Rising like an ancient sea monster in the middle of the fjord, an oil rig. Directly in view from Astrid's living room window, I ask her what she thinks of it.
"It means money and jobs," she proudly replies.
|oil rig on the Norwegian fjord|
In the past Norway's economy relied heavily on fisheries, agriculture, textiles, and timber. Though people weren't starving, Norway was one of Europe's poorest countries, In 1969, the country struck oil.
The Oil Fund
Norwegian oil was treated as a national resource, and somehow the wealth didn't end up in the hands of a select few, as in the Middle East, whose royal families buy off the populace with very minimal distribution of the wealth, Russia, whose citizens suffer while a kleptocracy of oligarchs squabble and grab every fistful of dollars they can from the collective table, the rampant corruption of Africa, or even the United States and Canada, where oil revenues primarily benefit private corporations, with a smattering of royalties paid to the government.
While companies do benefit from the technologically difficult extraction of oil from the North Sea, and offshore labor like welders, engineers, and even cleaning crew get paid wonderful wages, the majority of revenues flow into a government run oil fund.
Care to guess how much Norway's oil fund is worth? Close to 900 Billion dollars (yes Dr. Evil,- you can put your pinky finger to your lips, 900 times.) That means if they were to disburse the fund to Norwegian citizens, every single baby, soldier, Grandpa, hooker, politician, and maid, would receive a check for over a million Norwegian krownes; even taking into account the cost of postage.
But don't anxiously wait for the postman. Since its inception the fund is allowed to spend 4% of it's worth each year in Norway, saving the rest for a rainy (a very rainy) day.
Norway's government anticipates two things. First, that within the twenty years, oil and gas will be an antiquated form of energy, as the cost of renewables is rapidly decreasing; second, even if oil and gas are still viable, Norway's production will decline and their reserves will eventually run dry.
Hence, rather than spending every petro-dollar on the bling-bling malls and high-rises you see in Dubai, high octane cars, or diamond and gold chains, Norway puts the money into a national retirement account to ease the post oil transition for future generations, somehow ignoring the human impulse to spend now.
Meanwhile the USA plunges further and further in debt.
How many politicians in the US could resist raiding this fund if they inherited it? A different psychology exists in Norway, a more socialist outlook, combined with true faith true faith in government.
Norway has no government debt or deficit (in fact they operate on a huge surplus), and education is free from pre-school through post graduate university, and healthcare is largely subsidized.
So Where's the Cash?
The fund is heavily invested in equities and real estate. The fund owns nearly 2% of all public European stocks, 1% of the American market, as well as property in most big cities around the world: New York, Boston, London, etc.
The money is invested fairly conservatively, and its 60% allocation into equities is based on the supposition that over the long term they are the safest and best yielding investments.
Additionally, to garner Norwegian capital, companies must meet certain ethical standards. All tobacco stocks and companies deemed to cause too much environmental damage have been blacklisted.
Plus + Minus
While Norway has done an amazing job with managing it's oil resources and wealth, it has done a far less acceptable job managing one of its oldest economic resources, fish stocks, which have plummeted to critical levels.
To combat this, Norway has embarked on salmon farming, even investing some of the oil money into research, and exporting that technology to other fish farming nations of the world, such as Chile.
video: how to tell farm raised from wild caught salmon
Norwegian companies are heavily regulated, especially with respect to labor relations. Unions have negotiated very high wages and rights for workers, surpassing even those in Sweden which is hard to fathom. Many Swedes come to Norway for the higher pay, and I am told they are often preferred hires, as they make less stink about labor laws than Norwegian citizens.
As conservative as Norway is fiscally, (a friend of mine who has lived there for years describes Norweigens as "super cheap") the government deserves tremendous credit for how they've managed their wealth, a model which should be emulated at least to some degree not only by other sovereign nations, but also individuals.
Yet, knowing what it's like to be poor and wanting to save what I made so I would have some breathing room, I can relate to Norway's attitude towards money, which is especially ingrained in the older generations which have known lack in the past.
My friend Egil, involved in Norwegian politics, a multi-millionare, CEO and senior partner of a large asset management firm, tells me of how he sent his father on all expense paid trip for his 80th birthday to Norway's most beautiful and expensive hotel. Egil told his father everything was to be paid for with his American Express Black Card, and to spare no expense.
Upon arrival, his Dad checked in, went down to the bar for a beer, and upon being told the price, promptly sent his grandson to the liquor store to get him a six-pack. It was just too expensive.