Debt-laden European nations and resource-rich developing countries could all learn from Norway’s tight-fisted spending habits and oil wealth management programme, the country’s outgoing prime minister has said.
Jens Stoltenberg said Norway had become one of the wealthiest countries in the world mainly by refusing to spend its huge state oil revenues, instead placing them in a sovereign wealth fund and using only the annual returns.
“That way the fund lasts forever,” he told an academic audience at Harvard University in Cambridge, Massachusetts.
“The problem in Europe with the deficits and the debt crisis is that many European countries have spent money they don’t have.
“The problem in Norway is that we don’t spend money we do have.
“That requires a kind of political courage.”
Mr Stoltenberg, a member of the Labour Party who served two consecutive four-year terms as prime minister, is due to resign his post on 14 October after losing the 9 September general elections to the opposition Conservatives, who campaigned to lower taxes and raise spending.
Mr Stoltenberg said Norway’s sovereign wealth fund – a now $700 billion (£439bn) fund with investments in bonds, more than 7,000 companies, and some real estate – was the main reason Norway sidestepped the “curse of oil” that has plagued many other resource-rich nations, particularly those in the developing world.
Also referred to as the Dutch disease, the curse of oil occurs when a sudden influx of petrodollars to state coffers triggers a public spending spree that in turn creates inflation and stifles other domestic industries.
The Netherlands suffered a decline in its manufacturing sector in the 1970s after the discovery of a large natural gas field.
“There are many, many other countries in the world that are in similar positions, that are facing the same kinds of challenges that we are facing, which is huge temporary income from natural resources,” Mr Stoltenberg said.
“So, if there is a danger of an oil curse, Norway is really exposed to that danger. But we have managed to avoid it. The oil industry has been a blessing for Norway.”
Norway’s sovereign wealth fund is fed, among other things, by a 78 per cent tax rate on private oil companies.
Mr Stoltenberg said Norway’s economic and fiscal policies had also encouraged one of the highest employment and productivity rates in the world, as well as more wealth equality than many other rich nations.
Asked if the United States, which has seen oil production surge but which is struggling with mounting deficits and a growing gap between rich and poor, could draw any lessons from Norway, Mr Stoltenberg said yes.
“Every country has their own national experiences, history, environment for making political decisions. So I don’t think that countries can copy each other. But I think that we can inspire each other, that we can learn from each other.”