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Will New Norway Government Help Prosperity?

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There’s an old adage that says, “If it ain’t broke, don’t fix it.” Norway seems to disagree.

The country’s highly prosperous record under eight years of Prime Minister Jens Stoltenberg’s Labour Party has come to an end as a result of its most recent election, and Stoltenberg will be succeeded by “Iron Erna” Solberg, whose right-center Conservative Party promises change in everything from management of Norway’s sovereign wealth fund—the largest in the world—to oil exploration, from education and health care to immigration policies. Which way those changes take the country, however, could depend on other influences.

To rule, the Conservatives must form a coalition government with other parties. One member of that coalition is likely to be the populist and anti-immigrant Progress Party, which gained unfortunate notoriety when former member Anders Breivik killed a total of 77 people two years ago. Others include the Liberals and the Christian Democrats, known to be more moderate than either of the other two. Depending on how it plays out, one or another of those parties will influence the way the Conservative Party keeps its campaign promises—or not, as the case may be.

Norway is one of the most prosperous countries in the world, thanks in large part to its massive sovereign wealth fund. State revenues from the petroleum sector are set aside in the fund against the day when the country’s fossil fuels play out and there is no more oil money. Money from the fund—no more than 4% per year—pays for a chunk of the country’s expenses, such as health care and education.

But Solberg’s party sees that fund, cited variously as $750 billion to $1 trillion in size, as too big, favoring a breakup into two or three smaller funds. The Progress Party says that perhaps it should be broken up even further, and that some of the petroleum money—$1 billion a week in profits and taxes—should be withheld from the fund to invest in infrastructure projects at home.

The existing fund, which is limited to investing in foreign stocks, bonds and property, isn’t allowed to invest within Norway, but perhaps that too might change. Concerns that it might overheat the Norwegian economy have thus far prevented that, but change is in the wind. Currently the fund owns an average of 1% of the world’s shares, and more than 2% of all listed companies in Europe. It manages the money for the very long term: the time when the tides of oil and gas no longer flow out to bring money flowing in.

And about petroleum: another change advocated by the new government is the opening of environmentally sensitive areas Lofoten, Vesterålen and Senja in the north to oil and gas exploration. While that could happen, the Conservative Party will have to negotiate with Liberals and Christian Democrats, who are far more protective of Norway’s natural surroundings—so it’s anything but a done deal. Still, business in oil leases in existing areas is brisk, with new licensing arrangements in the works as well as a new discovery of oil near the existing Norne field in the Norwegian Sea by Statoil.

Immigration is a big issue, since the Progress Party has engaged in some pretty incendiary rhetoric in the past that it only toned down after Breivik’s murder spree, and since the rate of unemployment in Norway is so low that its economy relies on immigrants to fill many positions to keep business humming. Look for lots of discussion pro and con as Norwegians seek to reach consensus on this and other issues.

Then there are the health care and education sectors. The new government owes at least some of its votes to its promises to make more private health care available even as it cuts taxes—Norway has both public and private health care—and it also seeks to double the number of private schools in the country. Privatization will open the door for large chains as well as smaller entities.

Voters in Norway voted out the Labour Party not out of any desperate desire for transformation in the public sector, but more or less because Labour had been in power so long. It remains to be seen whether the change voters craved will be change they can live with, and whether the country’s current prosperity will continue.


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