Norway Bucks the Trend

A number of Northern European countries have attained a very high level of human and material development. More particularly, the Scandinavian countries have some impressive achievements in life expectancy, educational attainment, comparatively low unemployment rates and high income levels. Even among them, Norway stands out at this time in economic history for the reason that it has totally escaped the ravages of the economic crisis facing most of the world.

As this article states, the leadership in Norway ascribes their unique and comfortable position to prudent economic policy management and the placement of some limits on markets. It does help that Norway also has a large natural resource endowment starting with petroleum to other metals. To its credit, the country has records a high level of state capability and foresight as evidenced by the establishment of a sovereign wealth fund.

While Norway's leaders relish their contrariness and emphasize the fact that it is a cohesive and socialist model, I think that their use of the socialist model is altogether inaccurate. Fine, the country has very robust and overgenerous safety nets but its approach to economic affairs and prudent public finances has allowed substantial private sector growth. It is also material that the country has a small and homogeneous population.

As the article concludes, it is essential to note that this prudent management ought to contend with the effects of the generous safety nets which appear to have discouraged some workers. It is not clear from the article whether the number of lay abouts is as large or even growing but the growth model that Norway has chosen clearly has trade offs. Not every country can pull this off but the bigger question is whether this model can be maintained indefinitely.