"Norway is like the guy who won the lottery, kept his normal day job and invested his winnings into stock portfolios"
Norway is a land of remarkable beauty, home to serene landscapes and charming cities. More to this, Norway has an economy Stronger, more productive and more equal than most on Earth. They boast the 4th highest GDP per capita globally ($81,995), an unemployment rate of 0.41%, a robust trade surplus of $21.1 billion, a life expectancy of 81.8, a highly skilled workforce (with 42% of workers being Uni graduates), an extremely robust worker protection structure and all whilst ranking 3rd on the global happiness index, the list goes on. Subsequently, it is no surprise to hear that Norway is often labelled as the posterchild for a socialist-capitalist mixed economy done right. So, what is their secret? And why haven’t foreign economies simply replicated the polices which Norway seem to so successfully have implemented?
Truthfully, Norway wasn’t always this prosperous. In the 1960’s they had a GDP similar to that of underdeveloped countries such as Bangladesh and Nigeria relying mostly on incomes from fishermen. However, it is worth considering Norway’s population was (and still is) far smaller than these other countries. Moreover, their living standards at the time did match those of its European counterparts such as Spain and Greece. Nevertheless, Norway in the 1960s was a far cry from the economic powerhouse it is today.
In May 1963 however, this all started to change. The Norwegian government asserted sovereign rights over huge areas of the North Sea declaring ownership of any resources found within it (Pssttt…OIL!). This all may sound highly dubious and somewhat illegal. Fortunately, Norway was a member of NATO and so didn’t experience any ‘repercussions’ faced by other countries partaking in this nationalising business in the 1960s. Nevertheless, 6 years later in 1969 a ship named the ‘Ocean Viking’ struck oil in the North Sea. As a result, Oil production exploded to a staggering 1,600,000 million barrels per day. By the mid 1970s, per capita, Norway produced more oil than any other country in the world. Now, before you stop reading, as I can imagine you are thinking to yourself “not another country that got rich from oil”, here comes the interesting part.
Understandably during the oil boom from 1970-1980, Norway’s GDP grew over five times ($12 billion - $65 billion) in this period. However, this oil was not being produced by private companies. Instead, all operations were carried out by the publicly run and owned company named ‘Statoil’ (now called Equinor). Subsequently, instead of filling the pockets of private shareholders, the enormous profits made by the sale of oil and natural gases were going directly to the government, making them very rich. Unlike other oil rich countries who had found themselves in this situation, Norway didn’t embark on a cascade of public spending, building huge cities whilst cutting taxes (which would have likely made the short-term prospects for a Norwegian citizen very exciting). Fortunately for these citizens, the Norwegian government had the foresight to realise that oil wealth was not forever. Considering this, the government started investing their profits into a very large piggy bank known as a sovereign wealth fund. This piggy bank is so large, it is actually the biggest sovereign wealth fund in the world, totalling an astounding $1 trillion in assets ( and climbing).
This huge fund actually belongs to the people of Norway with the rationale being that these natural resources were always the property of the Norwegian people so therefore it is they who should see the revenue from the sale of these resources. Essentially, every single citizen in Norway has $200,000 dollars invested into what is a giant hedge fund. Unfortunately, this money is not accessible to citizens to spend on various luxuries, in fact this money is not even accessible to the Norwegian government because It is only the profit which is generated from the fund which is allowed to be invested into things such as education (which helps to explain the very skilled workforce), a strong welfare system, public infrastructure and ultimately reinvestment into the fund itself. In 2017 the fund made an incredible $130,000,000,000 (that’s billion) from its investments.
The fund itself is comprised of a diverse mix of stocks, bonds, cash and commodities. However, more interestingly, the fund, under direction of an ethical council, has excluded investing into things like weapons manufacturing, tobacco companies, Companies that have caused heavy environmental damage and companies that have breached workers rights. The most interesting part of the fund however is the fact that the only country that is forbidden from investing into, is Norway itself. This means that all investments of this fund are actually in foreign companies, securities and commodities. Essentiality this means that the funds performance is independent of the Norwegian economy and thus free from effects of any negative downturns, which to many economists represents an incredible piece of economic foresight.
As a result of the Norwegian governments intelligent policy making and wise investment strategies, the welfare of Norway’s citizens will be safe and secure for generations to come. This is not to say Norway is completely free from economic issues. The cost of living in Norway is amongst some of the highest globally. However, it is commonly agreed amongst the citizens of Norway that they are more than happy to put up with this high cost of living safe in the knowledge they will never have to deal with crippling debts from medical expenses or the fear that they will become homeless if they lose their jobs.
So, is Norway the perfect economy? Well not really. Despite Norway, completely capitalising on the opportunities presented to them, their economy is essentially predicated upon the fortune of oil. Admittedly they didn’t splash their lottery winnings stupidly or become subject to the resource curse (such was the case to Venezuela). Nevertheless, it isn’t something that other countries can simply replicate. However, to give Credit where credit is due, the Norwegian government did an incredible job in realising the finite availability of oil and in doing so creating a fund that would protect the economic interests for the whole country for a long time to come. Moreover, as Norway lessens its reliance on oil, they are set to become a pioneering entity in creating green technology to combat the tidal wave that is global warming. Ironically, however, this will likely be funded by the very resource which has caused a great degree of climate issues in its extraction and use. In conclusion, Norway is like the guy who won the lottery, kept his normal day job and invested his winnings into stock portfolios.