Thriving Norway provides an Economics Lesson

http://www.nytimes.com/2009/05/14/business/global/14frugal.html?_r=1&em

by raheemm • 17 years ago

57 51 17 years ago

ilitirit2• 17 years ago

> Norway is a relatively small country with a largely homogeneous population of 4.6 million and the advantages of being a major oil exporter.

This probably has more to do with their successes as a country than anything else. Smaller populations are easier to govern (New York's population is around 20mil), and being an energy exporter ensures that there's enough wealth to go around to provide it's citizens with a large social safety net.

pierrefar• 17 years ago

Agreed. And some people are already saying that. From the article itself:

“We have become complacent,” Mr. Mork added. “More and more vacation houses are being built. We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”

Retric2• 17 years ago

The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.

The have a huge surplus and are saving 11% of their governmnets bugdet. At some point their savings could probably fund all government spending at which point running out of oil would not be the end of the world. Granted government spending is only 40% of GDP but 30 years from now they could have 40% unemployment and still have a stable functioning society.

vidarh• 17 years ago

"The dream" will end only if the oil runs out before the oil fund is large enough to offset the tax gap.

As it is, most oil revenue is set aside, and there wouldn't be a massive budget deficit if the oil revenue went away tomorrow. Doesn't mean there wouldn't need to be some adjustment if the oil revenue dried up, since it provides a lot of employment and the cost of dealing with increased unemployment could be significant, but Norway is surprisingly independent of the oil revenue, and becoming increasingly independent of it as the oil fund swells.

bwd• 17 years ago

I suspect that homogeneity and culture explain why they didn't blow all of their oil money in boom times like other oil producing nations. I wish Americans could see the same type of restraint in their politicians.

stcredzero2• 17 years ago

What effect does homogeneity have?

jimbokun• 17 years ago

In other words, Norway's lessons are very applicable to other energy exporting nations. But probably not many lessons that can be implemented by energy importing nations.

marcusbooster• 17 years ago

Your example of New York is a particularly funny one since there is a pretty big divide culturally and economically between NYC and the rest of the state. There are a lot of people in the western part of the state who feel they contribute just as much wealth yet do not benefit from the "large social safety net" you speak of.

menloparkbum• 17 years ago

He was talking about Norway's social safety net, and just used NYC to illustrate how small Norway's population really is.

sbt2• 17 years ago

Agreed on the small homogeneous population. Not true on the oil exporting. Just look at the neighboring countries.

Without oil, Norway would be like Denmark, or Sweden.

marvin• 17 years ago

Yeah. And Denmark and Sweden aren't particularly bad places to live. There is broad sentiment in Norway that we would be living in caves if it wasn't for our oil reserves, but this obviously isn't the case.

There are downsides to having a very homogeneous culture, of course. If you are different, you will have a hard time finding a broad network of friends. Norwegian culture is pretty tolerant in the most important ways, but a total population of 1/4 that of any major world city is noticeable. In terms of land area, our country is larger than you would think. This isn't just some weird enclave.

But it is probably impossible to enforce harmonically coexisting, internally homogeneous cultures. And I'm not even sure that would be something we'd want. My most important personal value is freedom to, within reason, do and say and think whatever I want. Meeting different cultures first-hand is often necessary in order to be able to do this, since there is a broad range of behaviors and mindsets that are excluded within any particular culture. We create our own intellectual walls without even thinking about it.

laut• 17 years ago

Yes, Denmark, Sweden and Norway are similar. Sweden is not a net exporter of oil AFAIK.

But oil is the biggest export of Denmark. Norway just has a lot more. Only Russia and Saudi Arabia exports more oil than Norway IIRC.

stcredzero2• 17 years ago

being an energy exporter ensures that there's enough wealth to go around to provide its citizens with a large social safety net

This is a powerful strategic argument for proactively promoting carbon neutral energy in advance of the market. This is especially true for energy delivered in the form of electricity, due to the nature of its delivery infrastructure. Someone stands to benefit from first mover advantage here.

ph0rque• 17 years ago

In some ways, Norway is approaching a post-scarcity economy mentioned in an article that was posted here recently (http://news.ycombinator.com/item?id=607540).

raheemm3• 17 years ago

If you compare Norway to the UAE (which includes Dubai, Abu Dhabi, etc) while Norway is investing its oil wealth in a sovereign fund, UAE is investing in real estate, tourism and other sectors. Both have rich social safety nets. In this way, both these energy exporting nations are smart in reinvesting/saving today's surplus. One interesting difference is that UAE is a federation of fairly autonomous states or emirates. So some states are already in the post-scarcity era (Dubai) while other states are still in the surplus era (Abu Dhabi, Ras Al Khiamah, etc). It makes for an interesting economic development scenario.

