The real world class
talent:
Thriving Norway Provides an
Economics Lesson
OSLO — When capitalism seemed on
the verge of collapse last fall, Kristin Halvorsen, Norway’s
Socialist finance minister and a longtime free market skeptic, did
more than crow.
As investors the world over sold
in a panic, she bucked the tide, authorizing Norway’s $300 billion
sovereign wealth fund to ramp up its stock buying program by $60
billion — or about 23 percent of Norway ’s economic output.
“The timing was not that bad,” Ms. Halvorsen said, smiling with
satisfaction over the broad worldwide market rally that began in
early March.
The global financial crisis has brought low the economies of just
about every country on earth. But not Norway.
With a quirky contrariness as deeply etched in the national
character as the fjords carved into its rugged landscape, Norway
has thrived by going its own way. When others splurged, it saved.
When others sought to limit the role of government, Norway
strengthened its cradle-to-grave welfare state.
And in the midst of the worst global downturn since the Depression,
Norway’s economy grew last year by just under 3 percent. The
government enjoys a budget surplus of 11 percent and its ledger is
entirely free of debt.
By comparison, the United States is expected to chalk up a fiscal
deficit this year equal to 12.9 percent of its gross domestic
product and push its total debt to $11 trillion, or 65 percent of
the size of its economy.
Norway is a relatively small country with a largely homogeneous
population of 4.6 million and the advantages of being a major oil
exporter. It counted $68 billion in oil revenue last year as prices
soared to record levels. Even though prices have sharply declined,
the government is not particularly worried. That is because Norway
avoided the usual trap that plagues many energy-rich
countries.
Instead of spending its riches lavishly, it passed legislation
ensuring that oil revenue went straight into its sovereign wealth
fund, state money that is used to make investments around the
world. Now its sovereign wealth fund is close to being the largest
in the world, despite losing 23 percent last year because of
investments that declined.
Norway’s relative frugality stands in stark contrast to Britain,
which spent most of its North Sea oil revenue — and more — during
the boom years. Government spending rose to 47 percent of G.D.P.,
from 42 percent in 2003. By comparison, public spending in Norway
fell to 40 percent from 48 percent of G.D.P.
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund,
an expert on Scandinavia at the Peterson Institute for
International Economics in Washington. “But in Norway, there is
instead a sense of virtue. If you are given a lot, you have a
responsibility.”
Eirik Wekre, an economist who writes thrillers in his spare time,
describes Norwegians’ feelings about debt this way: “We cannot
spend this money now; it would be stealing from future
generations.”
Mr. Wekre, who paid for his house and car with cash, attributes
this broad consensus to as the country’s iconoclasm. “The strongest
man is he who stands alone in the world,” he said, quoting
Norwegian playwright Henrik Ibsen.
Still, even Ibsen might concede that it is easier to stand alone
when your nation has benefited from oil reserves that make it the
third-largest exporter in the world. The money flowing from that
black gold since the early 1970s has prompted even the flintiest of
Norwegians to relax and enjoy their good fortune. The country’s
G.D.P. per person is $52,000, behind only Luxembourg among
industrial democracies.
As in much of the rest of the world home prices have soared here,
tripling this decade. But there has been no real estate crash in
Norway because there were few mortgage lending excesses. After a 15
percent correction, prices are again on the rise.
Unlike Dublin or Riyadh, Saudi Arabia, where work has stopped on
half-built skyscrapers and stilled cranes dot the skylines, 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.
Norwegian banks, said Arne J. Isachsen, an economist at the
Norwegian School of Management, remain largely healthy and prudent
in their lending. Banks represent just 2 percent of the economy and
tight public oversight over their lending practices have kept
Norwegian banks from taking on the risk that brought down their
Icelandic counterparts. But they certainly have not closed their
doors to borrowers. Mr. Isachsen, like many in Norway, has a second
home and an open credit line from his bank, which he recently used
to buy a new boat.
Some here worry that while a cabin in the woods and a boat may not
approach the excesses seen in New York or London, oil wealth and
the state largesse have corrupted Norway’s once-sturdy work
ethic.
“This is an oil-for-leisure program,” said Knut Anton Mork, an
economist at Handelsbanken in Oslo. A recent study, he pointed out,
found that Norwegians work the fewest hours of the citizens of any
industrial democracy.
“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.”
But that day is far off. For now, the air is clear, work is
plentiful and the government’s helping hand is omnipresent — even
for those on the margins.
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.”
To Ms. Halvorsen, the finance minister, even the underside of the
Norwegian dream looks pretty good compared to the economic
nightmares elsewhere.
“As a socialist, I have always said that the market can’t reg ulate
itself,” she said. “But even I was surprised how strong the failure
was.”
Wah.
After reading this report, Norway looks like the better place to
live and work. 