Perhaps this is why they can afford many government programs that the US simply cannot. Without a prolific income stream comparable to Norwegian oil, the only way to provide more social services is to tax individuals and businesses harder.
Tax any group too heavily and you create brain drain, which hurts in the long run.
That would be a very interesting study. Anecdotally, only one person in my group of ambitious acquaintances has left Norway due to better opportunities elsewhere. Some super-wealthy (>$20 million net worth) have left to avoid paying the annual wealth tax of 0.85% of the market value of all taxes.
Sales tax is 25% (lower on food + public transport). Income tax is close to 50% for most of people (progressive), in addition there is a 14% tax per employee that the companies have to pay. If you take out dividend there is a 25% tax that don't earn you pension.
And a better metric would be to look at tax burden, because top marginal rates are just that: what you pay on our last dollar, not your first. Sales tax isn’t charged on rent/food/property so it’s only charged on a small percentage of one’s after-tax income.
Norway is also one of the few remaining countries that have a wealth tax (among OECD countries, the only other one is Switzerland), which is currently at 0.85% of all net assets above 1.4m NOK, including cash, public and private stock, cars, boats, and of course real estate. Material assets such as real estate is assessed based on tables that take square footage, age, etc. into consideration. The tax is, unusually and somewhat controversially, uncapped. In theory, you could end up owing 100% or more of your income in wealth tax.
The top marginal tax rate band is around 50%. Very few people pay that much income tax, or anywhere near it so it's highly misleading most people is near it. A large portion of the population are close to seeing a small portion of their income taxed at the marginal rates because Norwegian incomes are unusually flat and high, yes.
But according to OECD taxing wages 2019, the median tax and social security contribution for a single person with no children in full time employment in Norway is 27.5% vs 23.8% for the US.
Of course the US varies significantly by state.
Sales tax has relatively low impact as you spend a relatively low portion of your income on things taxed at the full rate.
Income tax comparisons will dramatically underestimate the tax burden for Norwegian citizens, but even then I believe you are only quoting the capital gains rate for non-securities investments. Summarizing from a comment I posted elsewhere:
* 25% VAT on everything except food, which is 12%. Electric vehicles currently exempt
* 40% income tax on average including 8% public pension contribution. Highest marginal tax on income is 47%, which applies to incomes greater than $116k.
* Employer has to pay 14% of your salary as employment tax. Company profits are taxed at 24% (this is separate from the capital gains tax). Stock-based compensation is taxed as income, so no possibility of weaseling around the employment tax. You won't get stock-based compensation unless you're in a startup or a C-class executive at a (big) private company. The wealth tax does weird things to the valuation of stock options; they'll almost always be worthless unless your company is sold or goes public.
* Net assets above ~$175k are taxed at 0.85% p.a, primary residence contributes only 25% of its market value to net assets
* 29% capital gains tax, primary residence is exempt as is most tax income from renting out primary residence. Sell your home with $1 million profit? No tax.
* 22% tax on capital gains or "general" incomes that are not linked to securities ownership. Relatively small amounts are collected through this bracket.
* On average ~$10k tax on all new motor vehicles, electric vehicles currently exempt
* A tax of approximately 30% (~5 NOK per liter) is applied to gasoline, in addition to the 25% VAT. Annual tax of ~$1000 on all motor vehicles, increasing with how good the vehicle is. Electric vehicles currently exempt.
* Various taxes on alcohol, tobacco, air travel. Some municipalities have a property tax on the order of ~$500 p.a. for an average residence.
The government is not allowed to use more than 4% (return on investment), in practice today this is close to 2% because the return on the fund is lower these days.
Shoulda been taxing any extraction of non-renewable resources into a fund like this. The whole country—literally, the physical country—gets poorer when that stuff's taken out. Shame we didn't capture some of that value for public, shared, long-term benefit.
[EDIT] all non-renewables, that is, not just oil. Should easily make up the difference between population and extracted natural resource value vs. Norway.
Imagine if we'd have had the foresight to take Norway's approach that natural resources are the nation's natural resources and let the returns build for 160 years.
We used ours to build an automobile-based economy. We didn't exactly lose out on the deal. The unfortunate discovery that CO2 contributes to global warming came much, much later. But at any rate, American economic dominance largely depends on infrastructure and mass market autos.
And? The point still stands that the different conception of property rights in the US allows the revenue of natural resources like oil to go to corporations instead of the nation. Even in cases where the resources are on public land the licenses for extraction are often a pittance compared to what the company will make.
Using the "US exports 3x as much oil as Norway" figure from the sibling comment, does that mean a comparable fund in the US could be $3000B, or $9k/person?
Even worse: Canada has actually paid US companies to come take our oil.
I feel like all we had to do was charge a very high extraction rate (calculated where 20% of the profit is more than enough to fully restore the ecosystem), have stringent rules in place about pollution, then actively use funds to clean up the environment
I think Alaska's system is fine. I don't think it's morally worse to give people their money up front instead of holding on to it "for them" but only letting the majority decide how to spend it.
U.S. Government spending is roughly 38% of GDP and in Norway it's 48%. I think it's safe to say that the U.S. can and does spend a lot, the debate is more towards what ends and how. I'm inclined to think we do a really poor job, with numerous reasons why.
Most spending in the US is squandered around war and socialism to the rich. The country has doing little int the last few decades to support science and combating global warming; they're also cutting social programs.
