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I did some quick math and with their current annual return rate of 5.8%, the returns from the the Oil Fund could finance the government's budget entirely once i

I did some quick math and with their current annual return rate of 5.8%, the returns from the the Oil Fund could finance the government's budget entirely once it gets to be about $2T in size. That's about 2x its current size. That's still about 20 years away at their current growth rate, and the government budget would probably increase by then, but it's still probably achievable. What happens then? Norway could theoretically cut its other income, including income tax, to zero and still maintain its current expenses.

marvin 7y ago
Unfortunately (as a Norwegian), that is never going to happen. Norway's is a success story, but there is a darker side to the oil fund. This money will be spent on something. Our public sector has a tendency to grow without questioning from any political group, such that the total tax level stays the same, regardless of any incomes from the oil fund. Currently, 1/3 of working-age Norwegians work in the public sector. 1/3 works in the private sector, and the final third are either unemployed or qualify for government benefits. (Meaning: Retired, long-term disabled, in full-time parental leave and so on). That this seems sustainable at all is very strange. We might as well go straight to a large-scale basic income experiment, because we almost have a basic income system in place already. In my opinion, this would be a more honest way of providing government benefits than the system we already have. Currently, 3-4% of the oil fund is liquidated each year to pay for the deficit in the national budget, while total taxation has in fact _increased_ under the current Right government. To my eyes, Norway has an exotic form of Dutch Disease in the form of our government spending, which is prevented from becoming a catastrophe by the oil fund. It will be interesting to see what the future brings, but it's not all roses.
- dkural 7y ago
  I agree with your general argument - one thing to nitpick. Full time parental leave is not a bad thing in creating social wealth. Domestic labor is often unappreciated - until one has to do it or pay for it. I wouldn't lump those in with what you clearly consider "unproductive" use of human capital and labor. You get the benefit of a meal or a clean house, and if you pay for a maid and a cook, it also shows up on the national statistics for GDP.
  - marvin 7y ago
    Oh, I’m not really opposed to a strong social safety net at all, if it came across like that. In fact, a basic income system would be very interesting to try out. Everything doesn’t have to be optimized for productivity; it’s quality of life and individual choice that matters. I’m just opposed to some aspects of the sustainability and wisdom of the current Norwegian system, as well as slightly disillusioned regarding the lack of quality debate around this in the country :)
dodobirdlord 7y ago
Minimizing expenditure from the oil fund is important to mitigate inflation in a country as low-population and rich as Norway. Goods and services are already incredibly expensive in Norway without the compounding effect of funding the entire government from an external revenue source. The Norwegian government regularly takes into consideration the inflationary impact when considering financing a project from the fund, so I don't think they'll be disposing of taxation any time soon.
dromtrund 7y ago
Whenever Starbucks try to break into a new city, they'll lower their prices, allowing their stores to take a loss for the first few years, just to starve out the competition. Smaller shops don't have the economical buffer to fight this, and Starbucks eventually take their customer bases and becomes the dominating shops. Norway already has state grants for innovative startups, which when boosted by oil money, could generate a similar environment for entrepreneurs and innovative business, allowing people and companies to take larger risks. If this is executed correctly, it would make Norway the spearhead of whatever the next oil is, since companies from other countries will get pushback from their investors when taking the same risks or going for years without generating revenue. When the oil runs out in 20 to 50 years, the future of the norwegian ecomony depends on finding new industries. Any spending of oil money that doesn't go towards securing this is irresponsible, IMO.

marvin 7y ago

Unfortunately (as a Norwegian), that is never going to happen. Norway's is a success story, but there is a darker side to the oil fund. This money will be spent on something. Our public sector has a tendency to grow without questioning from any political group, such that the total tax level stays the same, regardless of any incomes from the oil fund. Currently, 1/3 of working-age Norwegians work in the public sector. 1/3 works in the private sector, and the final third are either unemployed or qualify for government benefits. (Meaning: Retired, long-term disabled, in full-time parental leave and so on). That this seems sustainable at all is very strange. We might as well go straight to a large-scale basic income experiment, because we almost have a basic income system in place already. In my opinion, this would be a more honest way of providing government benefits than the system we already have. Currently, 3-4% of the oil fund is liquidated each year to pay for the deficit in the national budget, while total taxation has in fact _increased_ under the current Right government. To my eyes, Norway has an exotic form of Dutch Disease in the form of our government spending, which is prevented from becoming a catastrophe by the oil fund. It will be interesting to see what the future brings, but it's not all roses.

dkural 7y ago
I agree with your general argument - one thing to nitpick. Full time parental leave is not a bad thing in creating social wealth. Domestic labor is often unappreciated - until one has to do it or pay for it. I wouldn't lump those in with what you clearly consider "unproductive" use of human capital and labor. You get the benefit of a meal or a clean house, and if you pay for a maid and a cook, it also shows up on the national statistics for GDP.
- marvin 7y ago
  Oh, I’m not really opposed to a strong social safety net at all, if it came across like that. In fact, a basic income system would be very interesting to try out. Everything doesn’t have to be optimized for productivity; it’s quality of life and individual choice that matters. I’m just opposed to some aspects of the sustainability and wisdom of the current Norwegian system, as well as slightly disillusioned regarding the lack of quality debate around this in the country :)

dodobirdlord 7y ago

Minimizing expenditure from the oil fund is important to mitigate inflation in a country as low-population and rich as Norway. Goods and services are already incredibly expensive in Norway without the compounding effect of funding the entire government from an external revenue source. The Norwegian government regularly takes into consideration the inflationary impact when considering financing a project from the fund, so I don't think they'll be disposing of taxation any time soon.

dromtrund 7y ago

Whenever Starbucks try to break into a new city, they'll lower their prices, allowing their stores to take a loss for the first few years, just to starve out the competition. Smaller shops don't have the economical buffer to fight this, and Starbucks eventually take their customer bases and becomes the dominating shops. Norway already has state grants for innovative startups, which when boosted by oil money, could generate a similar environment for entrepreneurs and innovative business, allowing people and companies to take larger risks. If this is executed correctly, it would make Norway the spearhead of whatever the next oil is, since companies from other countries will get pushback from their investors when taking the same risks or going for years without generating revenue. When the oil runs out in 20 to 50 years, the future of the norwegian ecomony depends on finding new industries. Any spending of oil money that doesn't go towards securing this is irresponsible, IMO.