Home » Norway » If Norway can succeed like this, why can’t every country?

If Norway can succeed like this, why can’t every country?

by John Brian Shannon | September 4, 2014

Cruise ship navigates northern Norway coastline. Image courtesy of visitnorway com

Cruise ship navigates Norway coastline. Image courtesy of visitnorway.com

Let’s look at Norway, a tiny nation of 5.1 million people. Norway has a medium-sized undersea petroleum reserve, some timber resource and proximity to the largest market in the world. It also once boasted a booming fishing industry, however, with fish stocks in decline only a fraction of that former fishery remains.

On the bright side, Norway has more scenic views per kilometre than anywhere on the planet.

But other than that, the long and narrow, mostly empty country that exists along the North Sea spends most of the year under a blanket of snow, ice, and bitter cold.

Norway makes the best of its opportunities

And yet, Norway has made the most of its opportunities, ranking regularly in the top 5 places to live in the world, personal income ranks in the top 5 in the world, in the top 5 education systems in the world, and in the top 10 health care systems in the world. In many other measures Norway ranks among the top 10 globally.

How did little Norway, with only 5 million people, few resources, and buried under a blanket of cold and snow for 6 months of the year, manage all of that and so much more?

As is so often the case, the answer is found within the question itself. Good management!

Many nations have more generous helpings of natural resources and opportunities available to them compared to tiny Norway, and yet for some strange reason they can’t claim anywhere near Norway’s economic success and resultant quality-of-life for residents.

Norway overcame many obstacles to get where it is today, and chief among them was bad advice!

At Norway’s entry into the petroleum market after discovery of undersea oil and gas reserves in the 1969, the Norwegians were told that oil companies would leave if they weren’t granted exemption from the country’s high taxation, stalling any future development.

The Norwegians were also told that high personal tax rates would cause a flight of capital from the country and that executives and professionals would flee to greener pastures, leaving only a blue collar economy behind which would require Norway to thenceforth hire expensive foreign consultants to conduct the government’s business, high finance and corporate law.

Norway was also warned over-investing in its health care system and education systems could wreck their overall economy.

And the Norwegians were told that their country was too cold, too forbidding, and too isolated to have any kind of serious tourism business.

Well, lets look at how it all turned out, shall we?

  • With less than 1% of the world’s population, Norway’s economy has reached 22nd (nominal) / 46th (PPP) out of 191 countries, according to the CIA Factbook, with an average of 3.5% (2013) growth throughout the economy
  • Norwegian public debt is very low at 30.3% of GDP (2012)
  • Norway’s high productivity score, ranked #15 by the World Economic Forum in 2012 still puzzles economists worldwide
  • The WEF also scored Norway at #3 globally for its macroeconomic environment in 2012
  • Norway’s inflation rate is stable at 2.2% (2013)
  • Unemployment is stable at 3.3% (2013)
  • Norway maintains an AAA credit rating with the financial rating agencies (2012)
  • Norway’s entire economy produced $499.8 billion GDP with 3.1% growth in 2012
  • Out of that $500 billion dollar economy, Norway maintains one of the highest per capita incomes in the world at; 492,000 NOK / $79,104 (2013) (PPP) which places them at (3rd) position in the world
  • Monthly incomes for all employees, including male and female, full time and part time workers in the country rose 3.9% from 2012 to 2013, averaging 41,000 NOK / $6592, per month (2013)
  • Norway donates almost 1% of GDP each year to worthy causes around the world, amounting to slightly over $2 billion dollars of foreign aid annually.
Norway personal income chart 2013

Norway personal income chart 2013

Norway Healthcare

In 2000, healthcare in Norway was ranked by the WHO at 11th position in the world out of 191 countries, but in 2014 was ranked at 7th position by Commonwealth Fund Group in a comprehensive study of the top 11 healthcare systems in the world. See: The Commonwealth Fund 2013 International Health Policy Survey in Eleven Countries comparison charts here.

