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

Abstract

The chapter focuses at corruption practices in the bank crash in the town of Arendal in Southern Norway in 1886 using insights from chaos theory and butterfly effects as theoretical frameworks. Using secondary sources from reports and documents, we illustrate that the bank crash can be explained by corrupt practices of the business and political elite involving manipulation of accounting figures, financial guarantees given in closed and secret circles, and banks giving credit without sufficient security. These activities led the town into a large bank crash in the fall of 1886 having negative effects on business performance, large unemployment, and falling living standards for decades illustrated through a regional-global model discussed in the chapter. The findings can be of interest when studying other bank crashes such as the global bank crisis setting in fall 2008 having negative consequences for leading OECD countries up to present times.