Though in terms of science I'm not sure you're correct. U.S. spends above age in R&D spending as a percentage of GDP. Source: https://data.oecd.org/chart/5Dtz
Norwegian software developer here. I pay my taxes with pleasure, knowing that the money supported my education, my ability to go to the hospital, good roads, good airports, and lots of other public functions that are great because we collectively invest in them. I think anything below 20% in taxes simply means a country's public functions will suffer.
It's weird to me that Americans have so much against taxes. If a country has a low degree of curruption, and has incentives to innovate in the public sector, then taxes are a good thing.
Obviously I can't speak for the general population, but as for my close proximity: My colleagues think taxes are good too. No brain drain here.
I believe that the problem in most countries is that rich people have successfully brainwashed the population into thinking that is bad to support their own people with schools, health care, cultural programs, etc. On the other hand, they successfully brainwashed the masses into believing the socialism for the rich is necessary: for example, you will see people crying on the newspapers because the rich are paying "too much" in taxes, when in fact they never payed so little.
> I think anything below 20% in taxes simply means a country's public functions will suffer.
Honestly, the biggest difference between nations isn't so much in income/payroll taxes, but in the VAT. The US simply doesn't have one at the federal level, and state sales taxes are typically in the neighbourhood of 6% (https://en.wikipedia.org/wiki/Sales_taxes_in_the_United_Stat...).
I don’t know what that graph is showing but it’s not the sales tax I pay at the register. In Illinois it’s usually 9-11% if I recall correctly. I’m in Chicago, so maybe the local sales tax is much higher than the state average?
American here. I have no problem paying taxes. I just hate to see my tax dollars mismanaged. Baltimore MD has been in the news lately, largely as people have focused on a certain public official's tweets. Baltimore receives a huge amount of taxpayer dollars, federal, state, and local. Its per pupil school spending is by far the highest in the state. The percentage of public secondary school students who demonstrate proficiency in mathematics is less than 1%. 2 of its last 3 city mayors have resigned due to corruption charges. I consider this mismanagement.
Take a look at what the American government budget is spent on: https://www.nationalpriorities.org/budget-basics/federal-bud... (scroll down to "Total Federal Spending 2015"). The three largest parts of the spending pie, constituting over two thirds of government spending, are "Social Security, Unemployment and Labor", "Medicare and Health", and "Military". Less than 20% goes to education/infrastructure. Many conservative Americans oppose welfare and socialised medicine, and similarly many liberal Americans oppose high military spending (which makes up over half of "Discretionary Spending"), so it's easy to see why they think their taxes are being wasted. There are countries like Singapore that have extremely good infrastructure and schooling with government spending under 20% of GDP, because they spend only on infrastructure, not welfare, so high spending isn't a prerequisite for good infrastructure.
Less than 20% of Federal spending goes to education and infrastructure because the States pay for most education and infrastructure, it is misleading to only use Federal numbers for services provided primarily by States.
The US spends more on K-12 education alone than on the military.
All of the amenities that people like in America come from their local governments - police, roads, emergency services, courts, you name it. The surprising thing is that the local governments usually levy only a small fraction of the tax burden. Most of an American's tax goes to the federal government, where nobody knows what happens to it. It's stirred around, and a lot of it comes back to the local governments in the form of strings-attached funding that is used as an end-run around the individual state's rights to govern themselves. When the strings-attached money circles back to the local governments, they swear fealty to the federal government (which is what they're being paid to do) and then re-brand it as local services. That's why the average American sees a tiny fraction of their tax going to the local entity that does all the work, and a big fraction of their tax going to the federal system that only interacts with them when they haven't sent enough money.
Middleclass Americans' income taxes are around or above 20%. Americans generally are opposed to taxes because there is a perception (rightly or wrongly) that our government is inefficient (due to some combination of corruption and incompetence), and we should sort that out before increasing taxes on programs with a (perceived) high probability of mismanagement.
> Obviously I can't speak for the general population, but as for my close proximity: My colleagues think taxes are good too. No brain drain here.
I think that's the critical difference--Norwegians believe they are getting value out of their taxes and Americans do not.
EDIT: Obviously this is a generalization of groups; not all Americans think the government is inefficient. Hopefully we can forego the predictable and pointless digression into "well not all Americans are that way!"
But is does have more and more easily used land. And while it looks very similar from outside Scandinavia it doesn't look quite so similar close up. Culturally similar but far from the same.
Topographically they are quite different, timber is more profitable in Sweden for instance because the country is much flatter and transport is much easier.
The two countries have different challenges to overcome and different histories that still affect the way people think.
> In 2017, Norway's immigrant population consisted of 883,751 people, making up 16.8% of the country's total population. This includes both foreign-born and Norwegian-born with two foreign-born parents, and four foreign-born grandparents. In this population, 724,987 are foreign-born immigrants, while 158,764 are Norwegian-born with foreign-born parents. The ten most common countries of origin of immigrants residing in Norway are Poland (97,196), Lithuania (37,638), Sweden (36,315), Somalia (28,696), Germany (24,601), Iraq (incl.Kurdistan region) (22,493), Syria (20,823), Philippines (20,537), Iran (incl. Kordestan province) (21,364) and Pakistan (19,973). The immigration population comprises people from a total of 221 countries and autonomous regions.
so more like 130k real refugees 2% of total populationthat have been handpicked and all paperwork in order or now compare rhat to UK, France or USA where the number is close to 10% where 1/3 of them are illegal, don't speak the language and don't pay any taxes.
