Economic Policy

Economic policy in relation to the Arctic includes both a territorial and a constitutional dimension. With regard to land, it encompasses Alaska; the Yukon and Northwest Territories, Northern Québec, Labrador; Greenland; Iceland; and the northern counties of Norway, Sweden, and Finland plus Russia and Siberia. Seen in relation to the constitutional dimension and sovereignty, it includes the eight Arctic states: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States. Only for Iceland do the territorial and the constitutional dimensions coincide. To understand economic policy, it is necessary to understand that Arctic mineral and energy resources are rich and include about 12% of the world resources, while the population is sparse and includes indigenous peoples. The Arctic states include some of the big players in international power play. These facts constitute the arena for Arctic economic policy and gives Arctic policy a geostrategic dimension and importance.

The present eight Arctic states have, over time, had a different position and different interests in economic policy concerning Arctic matters. Denmark and Norway were one kingdom until 1814 (The Kiel Peace Treaty) including Iceland, which was brought into the kingdom together with Norway at the end of the 1300s and part of the Danish Realm till it became a republic in 1944. Greenland was a Danish colony till 1953, and a Danish jurisdiction with Home Rule from 1979. The main Danish economic policy of 1814 was a Mare Nostrum policy, including the North Atlantic Ocean, Sweden and Finland were one state till about 100 years ago with no specific economic policy toward the Arctic. For Canada, Russia, and the United States, the Arctic regions were mostly unknown hinterlands.

The Greenlandic colonial status was due to the disappearance of the Vikings presumably sometime between 1350-1400. As the Danish Royal expeditions (organized in order to protect the Danish Kingdom "Mare Nostrum" from the increasing interests of the Netherlands and UK) came to Greenland more than 200 years later and found no Nordic people surviving and no Christianity, only one status was possible—that of a colony. In 1721, the priest Hans Egede was sent to Greenland to christen the inhabitants. Greenland is the only territory in the Arctic that has had a formal colonial status. The economic idea in a colony is that it shall create an economic surplus for the state. As seen from the old colonial accounts, this was the case till about 1850. From then until 1925, official policy was that the account should be in balance. In the 20th century, the account result was more volatile, a surplus when the cryolite corporation 0resund Ltd. operated successfully, but the rest of the time a deficit. Since the end of colonial status in 1953, the net income transfer from the Danish state to Greenland has been very large. The Danish Greenland policy was to modernize Greenland to the same level as in Denmark. It was considered a task for experts, and upon modernization, Greenland should function without income transfer from the Danish state.

Finland, Sweden, and Norway are considered to be unitary states in their constitutions although all the states have an indigenous people, the Saami, living inside their northern borders. When the Nordic welfare state was developed after World War II, it took place in a state-market mix called the mixed economy. It implied the beginning of comprehensive income transfer to the Arctic and northern areas and to people living there.

In Iceland the task was to show that voting for becoming a sovereign state in 1944 was the right decision (97% of the votes were in favor of Iceland becoming a state), and the way to show it was to create economic growth and a welfare state.

Except for Iceland, the various economic policies ran into unexpected troubles. It was possible to create economic development in the North, but not without current comprehensive income transfers from the state.

In the United States and Canada, the main problem was conflicting interests. Indigenous peoples and local populations felt they had too little influence on development. These problems were addressed successfully in some cases, in land claims policy.

In the USSR, it became still more evident that the economic command system avoided market failures but not state failures in planning. An enormous bureaucracy developed and political party power interests had considerable influence. The goals set in the five-year plans were not fulfilled.

The impact was as follows. In the Nordic countries, the welfare state and full employment economy developed satisfactorily and economic growth was high. It was a golden time for the Social Democrats in the Nordic countries. In Greenland, an increasing opposition to the Danish development policy developed. The new large towns constructed to provide a labor force for the new fishery plants ran into unexpected problems: Greenlanders could not adjust to living in high-rise blocks, and the fish (cod) almost disappeared in the 1960s, presumably due to lower sea temperatures. Based on these experiences, a strong demand for self-determination developed, and in 1979 Greenland attained Home Rule. The policy in Canada and Alaska differed more and more. In Canada a huge state institution—DIAND (Department of Indian and Northern Development)—was established to deal with the development issues. Over the years, land claim policy has been increasingly combined with the transfer of economic and political rights to indigenous peoples, with the creation of Nunavut being the culmination of that policy. After ANCSA (Alaska Native Claims Settlement Act) 1971, Alaska has stuck strictly to market economy and to Republican Party policy.

The main types of economic policy are fiscal, monetary, trade, and income policy. Fiscal policy, but in different forms, has been the main policy all over the Arctic since World War II. Fiscal policy was the main policy in the Nordic countries, Greenland, and Canada in a mixed economy setup. In the USSR, there was no room for private sector or market economy; all was decided by the state, a command economy. In Alaska, the fiscal policy was related mainly to the military expenditures and the economic regime continued to be a classical market economy.

In the USSR, trade policy was only an issue in relation to the outside world. Typically, when the goal in the five-year plan was not achieved, the USSR could export some oil and, for the money, buy grain instead. In the Nordic countries, in Canada, and in Alaska, it was free trade regimes that were applied. In Greenland, the monopoly on sea transportation from 1776 continued, and trade continued to take place via Denmark.

Income policy was applied in the USSR and in Greenland. Both places had a system with fixed prices. In the USSR also, the wages were fixed. In Greenland, wages were dependent on birthplace (the so-called birthplace criterion); it meant that public employees born in Greenland received a lower wage, normally 15% lower. The intention was to regulate for productivity differences, but how it could be accepted is difficult to understand today.

The Inuit Circumpolar Conference (ICC, established in 1977 by Eben Hopson) is an international organization representing 136,000 Inuit with the purpose of strengthening unity among the Inuit; promoting Inuit rights and interests internationally; seeking full and active partnership in the political, economic, and social development of circumpolar regions in order to promote greater self-sufficiency among Inuit and to ensure the growth of their culture; and developing and encouraging long-term policies that safeguard the Arctic environment. In 1992, the publication "Principles of Elements for a Comprehensive Arctic Policy" was published. It addresses issues of security, environment, economy, society, and culture for common policies. ICC is a nonprofit organization with an accepted position in the UN, and in this way has a direct and influential link with international policy.

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