As a result of a conversation with reader RichardH, I did some web research on Norway’s economy.
I found a number of interesting articles of various vintages. Below, I provide links to the articles and some snippets from them.
In a way, situations like Norway’s gives us a glimpse at how the issue in my previous post, Imagine – Total Automation could be resolved to most people’s benefit. When the amount of wealth generated by the economy far exceeds the work needed to generate it, the fruits of that wealth can be distributed to the citizens by making essential services to be free. This thought is exemplified by the snippet from the last article below.
To many in this country, the thought of the government owning such a large share of private enterprise through the investments by its sovereign wealth funds would seem like Socialism. Well, yes, that is exactly what it would be.
Imagine if we considered the Social Security Trust Fund to be our sovereign wealth fund. We could get started toward an economy like Norway’s tomorrow.
How To Avoid The Oil Curse – NPR story broadcast by WBUR – September 6, 2011
So, that’s Norway’s secret: At every step of the way, do the opposite of basic human nature.
Tell powerful oil companies, you can’t get the oil right away. Tell taxpayers, you won’t get the money from the oil right away. And tell campaigning politicians, you know that half a trillion dollars we have just sitting there in our oil fund? You’re not allowed to talk about it.
Norway’s sovereign wealth fund: £259bn and growing – September 20, 2009
Created in 1990, the Norwegian Government Pension Fund is the world’s third-largest sovereign wealth fund, after the funds of Abu Dhabi and Saudi Arabia, according to the California-based Sovereign Wealth Fund Institute (this ranking, however, appears flexible: a 2007 UBS report puts the Norway fund in second place).
Commonly known as the oil fund, it invests the country’s oil and gas income in stocks and bonds to save for future generations, when the hydrocarbons run out. Investments are made abroad to avoid overheating the economy.
Outside of crisis times, only 4% of the fund, the estimated long-term rate of return, is used in the state’s national budget. The government made an exception this year, tapping into the oil fund to finance a package worth nearly 5% of gross domestic product to boost the economy.
The oil fund has become one of the most important issues of political debate in Norway. Although most parties agree to the 4% rule, the largest party in opposition, the populist Progress party, wants to spend more of the oil money for research and building infrastructure.
Norway wonders what to do with its oil wealth – September 6, 2010 – I don’t think they wonder. They seem to know.
Norway was one of Europe’s poorest countries when oil was discovered off its coast 40 years ago. Now its citizens are considered the wealthiest in the world according to the UN Human Development Index.
For the past 15 years, the profits from oil have been paid into two sovereign wealth funds. Norway’s Government Pension Fund Global invests in stocks and bonds around the world. It’s now worth over 500 billion euros.
As the leader of Norway’s second largest political party, Siv Jensen is not alone in her belief that more of the country’s oil wealth should be invested at home. But Norway already has the highest wages in the world and ranks second after Japan for high cost of living. Pumping oil wealth into infrastructure projects would lead to sky-high inflation making Norway uncompetitive on the world market.
Norway: Lighting up Europe – November 2009
At the same time, the country is still in the process of liberalizing and consolidating the banking and financial services sectors. Despite the advantages that oil has provided Norway, the precious resource also remains one of the biggest stumbling blocks on Norway’s path to becoming a diversified economy. Norway is working to achieving that balance by developing a well-rounded technological industry. On the positive side, the country’s healthcare system is considered to be one of the best in the world and education is free.