The Secret of Norway’s Success

The Secret of Norway’s Success | Previously published at JohnBrianShannon.com by John Brian Shannon

Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a combination of high living standards and low income disparity that has captured the world’s attention. At a time when the growing gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been cited by many scholars as a role model for economic opportunity and equality.” — Investopedia.

Norway flag
Norway has captured the world’s attention with its high living standards and its low income disparity. Norway flag. Image courtesy of www all-flags-world com

There isn’t a country in the world that shouldn’t be able to match the high living standards set by Norway

Norway provides us with an example that all nations should strive to meet or exceed within a few years’ time

In fact, if we’re doing it right, the stellar Norwegian example will come to be seen as the standard for successful economic policy, instead of the outlier.

But first, let us count the ways that Norway succeeds:

  • The highest accumulated revenue surplus in the world, worth $1 Trillion (held in a sovereign pension fund)
  • Strong and steady GDP growth (see chart below)
  • Very low Debt-to-GDP (see chart below)
  • A #1 to #4 ranking on the UN Happiness Index (varies by year)
  • A #1 ranking on the Social Progress Index (see chart below)
  • Typically a #1 or #2 ranking on the highest per capita income in the world
  • In the Top 5 worker productivity rankings in Europe (and by extension, the world)
  • One of the lowest crime rates in the world
  • One of the ‘least corrupt’ nations. Ranked #5 on the Corruption Perception Index
  • An average 2.5% unemployment rate (except during the global financial crisis where it shot up to 5.5%. Not to worry, it’s already fallen to 3.0%)
  • Free university tuition for all citizens and residents
  • Free universal healthcare ranked 7th in the world (It would rank higher, but maintaining full-service Hospitals in remote regions with tiny populations is uneconomical)
  • Virtually 100% of the country is powered by renewable energy except for some remote settlements where a microgrid (natural gas power) is the only choice
  • Unparalleled diplomatic credentials. Everyone knows Norwegians are among the best ‘honest brokers’ in the diplomatic world making Norway the ‘go-to’ arbitrators for nations in crisis
  • A favorite country of the Olympics committee having hosted successful games twice in recent years

Do you think Norway’s success happened by accident?
Do you think Norway’s success only happened since 1990 when oil and gas began to be extracted off the Norway coast?

Well, you’d be wrong on both counts.

The economy of Norway has grown at a rate better than that of any developed nation stock market, just as it was designed to do. And growth rates were steady prior to the large-scale extraction of petroleum in the country, and remain steady.

Say again?

Yes, you heard right. The growth rate of the Norwegian economy beats many stock market indices as measured over the decades.

Who wouldn’t want to invest in Norway’s public/private investments, in Norwegian business generally, and in the highly educated workforce with its high productivity rate and so much more?

Norway GDP from 1960 - 2015
Norway GDP growth from 1960 – 2015. Source: tradingeconomics.com

Successive Norwegian governments have limited deficit spending to a maximum of 4% of GDP during the ‘bad years’ — and used budgetary surpluses to paydown government debt during the ‘good years’

Here’s what that looks like.

Norway Debt-to-GDP
Norway Debt-to-GDP. Generally, Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting borrowing costs and government bond yields. Last updated on December of 2015. Source: tradingeconomics.com

Norway’s success didn’t happen by accident, nor did it occur after suddenly striking it rich in the undersea oil and gas fields

Other countries have struck it rich by discovering oil (or other massive resources) and haven’t experienced the positive outcomes seen in Norway. Where are their UN Happiness Index ratings, or productivity stats, or their per capita income stats? Nowhere near Norway’s, that’s for certain.

So why Norway?

Maybe the question should be, “Why only Norway and not every country?” — as every country could and should be seeing the same level of success as Norway.

Some people might question that their particular country, large or small, could excel like Norway.

But low ambition is the enemy of great accomplishments

If you aim low you’ll surely meet your goals. Conversely, if you aim high, you’re likely to excel. The Norwegians aimed high and succeeded — and good for them!

Aiming High

Many years ago, everyone believed that it was impossible for a human to run a 4-minute mile. And with each retelling of that erroneous belief it became that much more true.

After all, if it was that impossible, why bother trying to run a 4-minute mile?