hs• 17 years ago

but norway is debt-free (accourding tfa)

i'm not sure about uae, especially dubai

raheemm3• 17 years ago

Good point. I quickly did a google check and UAE does have debt but could not find percentage of GDP figures or how they compare with other countries.

aaronblohowiak• 17 years ago

Yes, but wheras Dubai employs slave labor to build ecological atrocities, Norway is investing the money in the future of its people. It is also quite interesting that dealing with middle-eastern immigrants is a controversial issue in Norway (especially because they largely refuse to assimilate.)

raheemm3• 17 years ago

Slave labor is wrong. Dubai is wrong for using it. So is anyone else who does. Norway rightly deserves credit in this regard. My initial comment is from a macro-economic point of view of how countries use/abuse their natural resources.

byrneseyeview2• 17 years ago

So the secret is to be a country full of dour, responsible people who discover fabulously valuable natural resources, and can thus afford to subsidize even the most degenerate kinds of behavior?

sbt2• 17 years ago

I think the point here is that subsidies doesn't really matter for the big picture. It could be that some of these outrageous benefits wouldn't happen if it wasn't for a very wealthy state. The question is what you would be left with. It's probably a fair assumption to look at the countries around it.

What you find is that the real strength of these countries are in their culture, not in their natural resources.

Another thing to consider is how one would actually manage this kind of wealth if you actually obtained it. In my opinion, the way Norway spends huge amounts of money on foreign development projects, spreading progressive values such as gender equality, and promoting the role of the UN, are certainly better than building huge palaces or indoor ski slopes.

ulvund• 17 years ago

Degenerate behavior like old age, education and accidents?

smanek3• 17 years ago

Did you read the article?

"Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. His scabs and sores betray many years as a heroin addict. He says that the $1,500 he gets from the government each month is enough to keep him well-fed and supplied with drugs.

Mr. Bruum, 32, says he has never had a job, and he admits he is no position to find one. I don’t blame anyone, he said. The Norwegian government has provided for me the best they can."

Why should other people be forced to subsidize that kind of lifestyle?

Tichy• 17 years ago

"Oslo retains a feeling of modesty reminiscent of a fishing village rather than a Western capital, with the recently opened $800 million Opera House one of the few signs of opulence."

What a bullshit article. Sorry...

Lessons learned: it's good to have a lot of oil.

Did they invest so wisely? Maybe, maybe not - even if they did, who says they were not just the lucky ones that are bound to exist (just as with fund managers)?

dpapathanasiou• 17 years ago

Did they invest so wisely?

Here's one case (and I'm sure there are others) which is a resounding no: http://www.nytimes.com/2007/12/02/world/europe/02norway.html

Xichekolas• 17 years ago

Well that's not quite the same, since that story is about municipalities investing poorly. Hopefully Norway's sovereign wealth fund didn't do likewise.

(as an aside: I've been to Narvik, in the summer, and the scenery is absolutely stunning. The 2am sunshine is also amusing to behold.)

henriklied• 17 years ago

I agree – Oslo, a fishing village? Please.

Technology wise, Norway is way up on the list. Most of us have 20mbit ++ directly into the wall, a diverse open source environment, a subsidized media channel which delivers lots of their TV shows via BitTorrent in 1080p/720p, etc.

tallanvor2• 17 years ago

This article doesn't tell the whole story. On the whole, the Norwegian economy is strong - probably stronger than most other nations, but that doesn't mean there aren't problems here. I have several friends who have been laid off this year, and even the company I worked for laid off a number of employees earlier this month.

That said, I'm still happier to be working here as opposed to being back home in the States. And, while Norwegians do work fewer hours, most of them are more productive during the hours they do work.

Dauntless• 17 years ago

Ok, Norway is a net oil exporter and has huge benefits because of that... But can you please stop mentioning that every time you read Norway, completely ignoring everything else they managed to do right? USA had much more natural resources than Europe, that doesn't mean you should ignore everything else they did well over time to get where they are now.

Element2• 17 years ago

This rebuttal on Forbes helps put Norway's oil wealth into perspective.

http://clipmarks.forbes.com/2009/05/14/the-real-norway-lesso...

discojesus• 17 years ago

"Norway has 20 times as much oil production per capita as the UK. That's the real Norway lesson. Sit on tons of oil."

Haha, brilliant. Sounds a little like a lottery winner offering financial advice.

CaptainCrap• 17 years ago

As others have pointed out, if you take away the oil, Norway's economy is crap. The infrastructure sucks, there aren't really any other industries to speak of, taxes are very high and the incentives for someone to start a business there are appallingly low.

known• 17 years ago

Isn't Japan with zero natural resources as better case study?

Thriving Norway provides an Economics Lesson

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