“The strongest man is he who stands alone in the world”
– Norwegian Playwright Henrik Ibsen
Fascinating story in the NY Times this morning about how Norway, a nation of less than 5 million people but a relatively huge $68 billion in oil revenue last year, was able to buck the global crisis. Preservation of the oil revenue was the key.
As investors the world over sold in a panic, she (Norway’s finance minister) bucked the tide, authorizing Norway’s $300 billion sovereign wealth fund to ramp up its stock buying program by $60 billion — or about 23 percent of Norway ’s economic output.
Take a look at the country’s fiscal condition compared to ours:
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.
And guess who is now in the driver’s seat?
Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, state money that is used to make investments around the world. Now its sovereign wealth fund is close to being the largest in the world, despite losing 23 percent last year because of investments that declined.
I wonder if the oil states in the middle east are paying attention. You’d never catch a Norwegian building a Rolls Royce out of solid gold.
Unlike Dublin or Riyadh, Saudi Arabia, where work has stopped on half-built skyscrapers and stilled cranes dot the skylines, Oslo retains a feeling of modesty reminiscent of a fishing village rather than a Western capital, with the recently opened $800 million Opera House one of the few signs of opulence.
Nicely done, Norway.