Yet, one man, Roger Bannister from England, decided that he would aim high and run a mile in less than 4 minutes. And not long after making that decision, he did.

Since Sir Roger exceeded that expectation, many thousands of athletes have run the 4-minute mile. It’s almost commonplace nowadays for professional athletes to run a 4-minute mile as part of their overall training programme to prepare for competition.

Norway is the Roger Bannister of nations!

By getting the fundamental economics right, Norway set itself up to succeed every time an opportunity to succeed, appeared. And that in a nutshell, is the measure of successful governance.

Norway with its smallish, mostly ice-covered landmass and its tiny population of only 5.1 million residents has $1 Trillion dollars in the bank!

It’s true. The Norwegian government has carefully invested its revenues and sharply limited government spending to the point that the Norwegian government may not (by law) run a budget deficit of more than 4% in any given year.

By limiting spending in this way, it allowed government revenues to accrue ‘during the good years’ while the economy was booming, and it limited spending during the lean years.

“But Norway is rich because of their offshore oil and gas revenues.”
If oil and gas are the reason Norway is doing so well, then why was Norway wealthy and well-governed prior to the exploitation of their offshore oil and gas?

“Well then, Norway was rich because of its offshore fishing industry.”
But Norway was wealthy and well-governed even before large-scale commercial fishing fleets ruled the seas.

“Norway must be rich from its tourism industry.”
Yet the booming Norwegian tourism industry is only a recent development.

“But Norway must have been rich because of its strong timber industry.”
The same applies. Norway was a wealthy and well-governed country prior to large-scale mechanized forestry.

This conversation could go on for some time… so let me shorten it up for you.

The reason that Norway excels is because Norwegian politicians of all stripes agreed long ago that Norway should ‘live within its means’ and bank surplus government revenues for use in later years

And it has worked wonders for the Norwegian economy, for Norwegian citizens and non-citizen residents, and for global investors.

It isn’t all about the resources! It’s all about the good stewardship!

By strictly applying the Norwegian model of governance every country could see similar levels of success.

Some people might say, “Well fine. But our country has no resources.”

But every country has resources of some kind. There isn’t a country in the world that couldn’t maximize its resources to match or exceed Norway’s stellar example.

And Hey! Citizens are a ‘resource’ too. Just look at Taiwan’s success! And that high level of success occurred despite it being a land of very limited natural resources.

I challenge anyone to make the case that their country couldn’t excel given 10 years of strict application of the Norwegian economic model

You can’t win that argument. Even ice-covered Norway with only 5.1 million citizens, is an easy winner in the competition for the most successful nation as measured by per capita statistics.

They Began with the End Result in Mind

Including the most important statistics of all — a very high ranking on the UN Happiness Index and the Social Progress Index — the stats from which all other positive stats flow. (Say that three times, to let the profundity of that statement to sink in)

Social Progress Index 2015
It’s Norway (again) taking the Number One spot on the Social Progress Index.

Again, it isn’t about the resources it’s about advanced governance

In Norway, it’s about helping businesses to thrive — while putting the well-being of citizens and residents first!

It’s about ensuring a strong, stable, and vibrant society, and it’s about ensuring excellence in economics and governance.

And that, my friends, is the secret of Norway’s success.

Large Scale Job Sharing Could Prevent a Host of Societal Ills

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Truism: Whenever and wherever the unemployment rate is low anywhere in the world, drug abuse, crime, and homelessness drops.

Jobs prevent the depression that leads to drug abuse, crime, and eventually, homelessness.

Because corporations in North America prefer a high-ish unemployment rate (to guarantee they get the choicest and hungriest applicants, and to ensure a large pool of seasonal labour, and as a device that works to continuously dampen calls for a higher minimum wage) we have the follow-on problems of depression, leading to drug abuse in some cases, which eventually leads to crime and later, homelessness for many of the working poor.

Which results in higher costs to society and it’s the taxpayers who must cover those costs, one way or another

To solve this utterly predictable set of problems, all levels of government should be working with corporations to ensure that corporate needs are met — but without destroying the lives of many people who would frankly, rather be working!

When everyone matters, society works better.

Nordic countries ask; What societal problems?

Sweden has mandatory job sharing in those industries that can’t employ all of their workers. Except for retired people, students, those with chronic illness, or the very wealthy, everyone in the country works for *at least* 6 months of the year. Which neatly prevents such societal ills.