Not sure where you get the 130k from but yes Norway is strict about applying the rules on refugee status, economic migrants are sent back out unless they qualify for a residence permit (have a job so they can support themselves and their dependents). For those who are allowed in Norway provides free or cheap language classes, accommodation, and enough money to live on. However, unlike other countries, refugees who are granted asylum are not allowed to live just wherever they like, they are scattered around the country and effectively can only move when they can provide the money to do so on their own. So one doesn't get the same degree of concentration of foreign people as one gets, for example, in Sweden where until recently such a policy did not exist. My impression is that this has made Norway a less popular destination for those who are, or cannot prove that they are not, economic migrants.
Withdrawals from the oil fund amounted to 17.4% of the total state budget of Norway in 2018. (This is in the neighborhood of 3% of the fund size). This is the only "oil money" that is used on the government budget -- incomes from taxation of petroleum companies are put into the fund, never used directly.
Taxation in general is very high, at approximately 55% of the gross domestic product. We could fund plenty of social welfare programs on tax revenue alone.
The electorate in the US would not accept a tax burden that is close to that of the Scandinavian countries.
Did they divest the fund of all monies that ultimately originated with oil or did they just switch some of their foreign investments? Because if they went ahead and kept all that money, this is the classic "I've got mine" theory of economics.
So I'm supposed to believe that a certain party in the US wants to rip out all of our infrastructure reliant on oil and completely replace it with something new..because fossil fuels will destroy the world in 10 years.
Yet Norway, which is pumping out said oil and making billions of dollars in the process, is perfectly okay because they are using a fraction of it for renewable energy research?
Climate change has nothing to do with science and everything to do with politics if this is the case.
I don't think anybody says "Norway pumping all that oil is good, US pumping all that oil is bad".
What people are saying "Norway use of limited resource exploitation proceeds is good, every other government sucks at it even when not outright corrupt".
What is admired here is prudent fiscal management, a government that is apparently not corrupt and not sold out to corporate interests, and just a rare example of whole country looking further than their own nose.
You can object to the source of the money but you can't object to the way they use it.
It may have in the early days (just like many countries' oil programmes), however now the fund is helping to provide subsidies which makes gasoline cars more expensive than electric cars (amongst other policies), and hence Norway is now one of leaders of EV adoption (per person):
There is nothing in that article that says that the oil fund subsidises the purchase of EVs. As far as I know the oil fund is not used directly for such purposes, can you provide a reference?
The point is diversification. If norway’s economy collapses, they’ll still be invested elsewhere. It’s financially unwise to keep all your eggs in one basket
The goal of this fund is not to invest in the economy, but to work as an insurance if ever the economy turns bad. If for whatever reason the economy in Norway collapses, they will still have this.
It's called diversification. If there's a downturn in Europe, you want to be insulated against it, otherwise you'd then be out of funds right when you actually need them the most.
It'd be like investing all your savings in your company stock. If the company falls into tough times and you get laid off, you'd be out of money exactly when you need it real bad.
That's also the major difference between a sovereign wealth fund, designed to provide income to the state, and an economic development fund.
It also raises real political risks: it takes government competence over the long term to not use such a fund as an easy source of money for patronage-type "investments."
It's how countries conquer other countries in the new world. Before it was take over by region. Now it is franchise the region into a bunch of smaller obtainable parts. Norway is conquering the way it knows best.
There is a legislation on vote these days to open up for investment in companies that is not listed on the stock market. A lot of greentech companies is not listed yet, this is the main driver for the change. They still have to publicly give out information about their investments.
They already do this. It's the global fund that's reached $1tn, there's another side which is the Norway fund, though it actually limits to the Nordic countries and is a significant presence in that market. The Norway fund is worth a fraction of the Global fund, but I have no idea what proportion of oil revenues go into each.
Well, yes, they should, but the Norwegian economy is not really built around original ideas. Despite its current image as a country, Norway is historically incredibly conservative and this continues to be the case in their business environment. Nearly all of their exports are petroleum, fish or metal. Try to think of even a single notable Norwegian startup.. without Googling :-D
The Norwegian government also owns about a third of the total shares by value listed on the Oslo Stock Exchange. This fund is explicitly only investing outside Norway to prevent driving inflation, but the government also pumps a lot of money into Norwegian businesses.
Edit: Oops, I misunderstood a question. Actually further in PDF they specify that US specifically is 39%, which is roughly 400 billion. If we go by this number of total capitalization of the US stocks being 30 trillion, then Norwegian oil fund owns 0.4/30 which is 1.3%
No, meaning it owns 1.4% of the global public equity market.
They have some $700bn in stocks. The market cap of the S&P 500 is $25tn. If they held US large cap stocks only they would have almost 3% of each one of the S&P 500 companies.
Wow! These people must be extraordinary to use oil money this way! Not kidding! Never been in Norway, but in countries I have ever been this would be barely possible due to corruption and the needs of the politician’s buddies. Like yachts, private jets, Bentleys and Vertu phones. This $186k/person isn’t far from what average German poses: https://www.bundesbank.de/resource/blob/617492/cd59713c156ad...
I would even make a more general statement: in most countries excess money is usually spent quickly (and usually inefficiently) on the scare-of-the-day.
Developed countries are not immune to this. For example, in late 1990s and early 2000 US budget deficits were falling, then budget went into growing surpluses. But those surpluses were quickly spent on tax breaks and war on terror and US went back into large deficits. Politics :(
I wonder if it's about being developed, vs being about having a high-trust society?
In a lot of places people will immediately get suspicious if you say you're setting up a government fund to hold everyone's money. For the benefit of society, of course.
