Monday 16 Jul 2018 | 11:06 | SYDNEY
Monday 16 Jul 2018 | 11:06 | SYDNEY

The Norwegian model


Sam Roggeveen


21 April 2010 17:38

Mark Thirlwell is on the look-out for an economic model to 'mitigate the rich world's capitalist excesses'. It's hard to disagree with his dismissal of state-corporatist China and the sluggish continental European model as alternatives. But what about Norway, which has emerged from the GFC smelling of roses?

I'm in no position to judge the merits of Norway's overall economic model, but Norway's famous State Petroleum Fund (well, famous among policy wonks, anyway) at least offers a sober riposte to the debt-ridden excesses that led up to the GFC. Here's Slate's explanation of the Fund:

Norway has pursued a classically Scandinavian solution. It has viewed oil revenues as a temporary, collectively owned windfall that, instead of spurring consumption today, can be used to insulate the country from the storms of the global economy and provide a thick, goose-down cushion for the distant day when the oil wells run dry.

Less than 20 years after they started producing oil, the Norwegians realized their geological good luck would only be temporary. In 1990, the nation's parliament set up the Petroleum Fund of Norway to function as a fiscal shock absorber. Run under the auspices of the country's central bank, the fund...converts petrodollars into stocks and bonds. But instead of paying dividends, it uses revenues and appreciation to ensure the equitable distribution of wealth across generations.

As is the case with Mark's proposed 'Australian model', Norway's initiative is hardly universally applicable, since it requires a lot of natural resource revenue. But the simple moral lesson of the State Petroleum Fund (save for a rainy day) is surely attractive, and Norway's Fund model has some support in our region. Lowy Institute Fellow Warwick McKibbin has proposed that Australia establish a natural resources fund, and PNG and East Timor are looking at it too.

Photo by Flickr user Stig Nygaard, used under a Creative Commons license.