NORWAY: THE EXCEPTION TO THE NORM 

Norway is a low-populated Scandinavian country not only known for its record-breaking economic and development figures but also its socially led political agenda and policies. However, that has not always been the case. Back in the 1960s, Norway was a middle-class country, whose economy was sustained on fish exploitation and trade with its rich geographical neighbors. So, what pushed this state into increasing its GDP per capita by an astonishing 7,040%? 

In the late 1960s, the discovery of substantial oil reserves was made in the North Sea, shattering its inhabitants’ prospects. Nevertheless, through an aggressive intervention by the government and a meticulously thought investment plan, Norway managed to escape the resource curse. The truth is that, as you have probably been taught in class, the discovery of abundant natural resources tends to act like a Trojan horse. A point in case would be Nigeria. Having discovered comparable oil reserves in the 1950s, this African state’s economy was presumed to become one of the biggest in the world. Contrarily though, the surged optimism was later opaqued with corruption, economic instability, neglect of other sectors, and environmental damage. 

On the other hand, to avoid private extractivism, Norway assured the collection by the government of half the profit generated by the extraction and sale of the given resource. As to that, all companies operating under this newly formed Norwegian industry would return the stated proportion of benefits to the country’s state. This was defended under the argument that the reserves should be rightly property of Norway’s population.  

Moreover, instead of squandering its newfound wealth, in 1990, the Nordic country established the Norwegian Sovereign Wealth Fund, to manage its oil revenues for future generations. Its main goal was for the country’s economy not to endure a visible shock when running out of oil to explode. This measure, even if seeming the logical approach, almost represents an abnormality, which has been massively acclaimed by economists all over the globe.  

As of February 2024, the stated fund had over US$1.548 trillion in assets, invested in companies from diversified sectors all over the world. This, translating to a breathtaking figure of US$270,000 per Norwegian citizen, makes it the world's largest single sovereign wealth fund in terms of total assets under management. The current spot has been assured thanks to both cleverly assessed financial investments, and the latest increase in oil prices. Moreover, thanks to the European block and tariffs to Russian resources –after its invasion of Ukraine-, the demand of Norwegian oil by this continent’s countries has witnessed a massive surge. 

Notwithstanding, contrary to what you may believe and what most oil-rich countries have done, Norway’s government tax rates were never significantly reduced. The country's current VAT rate is 25%, 4 points higher than the Spanish. The fact is that, according to the country’s finance institutions, tax collection serves as a means to tackle inequality. This has indeed played a huge role in positioning Norway as one of the countries with better income distribution. Quantitatively, the country’s GINI index –a globally accepted measure for wealth dispersal, this being best when near to 0- falls from 0.43 before taxation, to 0.26 after. 

Parallelly, because of its cultural bond with the environment, and consequently being a firm defender of the green transition, Norway ironically committed to eradicating its energy consumption from non-renewable sources. This led to an unprecedented 98.5% of its energy usage being generated by renewables in 2022 –mainly from hydropower-.  

In conclusion, Norway has once again demonstrated its resilience to historically considered curses, while focusing on social development and its’ green transition. For all this, it certainly is a country to watch!