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by John Brian Shannon | December 15, 2015
“Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a combination of high living standards and low income disparity that has captured the world’s attention. At a time when the growing gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been cited by many scholars as a role model for economic opportunity and equality.” — Investopedia.
There isn’t a country in the world that shouldn’t be able to match the high living standards set by Norway
Norway provides us with an example that all nations should strive to meet or exceed within a few years’ time
In fact, if we’re doing it right, the stellar Norwegian example will come to be seen as the standard for successful economic policy, instead of the outlier
But first, let us count the ways that Norway succeeds:
- The highest accumulated revenue surplus in the world, worth $1 Trillion (held in a sovereign pension fund)
- Strong and steady GDP growth (see chart below)
- Very low Debt-to-GDP (see chart below)
- A #1 to #4 ranking on the UN Happiness Index (varies by year)
- A #1 ranking on the Social Progress Index (see chart below)
- Typically a #1 or #2 ranking on the highest per capita income in the world
- In the Top 5 worker productivity rankings in Europe (and by extension, the world)
- One of the lowest crime rates in the world
- One of the ‘least corrupt’ nations. Ranked #5 on the Corruption Perception Index
- An average 2.5% unemployment rate (except during the global financial crisis where it shot up to 5.5%. Not to worry, it’s already fallen to 3.0%)
- Free university tuition for all citizens and residents
- Free universal healthcare ranked 7th in the world (It would rank higher, but maintaining full-service Hospitals in remote regions with tiny populations is uneconomical)
- Virtually 100% of the country is powered by renewable energy except for some remote settlements where a microgrid (natural gas power) is the only choice
- Unparalleled diplomatic credentials. Everyone knows Norwegians are among the best ‘honest brokers’ in the diplomatic world making Norway the ‘go-to’ arbitrators for nations in crisis
- A favorite country of the Olympics committee having hosted successful games twice in recent years
Do you think Norway’s success only happened since 1990 when oil and gas began to be extracted off the Norway coast? Do you think Norway’s success happened by accident?
Well, you’d be wrong on both counts.
The economy of Norway has grown at a rate better than that of any developed nation stock market, just as it was designed to do. And growth rates were steady prior to the large-scale extraction of petroleum in the country, and remain steady.
Yes, you heard right. The growth rate of the Norwegian economy beats many stock market indices as measured over the decades.
Who wouldn’t want to invest in Norway’s public/private investments, in Norwegian business generally, and in the highly educated workforce with its high productivity rate and so much more?
Successive Norwegian governments have limited deficit spending to a maximum of 4% of GDP during ‘bad years’ — and used budgetary surpluses to paydown government debt during ‘good years’
Here’s what that looks like.
Norway’s success didn’t happen by accident, nor did it occur after suddenly striking it rich in the undersea oil and gas fields
Other countries have struck it rich by discovering oil (or other massive resources) and haven’t experienced the positive outcomes seen in Norway. Where are their UN Happiness Index ratings, or productivity stats, or their per capita income stats? Nowhere near Norway’s, that’s for certain.
So why Norway?
Maybe the question should be, “Why only Norway and not every country?” — as every country could and should be seeing the same level of success as Norway.
Some people might question that their particular country, large or small, could excel like Norway.
But low ambition is the enemy of great accomplishments
If you aim low you’ll surely meet your goals. Conversely, if you aim high, you’re likely to excel. The Norwegians aimed high and succeeded — and good for them!
Many years ago, everyone believed that it was impossible for a human to run a 4-minute mile. And with each retelling of that erroneous belief it became that much more true.
After all, if it was that impossible, why bother trying?
Yet, one man, Roger Bannister from England, decided that he would aim high and run a mile in less than 4 minutes. And not long after making that decision, he did.
Since Sir Roger exceeded that expectation, many thousands of athletes have. It’s almost commonplace nowadays for professional athletes to run a 4-minute mile as part of their overall training programme to prepare for competition.
Norway is the Roger Bannister of nations!
By getting the fundamental economics right, Norway set itself up to succeed every time an opportunity to succeed, appeared. And that in a nutshell, is the measure of successful governance.
Norway with its smallish, mostly ice-covered landmass and its tiny population of only 5.1 million residents has $1 Trillion dollars in the bank!
It’s true. The Norwegian government has carefully invested its revenues and sharply limited government spending to the point that the Norwegian government may not (by law) run a budget deficit of more than 4% in any given year.
By limiting spending in this way, it allowed government revenues to accrue ‘during the good years’ while the economy was booming, and it limited spending during the lean years.
“But Norway is rich because of their offshore oil and gas revenues.”
If oil and gas are the reason Norway is doing so well, then why was Norway wealthy and well-governed prior to the exploitation of their offshore oil and gas?
“Well then, Norway was rich because of its offshore fishing industry.”
But Norway was wealthy and well-governed even before large-scale commercial fishing fleets ruled the seas.
“Norway must be rich from its tourism industry.”
Yet the booming Norwegian tourism industry is only a recent development.
“But Norway must have been rich because of its strong timber industry.”
The same applies. Norway was a wealthy and well-governed country prior to large-scale mechanized forestry.
This conversation could go on for some time… so let me shorten it up for you.
The reason that Norway excels is because Norwegian politicians of all stripes agreed long ago that Norway should ‘live within its means’ and bank surplus government revenues for use in later years
And it has worked wonders for the Norwegian economy, for Norwegian citizens and non-citizen residents, and for global investors.
It isn’t all about the resources! It’s all about the good stewardship!
By strictly applying the Norwegian model of governance every country could see similar levels of success.
Some people might say, “Well fine. But our country has no resources.”
But every country has resources of some kind. There isn’t a country in the world that couldn’t maximize its resources to match or exceed Norway’s stellar example.
And Hey! Citizens are a ‘resource’ too. Just look at Taiwan’s success! And that high level of success occurred despite it being a land of very limited natural resources.
I challenge anyone to make the case that their country couldn’t excel given 10 years of strict application of the Norwegian economic model
You can’t win that argument. Even ice-covered Norway with only 5.1 million citizens, is an easy winner in the competition for the most successful nation as measured by per capita statistics.
They Began with the End Result in Mind
Including the most important statistics of all — the ones from which all positive stats flow; A very high ranking on the UN Happiness Index and the Social Progress Index. (Say that three times, to let the profundity of that statement sink in)
Again, it isn’t about the resources it’s about advanced governance
In Norway, it’s about helping businesses to thrive — while putting the well-being of citizens and residents first!
It’s about ensuring a strong, stable, and vibrant society, and it’s about ensuring excellence in economics and governance.
And that, my friends, is the secret of Norway’s success.
by John Brian Shannon | September 4, 2014
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.
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.
Tourism in 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.
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.
What 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!
- Minifacts about Norway 2014 (Norwegian Ministry of Foreign Affairs)
- Norway’s sovereign wealth holds lessons for Canada (CBC)