The Commonwealth Fund 2013 International Health Policy Survey in Eleven Countries

The Commonwealth Fund 2013 International Health Policy Survey in Eleven Countries

Tourism in Norway

The official emblem of the 1994 Winter Olympics in Lillehammer, Norway is a stylized aurora borealis (northern lights) and snow crystals.

The official emblem of the 1994 Winter Olympics in Lillehammer, Norway.

Although the incredibly scenic fjords are unavailable for tourism six months of the year, the picturesque cities dotting Norway’s far-flung fjords welcome thousands of cruise ship travelers all summer and are a vital contributor to the country’s economy. Inland, various scenic driving and hiking tours are available and a surprising number of homeowners advertise bed-and-breakfast accommodations.

Skiing and snowboarding facilities exist country-wide and the Norwegian’s have capitalized on all six months of snow and cold temperatures, bringing a combined tourism industry from almost nil, to a multi-billion dollar level with four decades of dedicated effort.

The Lillehammer Winter Olympics officially known as the XVII Olympic Winter Games were held in Lillehammer, Norway in 1994. Norway’s capital city of Oslo held the 1952 Winter Olympics.

Total tourism revenues at the height of the global financial crisis in 2009 were in the neighbourhood of $6.6 billion dollars (direct and indirect) and $319 million dollars (direct) annually. See: VisitNorway.com

Norway’s Oil and Gas industry

Norway extracts 1.92 million barrels per day from its North Sea crude oil reserves and also extracts some 200,000 Million square metresᶟ (oil equivalent) of natural gas.

Petroleum profits are taxed at 78%, which nets Norway significant annual revenue. Even with the highest oil and gas taxation on the planet, Norway has no shortage of oil companies willing to exploit the medium sized offshore reserves.

One of the companies involved in Norway’s oil and gas industry is (67% government-owned) Statoil, Norway’s state oil company. It is the 11th largest petroleum company in the world, reporting gross revenues of $723 billion dollars in 2012.

Norway Petroleum Directorate

Norway Petroleum Directorate. History and forecast for oil and gas extraction graphic in millions of square metresᶟ oil equivalent, per year.

Why does Norway have $1 trillion dollars in the bank? And why did it pass legislation to never spend more than 4% of the total in any given year?

While there’s no question that Norway has done well from its oil and gas, unlike many resource-based nations, Norway has invested its petro dollars in such a way as to create and sustain other industries where it is also globally competitive. The second largest export of Norway is supplies for the petroleum industry, points out Ole Anders Lindseth, the director general of the Ministry of Petroleum and Energy in Norway.

“So the oil and gas activities have rendered more than just revenue for the benefit of the future generations, but has also rendered employment, workplaces and highly skilled industries,” Mr. Lindseth says.

Maximizing the resource is also very important. Because the government is highly invested, (oil profits are taxed at 78 per cent, and in 2011 tax revenues were $36-billion), it is as interested as oil companies, which want to maximize their profits, in extracting the maximum amount of hydrocarbons from the reservoirs. This has inspired technological advances such as parallel drilling, Mr. Lindseth says.

“The extraction rate in Norway is around 50 per cent, which is extremely high in the world average.”

In 1990, the precursor of the Government Pension Fund – Global (GPFG), a sovereign wealth fund, was established for surplus oil revenues. Today the GPFG is worth more than $700-billion.

The GPFG wealth fund is largely invested outside Norway by legislation, and the annual maximum withdrawal is 4 per cent. Through these two measures, Norway has avoided hyper-inflation, and has been able to sustain its traditional industries. — The Globe and Mail

Norway fishing and seafood industry

The wild and farmed fishery and non-fish seafood industry in Norway accounts for billions of dollars of economic activity. Exports totaled $7.1 billion dollars in 2009, $3.8 billion of that from aquaculture. In 2011, aquaculture alone had grown to $4.9 billion.

Guided by the Norwegian government, the fishery has grown into a sustainable industry that meets the needs of Norwegian’s and continued growth is expected for fish and other seafood exports.

Summary of ‘the little country that could’

Rather than complain about the cold weather most of the year, Norway took a long look at its assets and location and decided to make the best of it. A telling refrain you will hear in the Nordic countries is, “There is no bad weather, only bad clothing.” That, in a nutshell, is the Nordic mindset.

