% New LorkK
&(for!ni"ersit# $ress%