Saturday, May 17, 2008

Norway's Gladstone Gander Economy

Today is May 17th, Norway's national day, so perhaps a review of the Norwegian economy is warranted. I actually did review it 2 years ago on the Der Invest Informant web site. In these two years, not much have changed so what I wrote there still holds so I won't repeat it here and instead recommends you to follow the link and read it the article. The only difference is that the oil price is even higher now than then, and that the Norwegian krona has strengthened even more (at that time a US$ stood at 6 NOK, now it costs only 5 NOK), so the Norwegian budget- and current account surplus is even higher now, particularly in dollar terms. And because of this, the relative wealth of the Norwegians are even greater now than then. Indeed, at current exchange rates, Norway's GDP per capita will likely surpass $100,000-more than twice as high as in the United States and most Western European countries. While this advantage is much lower if you consider the very high cost of living in Norway, it is certainly the case that Norway is richer than any other country in the world except for Luxembourg and maybe also some Arab Gulf state.

Not that Norwegians can actually enjoy it as the government forcibly saves all of the oil revenues in a special oil fund that invests in foreign securities. This policy, as I wrote in the article is basically supported by all parties except the in theory libertarian but in practical politics right-wing populist Progress Party (Fremskrittspartiet (FRP) in Norwegian), who wants to if not halt, then at least reduce this forced savings and use it for dramatic tax cuts combined with increased spending in some areas. A somewhat humorous note was in the latest Progress Party congress, when the party's taxation spokesman Gjermund Hagesæter attacked socialist finance minister Kristin Halvorsen and said she was like Onkel Skrue, the Norwegian name for Uncle Scrooge or Scrooge McDuck, and had brought a figure of that Ddisney character to illustrate this.

After having pointed out that despite the record oil wealth, Norwegans were forced to pay more taxes than ever, he asked the gathering what the similarities between Halvorssen and Scrogge McDuck was and answered this himself by saying

"Ja, for uten at de begge er store i nebbet da. De sitter begge på store pengesekker og de er like gjerrige. Kristin Halvorsen er Norges svar på Onkel Skrue!"

Which in English means: "Well, I mean aside from both having a big beak. They are both sitting on hugh amounts of money and they are both equally greedy. Kristin Halvorsen is Norway's version of Uncle Scrooge!"

Still, while Kristin Halvorsen may be a statist version of Scrooge McDuck, the Disney character that best describes the Norwegian economy is arguably Gladstone Gander.

Gladstone Gander is the cousin to Donald Duck that is a rival for Daisy Duck, but in sharp contrast to Donald has really unbelievable luck. Gladstone Gander never works or save any money, but because of his unbelievable luck he still always have enough money to live comfortably, because whenever he runs out of cash he simply walks out on the street where he finds a lottery ticket which gives him a winning of $100,000 or some other large sum that enables him to live comfortably without working.

Of course, most Norwegians do work and so it is certainly not the case that all of their wealth can be attributed to luck, in the way that all of Gladstone Gander's money is acquired through sheer luck. So Norway is not purely a Gladstone Gander economy, and certain Arab Gulf states have arguably an even stronger Gladstone Gander character. But it is clearly the case that reason why Norway is so much richer than the rest of Western Europe is because they had the luck of having all that oil, which is becoming more and more advantageous for them as oil prices just keeps rising.


Anonymous Anonymous said...

Does the Norway's economy also include "labor market political activities?"

7:21 AM  
Blogger stefankarlsson said...

Yes, they have that in Norway too.

11:28 AM  
Blogger Allen said...

How large is that fund? What is the purpose of it? Does any money from it go into funding the government? Just curious what kind of wiggle room they have in terms of putting money into it now versus the future.

9:21 PM  
Blogger stefankarlsson said...

The fund's value was over 2 trillion NOK, which is to say $400 billion at the end of 2007, with a net contribution to it of 316 billion NOK in 2007 alone. The supposed purpose of it is to ensure that Norway have enough money in the future when the pension burden rise, as well as to prevent the Norwegian krona from rising too much and so knock out other export industries.

None of these are really valid as there are money for the pension purpose in the separate pension funds, and while a stronger NOK would harm export industries it would benefit other domestic sectors, while not doing much in terms of dependence on the oil sector.

9:45 PM  
Anonymous Anonymous said...

If Norway had a small government, lets say the size of Hong Kong, and the ideal Austrian economy was in place, what would GDP per capita be?

5:26 AM  
Blogger stefankarlsson said...

I don't know exactly, but it would certainly be higher than today.

2:38 PM  

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