Tuesday, March 23, 2010

In praise of Norway

I have a great deal of admiration for Norway (even if I have rather childishly chosen a picture of the "Norwegian Blue" parrot to illustrate this post) mainly because of how they have handled their economy. Just like Britain, Norway has been blessed with huge oil and gas reserves to exploit in the North Sea and this industry has made it a very rich country.

The main plank of their economic policy (apart from to keep a million miles away from the Euro and the EU) is to invest much of the oil and gas money into a national fund to underwrite the country's future prosperity and specifically pensions.

This fund has grown to close on half a trillion dollars in value ($457 000 ooo ooo at the end of 2009) and is invested in bonds and shares all over the world including Spain. In fact the Norwegians have shown surprising faith in Spain investing about €18 billion in companies like Telefonica, Santander, BBVA, Iberdola and Repsol. It may be a sign of the times and show a lack of faith in the Spanish government's ability to manage its own finances, but the fund has very little invested in Spanish government bonds.

It's interesting, and quite depressing if you are British, to contrast the positions of Norway and the UK which also had a North Sea windfall:

Economy - Norway's is strong. GDP per head the 3rd highest in the world and fell only slightly during the recession. Britain's ... er, isn't

Public Finances - Contrast Norway's consistent surpluses with the UK's near bankruptcy

Trade - UK has chronic balance of payment difficulties, Norway exports twice what it imports.

Pensions - Norway's national pension fund contrasts with the destruction of the UK's private pensions and unfunded (most likely unaffordable) commitments to pay state and public sector ones.

Energy - Britain's North Sea production is in decline and we are closing power stations with no clear plan of how the lights are going to be kept on. Norway has used hydropower for its internal energy needs and invested heavily in energy efficiency.

You get the picture. It's like chalk and cheese and successive British governments are to blame with the current one being the worst of the lot when it comes to all of these issues. Let's hope come this May that it is dead, deceased, ceased to be, expired etc etc

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