Norway Has Too Much Money
The Norwegian government faces an awkward economic situation: It has too much money from its oil wealth, and does not know what to do with it.
This beautiful sight of Oslo, Norway comes with knowing that they have way too much money hiding in those buildings. (Image Source: Flickr: Steinar Johnsen)
In many cities, states, nations around the world, the economic recovery from the so-called "Great Recession" of 2008 has been an awful matter, simply because the well has run dry. In a time when money needs to be spent in order to stimulate the economy (even though people themselves are not spending any). Norway, that Scandinavian nation that people often confuse with Sweden, suffers from the opposite problem all together: It has too much money, and does not know how to spend it, thanks to a massive sovereign wealth fund. This may sound like a goofy problem to have, but it reflects on what it means to have a future and a decent economy, especially in the midst of an election.
Norway, like many super-rich nations, earns its wealth through selling oil, and is the third largest exporter on the planet. Oil in Norway comes primarily from the Barents Sea to the north and the North Sea to the South. Rather than spending frivolously on the unexpected wealth (unlike many a Gulf nation) or manipulate the oil markets, the Norwegian government kept their prices in line with the market, and placed the money in a sovereign wealth fund. Norway's Government Pension Fund, which holds nearly 2% of all of Europe's stocks, is currently valued at $750 billion.
Now, as an election is under way in Norway for its parliament, the question becomes what to do with that money. While the Norwegians have been far more frugal, benefits for Norwegians have been substantial for them thanks to the Government Pension Fund, including 46 weeks of paid parental leave following the birth of a child and free health care. They also have one of the lowest unemployment rates in the world, at 3.5%. At the same time, the law dictates that the Norwegian government is not allowed to spend more than 4% of the Government Pension Fund (which is the average annual earnings of the fund) to fund the state budget. The total current budget for Norway, with use of the fund, is at approximately $62 billion.
While the left-wing Labour Party, led by Prime Minister Jens Stoltenberg, have been cautious with the money, they are likely to be thrown out of government in today's election. The two leading parties to take over the government, the Progress and Conservative Parties, are at odds over what to do with the Government Pension Fund. The Progress Party wants to break tradition and expand use of the fund, to build up infrastructure and education, while the Conservative Party wishes to tighten use of the fund even further.
If nobody minds me throwing out a suggestion over there: If Norway needs to spend some money, I would suggest helping other nations or cities out. More specifically, Detroit. Detroit is about $17 billion in the hole, and the State of Michigan is refusing to bail out the city (some would argue it's egging on Detroit's bankruptcy), while the American government is offering only $106 million in aid. America's paltry offer to Detroit comes despite giving more $8 billion combined to Israel, Egypt, Pakistan, and Afghanistan, because reasons. Perhaps, if Norway offered a bit of money, perhaps the equivalent of Israel's completely unnecessary $3.1 billion in aid, it might shame the American government just enough on its aid priorities. The Norwegians do not even need to spend it, just threaten to. And they can, because Norway has too much money.