He was party secretary of the Labour party from 1945 to 1969, a period through which the Labour party was in government for most of the time. The joint leadership between Lie and the most prominent prime minister during the period, Einar Gerhardsen has become famous in Norwegian politics both for its effectiveness in building the country and for its latter days bitter rivalry.

Lie was one of the people who rebuilt the Labour party from a party of class struggle to a broader mass party building the welfare state on a compromise between capitalism and socialism. He was one of the ideologers that formed a new kind of socialism where anti-capitalism was replaced by a modern social democratic quest for liberty for all. In domestic policy he pushed for social reforms along with his comrade in arms Gerhardsen.

In foreign and security policy he was much more controversial. He was driven by a distaste for communism whose anti-democratic tendencies he felt was a corruption of socialism.  He feared its spread and favoured NATO membership and nuclear armament. He went as far as agitating for nuclear arms on Norwegian soil and was somewhat of a Norwegian McCarthy in actively organizing networks to report on “suspicious activities”, and demanded internal loyalty. These things created a growing divide between him and Gerhardsen who had a less realist approach to foreign policy and a more open approach to dissent.

In 1967 the conflict between Gerhardsen and Lie came to a boil as Gerhardsen confronted him at the party congress, proposing to depose him as party secretary. According to eye witnesses Lie responded by threatening to “crush you like a louse”. Lie’s reign survived the attack at the ’67 congress, but he stepped down in 1969.

This was however not the end of his political influence. Even unto his sickbed for the last half year of his life, at age 103, he was approached by politicians and journalists alike for advice and comment. He remained an outspoken critic of the Labour party leadership whenever he meant that they strayed from the right path of social democracy. His retirement was also spent writing books, of which he published a respectable number.

Haakon Lie remained a giant in Norwegian politics until his death, and although controversial in many ways he will remain in Norwegian history as one of the architects of the post-war welfare state.

See also

• Obituary in the Guardian
• Haakon Lie on Wikipedia

“As a socialist, I have always said that the market can’t regulate itself,” she said. “But even I was surprised how strong the failure was.”

These are the words of Norway’s Finance Minister Kristin Halvorsen from the political party Socialist Left (SV), which is part of the current centre-left government coalition in Norway. The words come from an article in the Global Business section of The New York Times, which praises the economic management of the Norwegian state, among other things  how it has stuck with its social democratic welfare model through boom and bust.

The global financial crisis has brought low the economies of just about every country on earth. But not Norway.

With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.

And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.

The debt free government is of course something the current centre-left coalition can’t take the credit for alone. The Norwegian government has passed between Labour, centre-right and centre-left governments for the last decade.  Since 1990, there has been a broad consensus in the Norwegian parliament for a programme of  national savings in a government pension fund, to preserve value for future generations and avoid “Dutch disease“. I mentioned this policy in an earlier post on this blog.

The description of Norway as always sticking with its welfare model is another issue, though. Norway did go through a phase of privatization of welfare, for example the schooling system, during the last government, but this was abruptly stopped by the centre-left Stoltenberg administration when it came into power four years ago. Of course this didn’t necessarily affect government expenditure.

If the right wing were to come into power in the upcoming parliament elections, we might see another shift in this policy. Although supportive of the need for government stimuli to the economy, their preferred stimuli come in the form of tax cuts rather than the countercyclic government expenditures the current government favours. Last week’s conservative party congress heavily emphasized this.

(Hat tip to Tromp for bringing this to my attention).

The package expands the national budget directly with about 2o billion NOK (roughly 2.2 billion € or 2.86 b$), with nearly 17 billions increased expenditure and over 3 billion worth of tax cuts. With secondary effects, the government estimates a total expansive effect of 27 billion NOK, reducing the substantial oil-boosted government surplus. When correcting for petroleum-based offshore income, the government now estimates a government deficit of 119 billion NOK for 2009. This sums up to an expansion of the oil-corrected government budget of 2.3%, substantially higher than the 1.5% goal set by the EU.This represents a deviation for what has been known as Handlingsregelen, a term that can be roughly translated into the Rule of Thumb (or the Budgetary Rule according to Wikipedia). It states that only 4% of the expected capital gains from the government pension fund (formerly The Petroleum Fund) should be spent each year. This fund is in turn comprised of all the government surplus from the Norwegian offshore petroleum activity.

This is also a powerful political broadside before the upcoming parliament elections in Norway. The expansion of the budget, heavily focused towards public expenditure gives the package a strong leftist profile as well as allowing the government to support popular causes such as strengthening the economy of municipalities (which are responsible for primary education and care for the elderly among other things), more public building projects and increased spending on education and research.

This certainly represents a bold move, and a classical Keynesian one. It will be interesting to see if Norway’s oil economy will allow the government to soften the blow and if this was the right way to do it. Personally, I applaude.

You can find the details of the package here (PDF – in Norwegian).