Indeed, this speaks volumes about who they are as a people. If you want to go out, you dress appropriately. This worldview seems to have assisted the Norwegians to make the most of their opportunities by taking stock of prevailing situations, and responding appropriately.

Norway: Where what matters most – actually matters!

Their guiding principles dictate that the well-being of its citizens must be first and foremost in economic decisions, with care being taken to create a sustainable model.

Ergo, a country of 5 million with limited arable land and harsh winter, simply adapted to their environment and their economic environment. Citizens and non-citizen residents are fairly rewarded for their productivity and loyalty to the country, which further engenders productivity and loyalty.

Free tuition for students at any Norwegian university – thanks to good government / good economic decisions

Having wisely invested in the country’s future, all Norwegians and even non-Norwegian residents are entitled to a full university education. Any resident of Norway — whether a Norwegian citizen or not, can apply to Norway’s public universities and receive free university tuition. The idea behind this is that an educated society brings economic and other benefits to the country and increases the dissemination of knowledge to all corners of the Kingdom of Norway.

Likewise, all residents are covered with Norway’s healthcare service, although it can be challenging to service some of the very remote hamlets and villages, with tiny population numbers.

Likely due to the high living standards, the wonderful healthcare system, and the fact that most people in the country have a university level education, means that crime in Norway is almost non-existent. The most telling crime stat? Most years show that there are zero murders in the whole country.

Putting the needs of citizens first, guaranteeing the safety and security of residents, sustainable development of natural resources and sustainable, long-term economic models has placed Norway near the top of all indicators, and that is in spite of the negatives the country must contend with.

Norway is a model that every country must research carefully to contrast and compare with their own results. Which is what really matters. Results matter. Ideology does not matter.

Nobel Peace Prize medallionWhat matters to Norwegians is the well-being of residents and the strength of the economy, especially as measured by respected indices such as the UN, the World Health Organization (WHO), the World Economic Forum (WEF), credit rating agencies and others. Let’s hear it for pragmatism!

Norway should award itself a Nobel Peace Prize for Excellence in Governance and Society!

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5 Comments

  1. narhvalur says:

    They were quite poor until they found oil. Now they have fish, and oil.

    • Hi Ann,

      Thank you for your comment!

      Agreed. Many other countries were once also in the same position — poor, but suddenly found oil.

      But unlike some countries which spent their billions of petrodollars foolishly, Norway has invested it in building up their economy, their healthcare system and their education system.

      So much so, that they rank in the top 10 in almost all indices on the planet.

      Oil wealth is a blessing. Good governance is a gift.

      Best regards, JBS

  2. Ruth Dunlop says:

    Nice article John, Not to oversimplify things, but what it boils down to is Norway runs the oil companies, the oil companies don’t run Norway. The government worked with the oil companies and has control over anything that could be detrimental to Norway. That policy has successfully benefited both Norway and the oil companies.
    In Canada, the oil companies gave Harper a wish list, and he complied by changing all the laws-especially environmental laws-to accommodate them, in addition to subsidizing them with billions of taxpayer’s money. Canada’s debt is sitting around $700 billion, while Norway has a surplus ready to hit 1 trillion.
    Norway works for it’s citizens. Canada works for the corporations.

    • Hi Ruth,

      Thank you for your comment!

      Agreed. Norway does exert control over companies that work within its jurisdiction, as opposed to letting companies doing whatever they like.

      Companies sense fear, and if a government is afraid to stand up for environmental protection (for one example) on behalf of the citizens of the country, then they know that they can just threaten to leave and they will get whatever concessions from the government they are seeking.

      Norway decided early-on that even if it meant that there would be no oil and gas industry in the country, that they would enforce standards and regulations.

      Even at 78% taxation and with a 25% sales tax didn’t deter the oil and gas companies from drilling there.

      And the oil and gas companies are still raking in billions every year!

      Even more important, all residents of Norway live a very satisfying lifestyle.

      Cheers, JBS

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