It's about Norwegian climate: you don't work - you freeze to death in winter. In a dozen of generations an idea that everyone must work hard becomes an obvious thing.
No I mean 5-7. The skiing is rubbish until January but the ground is frozen by the end of October and defrosts in late March/early April. Lots of places have colder winters than here but they do drag on.
I can't really recall when there was snow in Oslo for half a year. Some years were nearly snowless. Officially, the winter period in Oslo is 119 days.
And well north of the city/further from the sea you can feel proper winter better, sure. Even so close as Lillestrøm it's crisper. But again, nothing unusual by North/central European standards.
Norwegian climate is not so harsh that it makes life an perpetual fight for survival. But it's nasty enough to slap one's lazy nose every once in a while.
It's not so harsh in Norwegian West, East and South as to be remarkable in any respect. Poland has rougher climate. Northern parts and central-inland in the peninsula are cold, but relatively sparsely populated.
Norway has its natural limitations though which made for a tougher life. Like insufficient options for agriculture, one thing that made feudal system here impossible and diets fairly lean.
As a Norwegian this is quite funny. At least the last few decades we've been super focused on not working too hard to such a degree that it's often characterized as national lazyness by the Norwegian press. If a Thursday is a national holiday it is VERY common to take Friday, and maybe Monday off too.
We look down on many countries, like the US, because they tend to overwork and prioritize work over life.
Our success, like the oil fund and high ratings, has much more to do with a series of smart efforts on building a mutually beneficial society where people trust each other, the media, businesses, the police, the government etc than just hard work. Many people from all around the work hard, but just hard work doesn't lead to good societies. In fact the mantra of "hard work" often leads to the opposite - survival of the fittest to the detriment of others.
This is the kind of asinine racism you can only espouse if you've never lived abroad. Let me assure you, foreigners are the same mix of lazy dumbasses and hard workers as your fellow countrymen.
Yup. Well, it's quite sad that there are people who truly believe feel-good stuff like "all people are the same" and "all cultures are equally good" even though the reality tells us different story... All countries have their fair share of basterds but in some countries it's the accepted and standard way of behavior.
No one said there aren't cultural differences. There are very huge differences! Being lazy or a dumbass is not a cultural difference. The implication that Mexicans are lazy and Swiss are not is racist.
Probably high-trust, but those who support the Nordic model would argue that this trust is developed. One of the goals is to have cohesion. That is the idea behind for example having universal systems. This trust arguably didn't exist when ~25% of both countries population left the United Kingdoms of Sweden and Norway for the United States.
(I wouldn't be sure Norway could do this today either).
This could use a bit more explanation and CGP Grey actually has a very good video out called "The Rules for Rulers" which touches on one of the reasons this really is a terrible situation. Whenever funds are diverted to the common good the party in power is, by definition, kicking less money into cronyism than is possible - in a setting with a poorly activated public, where power ends up being concentrated into the hands of the few, there is a constant pressure from those in power to divert more money to those representative voices from the voices you're unaccountable to - this makes it more likely that even a well intentioned leader will be ousted in a coup.
Most of the middle east is underdeveloped today. There's been some progress (sometimes huge progress, such as Iran), but it may be a generation or more before they really catch up.
In the US, and to a lesser extent Canada, the idea of the state benefiting too much is seen as lefty socialism (Canada briefly flirted with economic nationalism with the creation of Petro-Canada, but this was vehemently opposed by US energy companies). So we have a classic situation where the profits are privatized to the very few, and the costs are socialized (climate change, abandoned wells, pollution, etc).
The Dictators Handbook is a great book that talks about how natural resources can lead to autocracy a lot of times, because leaders can extract resources, sell them to get money/power and not give a damn about individuals. Countries that have fewer resources tend to need support from a larger selectorate and tend to (not always) lead to more democratic societies.
So that does go with what you said (I don't know their oil history, but I assume they build a society that was culturally western European before they discovered and started extracting oil resources).
There's a newer study from 2017, where the average is 232.800€, but the median is 70.800€ net. I'm not sure what net/gross is supposed to mean in this context.
The big difference between the two suggest an unequal distribution of wealth.
That's a pretty small difference, in such numbers, I think. If everyone had exactly the same job, and saved 10% for retirement their whole working lives, and got promoted occasionally, then you'd get about that much skew.
No, this is what Brazil should've done decades ago but could not due to corruption and short-sightedness. Nowadays, the only model that they are trying to replicate is that of authoritarian regimes.
Definitely similar and the green cubes dont really show scale per capita at all. Didnt try to demonstrate anything other than to show some context for where Norways energy resources go compared to other countries.
I wonder which model is better for phasing out oil/gas extraction, which is a precondition to stopping climate change. It might be bad for the voting public to be invested in oil.
If public receives regular dividends then yeah, there is a risk. If the fund is used for large scale projects and as an emergency fund, then votes are harder for populists to buy.
There are fewer vested interest with a megaphone that would stand to personally lose or gain massively, so more rational discussions can be had.
The beauty of the Norwegian oil fund is that it isn't invested in oil.
The fund grows from oil revenue, but it invests in all sorts of things that are specifically not oil. So there's not much conflict regarding oil divestment.
I agree that the fund's diversification helps some. But the fund is still fed from the oil income. And some of the oil income is spent in state budget, not all of it goes into the fund. And this is in addition to all the money being pumped into the economy from the oil industry (Norway has high wages, most Teslas per capita, etc). I think the financials of the citizens are much more connected to the oil profits than in other developed oil producing countries like the USA/UK/Netherlands.
