As the centre of Norways booming oil and gas industries, it is also a very wealthy place. Yet there are few displays of ostentatious spending - there are no supercars with tinted windows, no designer handbag shops, and no queues of people outside exclusive nightclubs. For while other countries have struck oil and then binged on the revenues, by contrast Norway is continuing to invest its oil and gas money in a giant sovereign wealth fund. The fund, worth about $800bn (£483bn), owns 1% of the entire worlds stocks, and is big enough to make every citizen a millionaire in the countrys currency, the kroner. In effect, it is a giant savings account. And most Norwegians are seemingly very content with this - according to a 2012 study by New Yorks Columbia University Norway is one of the worlds happiest countries. We had to invest a lot of money before we could spend anything, says Prof Alexander Cappelen, from the Norway School of Economics, explaining why the country has apparently avoided the pitfalls of vast wealth. In other countries the oil is much easier to extract, so they got the money straight away. We were put in the right mindset by knowing it was a long-term plan. So, no spending bonanza for Norway. In fact there is a closely followed guideline that only 4% of the surplus from the fund is spent or invested in public projects. Actually we are spending less than 4% currently - we are saving, says Prof Cappelen. There are several reasons, he says, why Norway is happy to save its wealth and shrug off the temptations of a luxury life. For this kind of system to work, you need to have an enormous level of trust, says Prof Cappelen. Trust that the money isnt going to be mismanaged - that its not going to be spent in a way you dont like. As a result of social democracy and egalitarian policies it is a homogenous society and has built up an enormous level of trust. We trust the government. We believe our tax money will be spent wisely. once you start trusting that others are contributing their share then you are happy to contribute yours. So is Norway rich because of Norwegians high level of trust, or are its citizens trusting because they are rich? I think it is both, says Prof Cappelen. High levels of trust make economic growth easier. But this oil boom is tailing off. So whats next? Norways economy is in a very fortunate situation. We are talking about a gradual shift over the next few years, says Norways Finance Minister, Siv Jensen. We have had a slower growth in productivity over the past few years, and for this government we have to look at a competitive tax level and reducing red tape to attract investment. But it is true we have a higher cost level than any comparable country.
Posted on: Tue, 26 Aug 2014 06:39:57 +0000
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