Thursday, May 14, 2009
There's a fascinating story in the New York Times about the government of Norway and their novel approach to managing public money - robust savings and investment accompanied by a complete aversion to debt - that can only be described as "other-worldly".
Of course, being a relatively small nation with a steady income from oil production, filled with a nearly homogeneous, well-educated population helps out quite a bit.
Nonetheless, the government sets a remarkable example for others.
The global financial crisis has brought low the economies of just about every country on earth. But not Norway.Once again, it would be a completely different story without the oil revenue (and the demographics), but they do stand in sharp contrast to other Western nations whose governments routinely rack up massive new debt that their grandchildren have no realistic chance of ever paying off.
With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.
And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.
By comparison, the United States is expected to chalk up a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.
Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”
Eirik Wekre, an economist who writes thrillers in his spare time, describes Norwegians’ feelings about debt this way: “We cannot spend this money now; it would be stealing from future generations.”