Time will tell it seems. Norway is very invested in at least appearing to get out of the oil business and into renewables. Couple pretty significant moves include renaming Statoil to Equinor and rebranding all of their gas stations (many in Scandinavia are branded as Circle K now). Norway very much wants to get out of the perception of being rich because of oil.
Statoil did not rebrand their gas stations although it could appear to be the case. First they separated the operation into a new subsidiary called Statoil fuel & retail, which they then sold to Couche-tard, a Canadian convenience store multinational. The deal preserved the right to use the statoil brand for some time. Then couche-tard rebranded them to Cirkle K as part of a global strategy.
The Norwegian success is the single biggest piece of evidence as to why the Venezuelan catastrophe was largely avoidable, and the fault of irresponsible leadership.
Because buying extraction rights from corrupt politicians who happen to be in the declared backyard of the empire number one, famous for covert operations .. might have not much to do with "fair capitalism" and investment..
So whoever discovers something automatically owns it? What if I discover an oil field that continues under someone else's land - is it mine because I discovered it? Do I get to take all the oil as long as the extraction equipment is only on my land? If my extraction activities lower the value of their land, do I owe them damages?
My point is not to actually get into these details but to point out that capitalism does not give the answers. Capitalism can only start after you have nailed down the rules about how public and private property work.
But what to say about Americans, who squandered natural resources to help the rich, and now the funding to their own social security is en route to insolvency?
It would be easy to make social security solvent far into the future. There's no shortage of resources to do it, just lack of political will.
One step would be to move it away from an insurance model and raise the cap on contributions. Another would be to modestly increase the contribution rates.
> One step would be to move it away from an insurance model and raise the cap on contributions. Another would be to modestly increase the contribution rates.
This is essentially what happened in the mid-90s with the Canada Pension Plan (https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor...): an increase of contribution rates to move beyond PAYGO solvency to a partial advance-funding model. As a result, the CPP now has a few hundred billion dollars in assets (invested largely in equities) providing income to support long-term solvency.
The downside of that is the Canadian pension doesn't provide a livable amount. One ex tech worker in Calgary who's collecting pension now told me it pays his electric bill.
If they do raise the cap on contributions people should have the option of either paying more in to social security or paying more into an uncapped IRA or 401(k).
America should seriously consider nationalizing its resources and using that money to either fund programs to reverse the trend of its declining life expectancy or at the very least reduce the deficit (and perhaps, one day, bootstrap a sovereign wealth fund of its own)
One of my clients at my old finance firm was Alaska’s oil fund. They do pretty well for themselves and dole out 2k/year in cash to everyone living there. It’s unsurprisingly a very popular program, though I’m kind of morally opposed to a government function like that.
The Norwegian fund is principally for our descendants. The state has a self-imposed limit on how much of the revenue of the fund can be spent each year, the capital is untouched as far as I know. Also what money is spent is spent by the state rather than by individuals; no guarantee that it will be spent wisely of course but a greater degree of likelihood that it will be spent on something of lasting value perhaps.
The Alaska Permanent Fund is unsurprisingly popular. To the extent that the state recently voted to cut essential services rather than to cut handouts from the fund:
A fundamental difference is that for Americans, natural resources are owned by the individual property owner rather than the state. If you find oil on your land in the US, it is yours and you decide what to do with it. In most other countries if there is oil on your land, the government has the exclusive right to oil (or other sub-surface minerals).
Usually where there are significant amounts of minerals, there are separate mineral rights. Mineral rights trump surface ownership, and usually the rights were sold off decades or centuries ago. If you find something under your property, it probably doesn't belong to you.
Also, state laws vary in weird ways. Should you find gold in New York, it's the property of the state.
Outside developed oil or coal plays, severed mineral estates in the US are the exception, not the rule. Also, to the point above, those severed mineral interests are almost always privately held.
>But what to say about Americans, who squandered natural resources
Yeah, they squandered their natural resources on the way to becoming the richest, most powerful nation in the history of the planet...
How can people say things like this with a straight face? The fact that there are some tough political issues that have or may span a couple decades doesn't erase centuries of history, or millennia of future prospects.
Exactly right. Many Americans are so ashamed of the US, when in many ways it's a shining example of how to do things right -- certainly relative to many other countries. The US is a spectacularly prosperous country, and all it seems anyone talks about is how to fundamentally change the systems that made it that way. There are always in which a society can improve, but man -- let's not forget what's worked well.
> The US is a spectacularly prosperous country, and all it seems anyone talks about is how to fundamentally change the systems that made it that way.
The things that made America so wealthy were changed pre-2000. It takes time for those changes to really impact society, and for people to realize it. And no one really talking about "fundamental" change. They're talking about raising taxes back to what they used to be like in the 60s and 70s. Not just in terms of the rate, but the percentage of the tax burden that falls on each segment of society.
While there are many other proposals, that kind of tax policy change would, in itself, definitely be a big change. I encourage people to use this calculator to determine your effective tax rate at various times in the past. If your family is like mine, reverting to the tax policy of the 60s and 70s would be a very large hit to us every year.
The US government overthrew a democratically elected government for the prosperity of a _fruit company_.
> all it seems anyone talks about is how to fundamentally change the systems that made it that way.
Many of the people are fighting the systems that have heavily exploited poor countries around the world for the last ~100 years because they see it as fundamentally immoral. The US doesn't _deserve_ the standard of living it has achieved, and it's built on the blood of dead South Americans and Middle Eastern people.
It's honestly pathetic that poor Americans aren't provided for given the absolute spoils of war the elite have enjoyed.
