Problem statement - PART 2

Chaos Theory Online Course
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Section: Chaos Theory and Butterfly Effects in Times of Corruption and a Bank Crash in 1886: The Case of Arendal (Norway) Illustrated through a Regional-Globalized Model
Lesson: Problem statement - PART 2
Introduction: the Norwegian shipping industry, a regional-global model, and the use of chaos theory
The historical background.Norwegian shipping has a long and proud history in international trade. From the Viking times, it has transported goods from the long coast to Greenland and the Southern Europe stimulating trade and economic growth.
Holland became a large economy in the 1500 and 1600 centuries. Norwegian timber was used to build Amsterdam and Rotterdam as large cities. Trade leads to a large immigration from Norway to Holland, and the opposite. United Kingdom was also a leading player in international trade meaning that new trading routes for Norwegian ships were established and developed.
The First Industrial Revolution, which spanned from the mid-1700s to the mid-1800s, was largely driven by the drivers of international trade in few commodities (particularly cotton). Most businesses tended to remain small and to employ as little fixed capital as possible. The chaotic markets of this area led economists such as Smith to describe market forces as an “invisible hand” that remained largely beyond the control of individual firms, leading to less interest for strategic thinking.
The Second Industrial Revolution, which began in the last half of the nineteenth century in the United States and rapidly expanded to Europe, saw the emergence of strategy as a way to shape market forces and affect the competitive environments. In the United States, the construction of the main railways after 1850 made it possible to build mass markets for the first time. In some capital industries, such as shipping and banking which is the empirical setting of this research, Smith’s “invisible hand” cam was supplemented by what Chandler termed the “visible hand” of professional managers.
Norwegian shipping from 1814 until 1849. Norway got her own constitution, the 17th of May 1814. After the poor country was significantly hurt by the Napoleon War (1807–1814), Norway gradually managed to catch up in the capitalist race far behind super powers like United Kingdom and United States basing their economies on decentralized organizational solutions from the First Industrial Revolution up to modern times ( ; 105) formalizing the use of explicit and tacit knowledge putting economic growth in the center of attention. The fundaments were laid for an expansion in the shipping industry with Arendal, one of the leading Norwegian towns.
Norwegian shipping expansion from 1850 until 1886 with a focus on Arendal.The Norwegian shipping industry expanded rapidly from 1850 until 1874. There was a great demand for products such as timber from Arendal when the United Kingdom was an engineer of economic growth in Europe, leading to possibilities for business people to take advantage of both economics of scale and economics of scope .
Arendal took advantage of the new business environment and expanded the fleet rapidly. From 1850 until 1870, Arendal’s fleet increased by 260% while it barely doubled from 1810 until 1849. Arendal was the largest shipping town in Norway.
In 1875, Arendal was the richest town in Norway mainly due to an expanding shipping industry ( , p. 156).
United Kingdom decided to drop the Navigation laws in 1849 as a result of more trade stimulating trade in many parts of the world. Lack of protective steps from United Kingdom meant that it opened up markets also for small countries like Norway. The change in attitude from United Kingdom meant that Norway and Sweden were regarded as one country being involved in a union until 1905 when Norway got her independence. This made trade much easier stimulating shipping between Norway and the United Kingdom .
In 1850, Norway had a fleet of 284,000 death weight tons and 1156 ships mainly consisting of sailing ships. The number of crews in the shipping industry this year consisted of 19,000 persons. Twenty-eight years later (1878), the number of death weight tons was 1.5 millions. The number of
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