If you wanted to design a small, 21st-century nation from scratch, combining outrageous good fortune with virtue...
/ OSLO, Norway — If you wanted to design a small, 21st-century nation from scratch, combining outrageous good fortune with virtue, you’d probably come up with something like Norway.
With a per-capita income of $65,509, Norway ranks second only to superrich Luxembourg. Much of the wealth derives from North Sea oil, but Norwegians have barely touched a penny of it, instead putting more than $350 billion into an investment fund for future generations.
Health-care services are considered among the best in the world and are available to everyone, with the cap on out-of-pocket expenses at $200 a year. Working women on maternity leave get a year off at 80 percent pay. Elderly Norwegians seeking to escape the harsh northern winters can retire to government-run geriatric communities in sunny Spain.
Norway, home of the Nobel Peace Prize, has no enemies, but it does have a well-trained army that is always on the front lines of international peacekeeping missions. It also gives generously to less fortunate nations, donating more per capita than any other country.
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And the government recently unveiled plans to cut its greenhouse-gas emissions to zero and thus become the world’s first “carbon-neutral” country by 2050.
So you might think that all of this good fortune and virtue would make the Norwegians just a little bit fat and self-satisfied?
Self-satisfied maybe, but fat, no. According to a new study on obesity, Norwegians are the slimmest people in Europe.
Business and political leaders agree that one of the keys to Norway’s enviable success is that it has been able to avoid the “oil curse.”
Oil is not usually the first thing that comes to mind when people think of Norway, but Norway is the world’s third-largest oil exporter after Saudi Arabia and Russia. At close to $96 a barrel, its 2.9 million barrels a day bring in roughly $1.8 billion a week.
Most of the Saudi wealth has been pocketed by the royal family. Venture beyond the gilded five-star hotels of Riyadh and Jiddah and you are in a Third World economy struggling with poverty, high unemployment and Islamic radicalism.
Russia’s oil wealth has raised property values in London’s posh Mayfair district and the French Riviera. It also has given Vladimir Putin an intimidating geo political weapon to wield against the West.
In developing countries as disparate as Nigeria and Venezuela, the easy money of oil has propped up corrupt and incompetent ruling classes.
Norway has not let its wealth go to its head.
But some of the lessons had to be learned the hard way.
When Norway began pumping oil in the 1970s, politicians were only too happy to spend the windfall.
The economy overheated, inflation set in, the currency exchange rate tanked, and when oil prices collapsed in 1986, the contractions in the Norwegian economy were painful.
After that, Norwegian politicians recognized the danger of oil addiction. They passed legislation requiring that almost all the revenues from the government-owned oil company, Statoil, be placed in an investment fund “to ensure that oil and gas receipts will also benefit future generations.”
Originally called the Petroleum Fund, the name was changed in 2005 to the Government Pension Fund to make the point that the money was not to be touched. In reality, Norway’s money is in what is called a sovereign wealth fund, a state-owned investment tool that has started to raise alarms in the U.S. and other Western economies.
The Bush administration is pressing the World Bank and the International Monetary Fund to look into regulating such funds, cumulatively worth trillions of dollars. The fear is that the funds could be used to destabilize markets or to take over strategic assets. Of particular concern are giant funds controlled by Russia and a new $200 billion fund launched by China earlier this year. Libya announced a $40 billion fund last month.
The Norwegian fund, however, is a model of transparency and enlightened Scandinavian management. It invests mainly in European and U.S. companies, but it is precluded from owning more than a 3 percent stake in any company in order not to unduly influence a company’s business.
The fund is now worth about $350 billion, making it one of the largest pools of investment capital in the world. The Norwegians have, in effect, figured out how to transform a nonrenewable resource into a self-sustaining resource.
A few other countries with oil money have taken note, and Martin Skancke, who heads the Norwegian Finance Ministry’s asset department, which oversees the fund, has been fielding queries from such places as East Timor and Bolivia.
“It’s a lot easier when you have transparent institutions, an educated population and a long history of democracy with very little corruption,” Skancke said.
These days, while European think tanks debate whether the so-called Scandinavian social model has been a success or failure, most Norwegians would agree that it has worked fine for them.
The combination of high taxes in exchange for a dazzling array of social-welfare benefits provided by the state has created an extraordinarily cohesive society with a strong egalitarian streak.
In Europe’s second-wealthiest country, “you won’t see opulence or ostentatious consumption,” said Stein Iversen, a Norwegian diplomat. Norwegians take pride in their sense of shared values and ability to run things by consensus. Undoubtedly, it helps to be a small nation — Norway’s population is 4.6 million — and ethnically homogeneous.
Despite Norway’s determination to be a good European citizen and a good global citizen, it has balked at joining the European Union.
“We are a relatively young nation. We only gained our independence in 1905. Before that we were in a union with Sweden, so the word ‘union’ still has a negative flavor for us,” said Erling Steigum, an economist at the Norwegian School of Management in Oslo.
Norway has had two referendums on EU membership, in 1972 and 1994, and in both the vote was 53 percent to 47 percent against joining.
Although Prime Minister Jens Stoltenberg’s center-left government, which came to power in 2005, cooperates closely with the EU, it says it will not call for another referendum. The main stumbling block seems to be Norway’s vast energy wealth.
“Are we going to let Brussels have a say in how we manage that?” asked a Foreign Ministry official. “I don’t think so.”
Lately there has been a growing populist push to dip into the cookie jar and spend a little more of the oil wealth. The right-wing Progress Party, which emerged as the leading opposition party in the last election, argues that more oil should be pumped and more of the profits used to improve services and lower taxes.
Thus far, the government has resisted the temptation.