Oh please. If imperialism and military might were the source of a country's wealth, then Mongolia would be on top, and Russia, and the sun would have never set on Great Britain. No, strong property and contract rights combined with the rule of law and relatively low corruption is what made the US wealthy. And, yes, natural resource extraction and up until recently relatively prudent management of its fiscal resources.
Mongolia's dominance was far before the industrial revolution. That argument is so devoid of context it's not worth addressing. They did achieve huge gains in wealth through imperialism anyway...
The USSR was imperialist, and did achieve massive increases to the standard of living of the elite through imperialism. It's much easier to feed Russia when you can starve Ukraine.
Colonial Britain and the Dutch East India company both achieved massive gains in wealth through imperialism.
The only argument you've made is that strong property and contract rights with rule of law and low corruption can prevent squandering the spoils of imperialism. I'm not sure if I agree with that, we're too early into the US's age of dominance to tell, but it's adjacent to my point.
None of those countries stopped those practices. That is, they realized the end of their prominence due to policy positions and factors other than imperialism (or maybe even because of imperialism). That is, imperialism doesn’t necessarily make a country wealthy, and it certainly doesn’t keep it that way. Distant wars are expensive. See Rome. The US’s escapades in the Middle East May break it yet. No, I maintain that those imperialistic tendencies are not at all what’s made the US so prosperous, and they may in fact lead to its demise.
That’s not true, the Saudis do very well for themselves. The entire citizen population is given massive handouts, and it seems to be working out okay. Corruption isn’t very bad, at least compared to other oil states.
Also Kuwait is doing good as well, and they have a retarded amount of oil.
But, in general, I agree that it often hurts instead of helps. But select countries like the US, Norway, Kuwait, and Saudi Arabia have become very prosperous from natural resources and nothing terrible has happened because of it.
>the Saudis do very well for themselves. The entire citizen population is given massive handouts,
Have you ever been to Riyadh and seen the poor state of housing, the laughable state of repair of motor vehicles, the constant complaints about the state of the education and health systems?
Perhaps they are given massive handouts but it doesn't seem to be translating into functioning infrastructure.
I think the difference is potentially that the Gulf countries - Saudi, Kuwait, Qatar etc - benefitted from being able to develop their economies and infrastructure and establish large social welfare systems in the 70s and 80s while their populations were small and oil prices and income were very high.
You can see that their per capita collapsed in the 80s along with oil prices. The royal families in those countries are incredibly corrupt by modern standards, but they have established a system that keeps everyone outside that circle in line with subsidies, religion and threats of imprisonment.
Correct me if I'm mistaken, but most of those other countries have not nationalized their oil (or at least the profits) like Venezuela and Norway have.
I'm reminded of a YouTube video, The Rules for Rulers, that touched on this. It makes the point that in a country with oil-based wealth, the keys to power are held by a few small elite, in contrast to a country with a 'service economy', in which case the masses are vital to the country's wealth.
There are people who for ideological reasons blame all of Venezuela's woes on external factors. Then again, there are some for ideological reasons who claim external factors haven't made things worse than the terrible leadership has made it. Not sure of the ratio of blame that should go to internal leadership versus external factors but it does seem like poor leadership has made it easier for external forces to worsen the situation.
There is also the fact that, with the American playbook for regime change being what it is, there is quite a lot of skepticism about the sudden surge to prominence in the news cycle about the governance woes of a very oil-rich nation, irrespective of how legitimate reports of the mismanagement actually are.
The people who barricaded the Venezuelan embassy when there was an attempted coup against Maduro for one.
There is a big ideological drive to show that communism works, and as such all the problems Venezuela faces are just imperialism at work (In their argument).
And on the other side there are lots of people trying to show how it all does not work, while ignoring that the super power number one does all they can, except open military actions, to make it not work.
In other words, to me the situation in Venezuela does not prove anything, in terms of political ideology.
Venezuela has less public ownership of resources than even the US. To say that they are 'communist' is an ideological farce.
People are opposed to regime change because the US government has a long history of destabilizing foreign governments in deference to US capital interests. It's unlikely their motivations are just, especially as the people involved were responsible for some of the worst atrocities in Southern American governments in the 50's-90's.
Furthermore, applying economic sanctions hurts the material conditions of poor Venezuelans without significantly affecting the corrupt government. This is evidence the US does not have a strong interest in helping poor Venezuelans, but primarily forcing regime change to a government more amenable to the interests of US oil companies.
If the US was truly a force for good, wouldn't we see the same pressure on the Bolsonaro regime in Brazil? The story is similar, a corrupt rise to power achieve through unjustly jailing political opponents. If you doubt this, read Glenn Greenwald's reporting in The Intercept.
I can't stand this ideological sports-team type of commentary, so just to add some real information and context (after my downvote):
Venezuela produces ~70k barrels per person per day. Norway produces a little more than half as much total oil, but with one-sixth the population it works out to ~330k barrels per person per day. An order of magnitude per-capita difference.
The UK has the same amount of oil spread across 12x as many people. Yes, the Tories wasted it but it could never have had the same impact on the whole UK that it had on Norway. Perhaps if Scotland had been independent (most of the UK's oil is in its waters) it would have been similar.
Nonetheless it would have ha some positive impact, And, while I'm as anti Tory as anyone there does not appear to have been a lot of objection to the way the oil income was handled from other parties.
Norway had a per-capita GDP 10x that of Venezuela when they launched their fund. The option was a luxury that they were granted by already being a fairly wealthy country.
