An economics lesson from an English major

Norway should not have any potholes.

In fact, the country should have heated sidewalks, gold-plated taxis and elephant tusk toothbrushes. Norway is so loaded that it should pay people to have children. (Wait, it kind of already does.)

I’ve raved so much about this country that some of my local friends have become weary of my seemingly inscrutable positivity. Well, I’m going to tell you Norway’s attributes again (but if you stay with me there is a rant imminent). Besides the natural beauty of the fjords, this country offers:

  • an excellent model of universal health care
  • extravagant parental benefits
  • subsidized education
  • social welfare programs
  • peacemaking efforts around the world
  • overseas humanitarian assistance

On top of all that, various surveys have deemed it the best place in the world to be a mom and the second happiest country.

How is it that this remote country, which quietly creeps an arm along Sweden and Finland and into the Arctic Circle, is able to give it’s people such a great lifestyle and have something to spare for the rest of the world?

One word: oil.

Norway produces more than 2.3 million barrels of oil a day. With a meager population under 5 million there’s no way it can spend all that extra cash, so it created a place for it: the Oil Fund.

The fund is growing every second – if you click here you’ll get a glimpse of it changing in real-time. Its investments include stocks of companies on every continent, giving it a 1% share of all global equities. Since the fund was established in 1990 Norway has saved 3.7 trillion kroner ($660 billion). By the end of next year, it’s expected to reach a whapping 4.4 trillion kroner.

President Obama probably wishes he had the same economic “problem” that Norwegian Prime Minister Jens Stoltenberg has.

The brains managing Norway’s oil riches are economic genius’. They’re the people your mom wants you to learn how to budget your money from. Rather than spending frivolously, say on heated sidewalks, Norway is doing three things with it’s bulging oil wealth:

  • allowing a small fraction of it into it’s economy today
  • saving it for future Norwegians when the country’s oil reserves are dry
  • sharing its good fortune with the rest of the world

Next year Norway plans to spend 30.2 billion kroner ($5.3 billion) to fight world poverty. That’s on top of millions spent in peacemaking efforts (Colombia, Philippines, etc.) and the billions in humanitarian and environmental efforts led by Norwegian NGOs.

Norway has taken the idea of spreading the wealth seriously but it’s careful how it uses the oil profits at home. Here’s where things get tricky. According to various principles of economics, if Norway allows too much of it’s oil wealth into its budget it could overheat the economy (that explains why there are potholes.)

The government is able to use up to 4% of the Oil Fund’s returns in its state budget. While Spain and Greece are in economic free fall, Norway’s coffers are so robust it can’t even use it’s whole quota of oil revenue for fear of stoking inflation. For the upcoming year, the state is using only 3.3%, or 125 billion kroner ($22 billion), while the rest comes from its tax base.

President Obama probably wishes he had the same economic “problem” that Norwegian Prime Minister Jens Stoltenberg has.

Now for the rant that I promised you. A look at this dilemma from the taxpayers’ perspective is less appetizing. Norway is setting even more aside for the future while today’s workers are facing an increase in taxes – imported cheese and beef are going up by 277% and 344%, respectively. This means that my favorite mac ‘n cheese at Café Fedora will become so unaffordable that the restaurant will either stop serving it or alter the flawless recipe.

In a country that already has scant choices at the grocery store and has the highest grocery bills in the world, this is preposterous. Already thousands of Norwegians flock to Sweden for cheaper groceries, this will only challenge more to follow suit.

I may not understand global economics but I do understand household budgets and based on that, I support a motion for free groceries in Norway for a month – who’s with me?