If you’ve ever visited Sweden, you’ll notice nobody lives in dumpsters there

Nordiske-flag Image courtesy of Hansjorn
Nordic flags. Image courtesy of Hansjorn. From left; Finland, Iceland, Norway, Sweden, Denmark.

Some industries in Sweden can’t use all of their available workers, so if you’re a worker in that particular industry it simply means that you’re ‘on work’ for 6 months and you’re ‘off work’ for 6 months of the year.

The ‘alternate person’ steps in and does ‘your job’ for 6 months while you’re on mandatory time off. Both people get Unemployment Insurance (UI) from Day 1 of their respective layoff dates.

It’s not like layoffs in North America. It’s more like, “Your scheduled time ‘off work’ is coming up, Anders. So, have you arranged the dates with your temporary replacement? You have? Thank you.”

In Sweden, you ‘own’ your job, you’re responsible for it, and you want to perform well for the company that has given you the responsibility for making sure that ‘your job’ is done properly

Also, even though you’re ‘off work’ for 6 months, you’re still expected to be available to fill that position whenever the alternate worker is ill, or can’t make it to work for any other reason. You like that a lot, because their UI system doesn’t penalize you for kindly making yourself available to the company AND you get to keep the wages you earned that day.

If you’re ‘on work’ for your 6 months and suddenly want a day ‘off work’ to go buy a house, propose to your partner or whatever, you just arrange it with your job sharing partner — and you’re covered. They come in and do your work for you. You inform the company merely out of courtesy that this will be happening. It’s ‘your job’ after all — not the company’s job.

So, let’s say that you’re off work for 6 months and ‘Sven’ (the person doing your job) has a skiing accident and needs 10 days off work to recover, you not only get your regular UI payment, you also get the normal wages for each day that you replaced Sven.

In this hypothetical job sharing scenario, the job of ‘Anders’ and ‘Sven’ is totally covered no matter what, 365 days of the year

Overtime wages? Unknown in Sweden. With one phone call the company simply adds another already trained worker to the project, and can keep them employed any number of days, or until project completion. Then, they send them back home until the company calls again to help with another project.

Everyone has a job, or is on UI for part of the year. Consequently, depression, drug abuse, crime, and homelessness are almost unknown in Sweden

Everyone has a job. Whether you are ‘off work’ for a time, or ‘on work’ for a time — you have a job, you have a place in society, you belong to a community. You may work 100 days per year, you may work 200 days per year, or any number of days between 100 to 365 days per year in Sweden. It depends how busy your particular industry is in that particular year.

The takeaway point is; If you live in Sweden — you’re a worker, you’re a valued person, you’re part of Sweden’s ongoing success, you belong.

When everyone matters — corporations work better, society works better, and the UN scores your country highly on the UN Happiness Index

Corporations like this employment policy, because more employees than they can afford to keep employed year ’round ‘own’ their particular position and over the course of a year, both workers communicate often, to make certain that every single working day of the year is ‘covered’ for the company.

The company doesn’t care which of the two workers are onsite on any given day, because both are eminently qualified and both feel that they ‘own the job’ and are responsible for it. Which is much better for the corporation when compared to only one person owning that job.

What happens in a Swedish company when an employee has time off due to illness, mandatory maternity leave, vacation times, or car trouble?

Nothing. The alternate worker is likely already on the premises doing the job. Utter, boring, Swedish efficiency! Also known as the Nordic Model — a fascinating mix of social and economic policies which has shown steady, predictable results, going on four decades.

The company knows that every work day of the year, each position in the company will be filled by the regular worker or the alternate worker — no matter what!

The inequality in North America is stunning. And there’s no good excuse for it. It’s merely a lack of leadership. Governments are kowtowing to uninspired, faceless, and unaccountable corporations that only care about the bottom line.

But hey, don’t blame the corporations! They’re in business to make a buck — not to solve social problems — that’s the government’s job.

But when the corporations are the ones causing the social problems via their policy of keeping workers hungry for work through a policy of high unemployment, union-busting, threats to export jobs to Asia, downsizing threats and more — that’s when we need to look at a better model.

And in the case of Sweden and the other Nordic countries, a much better model already exists — not just for society, but one that works better for corporations as well.