Also, consider if 25% of Norway's oil revenue is sufficient to provide a basic functioning government. Now you have Norway saving 75% of their oil revenue every year, and Venezuela still sucking 5% out of other funds, resulting in a long-term extremely wealthy Norway and a destitute Venezuela.
While your point about per-capita production is well-taken, I don't think the original comment was intending to score ideological points. It simply said the Venezuelan crisis was avoidable and happened due to mis-management, not that Chavismo is an inherently evil ideology...
Yes, thank you. I deliberately avoided attributing anything to ideology. At the end of the day, both countries are chiefly comparable in having nationalized their oil resources for the public benefit, at least de iure. Also Venezuela was actually doing quite well I believe in 2013 when prices were high. It was a singular failure of their stewards not to diversify the profits.
Second - the output itself depends on management, so I'm not sure it would be fair to compare current production numbers to show the potential help to the population. In fact - Venezuela has more proven reserves per-capita than Norway, by an incredible margin:
One piece of history that I think marks the start of Venezuela's free fall, it's the pardon that the then-president Caldera granted to the leader of a military coup, Chávez. That allowed populism and corruption to reign in the country (he won the next elections).
The corruption was there before the military coup. I think the only coup that did not involve prior corruption was the one against Mosaddegh (and still, the country was still corrupted from his predecessor). Also this was probably the coup that finished any hope of peace and democracy in the middle east.
Not many people here probably know who Mosaddegh was. So for context, he speaks of the 1953 CIA backed coup against the iranian elected president Mosaddegh, who nationalized the oil from foreign companys. Which the foreign companys and their governments did not like. But, I am not sure if all would have been peace and harmony without that coup. Sudden oil richness in a very, very poor society, is just very hard to do right.
Considering this is explicitly stated to be for welfare, it would be really interesting to see a major UBI experiment. If the fund doesn't grow there's 186k 4 per person could be 12k/yr for over 15 years.
Which is exactly why UBI is generally suggested to give below the poverty line. Enough to survive but not enough to be comfortable. Enough to get you through downturns but not enough where you'll abandon a well paying job.
I believe it was Andrew Yang who talked about UBI on Recode podcast recently. He also talked about UBI giving people the freedom to try something new. You may be more likely to start a business if you knew you had something to fall back on. This might be especially beneficial in the rural areas of America where $1000/month will support you longer than in urban centres.
Which is why i can't fathom why every business would not raise their prices to match the UBI minimum. I mean it's not like there would be anyone who can't afford that.
Because UBI could open their market to more people. If they can make the same profit per person but increase their market size, why raise prices? That prices out more people. In fact this is commonly done now. You sell at a competitive price to expand your market share. It's exactly the tactic of companies like Amazon and Walmart. The problem is if a company has a monopoly and the good is a necessity.
> If they can make the same profit per person but increase their market size, why raise prices
There is no dichotomy here- their market size increases magically with UBI. If the answer to that question was even remotely close to yes, the tech sector would be full of hungry workers.
Like I said, this would be a good experiment. You can rely on it for at least a decade and that's further ahead than most people think.
But that's also assuming the fund doesn't grow. Which it will. And it UBI works then there is absolutely no reason to think this fund won't get bigger.
But saying we can't try because this can only fund 15 years is kind of an obtuse statement. Indefinite finding requires infinite funding. If that's your requisite good luck funding anything.
Right, the emphasis being on "pursue new things and be creative". UBI is generally not intended to allow people to live out their entire lives without doing anything of value for anyone else. And if you're doing things that are valuable to the rest of society, you are paid under capitalism.
So the hope with UBI is that you should never need it for your entire life because you're not making any money at all.
What do the people do if their new thing doesn’t work out? There will be plenty of these. If UBI isn’t life long then it’s more like giving everybody a sum of money which they can use to start something new.
If they cant fall back on UBI then it’s exactly the same situation as we have now where a lot of people stay in careers they hate because they are afraid of losing what they have.
There already are those people. UBI does not create more failed people.
15 years is a long time. 2 years can be enough to try something new for a lot of things. If it doesn't work out, you can go back to the career you had before, or maybe even find one you hate slightly less. Or maybe you didn't hate your job, you just wanted to try something new. If it doesn't work out, go back to the job you liked well enough.
Yes, most capitalist countries decided to help the rich and are now singing the blues with their social services being depleted. I wonder if the billionaires of the world will do anything to help workers (rhetorical question, of course they will see this as just another opportunity to make more money).
Of course the UK has a far larger population, so it would be worth far less per capita. It's sobering to remember that Norway started this fund only in 1990. The UK mooted but cabinet ultimately rejected a North Sea Oil fund on similar lines in 1975. It was suggested by Tony Benn while he was Energy Minister. All that did materialise was the British National Oil Corporation (later Britoil having been privatised by Thatcher, now BP) as operator.
The UK was more or less on it's knees in 1975, I think that without North Sea Oil there would be very little chance that it could have build the services economy and infrastructure it did in the 80's and 90's. I think that you also give our politicians too much credit in terms of managing a fund; remember that the UK was the biggest recipient of marshall aid after the war, and it spent it on patrolling an empire that it was clearly about to lose and subsequently lost. I think that politicians of both parties would have been very likely to raid any fund and use it for vanity projects.
As was most of the western world, recovering from the oil crisis of 73, and experiencing chaos as a result through the rest of the decade. Hardly unique to the UK.
UK was largest recipient of Marshall aid for having the most need along with France only slightly behind. Being used as you say for maintaining world power status, and into the general treasury fund. We spent less on infrastructure during Marshall aid than without! They pissed that away just like was done with all oil revenues.
Considering the vast majority of oil revenues went on empty tax cuts and benefit spending through Tory created recessions, I'm not sure we'd have noticed the difference. 1 or 2p off income tax barely registers. I know I noticed none of Lawson's tiny bribes. At all. :p
The politicians would not, and should not be managing it being better served as some sort of apolitical hands off trust. I don't think politicians manage Norway's fund. Now there is little doubt that it would not have survived the privatisation and asset stripping of the eighties on unscathed, but, like the NHS there's no reason to suppose it would have been destroyed. The Tories debated but chose not to re-privatise the NHS in 51. Thatcher had a selection of industries that were felt were beyond the pale that were subsequently privatised by later administrations. Created in 75 might have been a bit late for achieving adequate perception in the public consciousness so who knows.
Still, it remains one of the very many great missed British opportunities that could easily have been a couple of trillion or more by now. 15 years of additional contributions and growth. There's many nations have sovereign wealth funds now, we easily could have too.
Same thing in Australia, the wealth coming from the resources boom has been and is being given to a few rich people, not the general public (who are having social services slashed regularly)
Yes this makes me very sad too. If you add the natural gas, iron ore, gold, etc we should be sitting on enough to run the country indefinitely. Instead the government is crying poor slashing services and selling off public assets.
We have also managed to completely hollow out the economy - there is nothing really left as all capital has flowed to the most profitable sectors (house building and resources) encouraged by public policy.
Compare Australian wages to the rest of the world. If you go on vacation to other places you see that Australians make more than people from other industrialized nations. You don't see it because your plumber wants to participate, too.
How is that relevant? Australian wages are high because of a long period of unionised action demanding better wages and working conditions in the 20th century. It's tangential to having a lot of natural resources.
Norwegian wages are good too, Venezuelan and Saudi wages are terrible.
We squandered all our mineral wealth on nonsense, have huge respect for what the Norwegians have achieved with their fund.
Assuming that a fund like that grows ~10% per year or so, each norwegian makes a bonus of 19230.7 just by existing. That is enough for a family to live in the european south.
Still, for a family of 4 that's ~ 45.000$ of free money. If southern european countries were smart , they would give incentives to norwegians to move there and have a permanent vacation in the sun.
A friend lives in Oslo, sometimes I visit, it shock me the amount of electric vehicles, in one single street all cars parked were Tesla(not the posh area).
The city have so much nature, is even hard to explain.
Some invest it themselves into real estate, both in their own country (like highest towers, most fancy hotel, palm tree shaped islands) and abroad (skyscrapers and office buildings in various financial structures).
They're really setting themselves up for them and their future generations to remain rich and comfortable for the forseeable future even when oil dries up or demand goes down.
Think hard about it, would you rather your government do something like this, or get a cheque every year like in Alaska (or right before an election in Alberta)?
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.
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.
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.
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 :)
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.
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.
I do wonder whether this fund should be subject to punitive measures, since it is built on an activity that is generally acknowledged to be destroying the planet. It's not right that a group of people should be able to insulate themselves from the carnage they have wrought.
A lot of comments in this thread seem fixated on the fact that this originated from oil profits, but to me it feels like more of a consequence of the Norwegian government's partial public ownership of its domestic energy companies and other industries. Lots of countries have a surplus of at least one natural resource; few of them have central governments with the authority (and lack of corruption) to publicly own those resources. Most governments just can't keep their hands out of the cookie jar.
Every time I hear someone talk about socialism, whether its pundits or politicians or columnists, they talk about welfare. Everyone seems to have forgotten that that public ownership of capital is by definition the more important part of socialist policy that makes welfare possible. Norway is probably the best example of this idea's power. I'm not saying socialism is without weaknesses, but I don't understand how anyone can look at Norway and think that it doesn't work or is somehow evil.
Yes, thinking of funds like this as cash flow is absolutely a mistake. Strong democratic ownership of capital will be necessary for true democratization of society, and this is an important step (although too centralized in my uninformed opinion :D).
One of the most mind blowing things to me, is that where I'm from (Canada) we've pumped almost 2.5 times more oil and gas than Nowrway over the past 30 years, yet our "oil fund" is somewhere around $20 Billion. Norway decided the benefits of resource extraction should be universal, while my country decided that the benefits should go to the wealthy and multi-national corporations.
There are a lot of people who rely on those investments, whether through their government retirement, their employer's retirement, or through their own holdings. Even many social programs are funded with investments in equities.
Slightly less than half of all Americans have any investment in the stock market. Pension funds were largely replaced with 401k's, but salaries were not increased to compensate.
While you're technically correct, the stock market primarily benefits those with enough disposable income to generate large investments where they do not need to draw down the principle, and that certainly isn't the majority of Americans.
I'm fully aware of that, however currently as a population we have nearly nothing to show for decades of oil extraction other than pockets of extremely concentrated wealth. If we make a wild assumption that we did exactly the same with our reserves and somehow contrived to create exactly the same sovereign wealth fund, that'd work out to around £13,000 per person. That's not enough to make everyone a millionaire, but it's much greater than the £0 we put aside the way we did it.
Of course this is speculation, featuring ifs/buts and using numbers plucked from our neighbour across the North Sea ... however it's pretty plain to see that we screwed this opportunity up.
>while my country decided that the benefits should go to the wealthy and multi-national corporations.
This doesn’t follow. I think Alberta mostly used its oil revenues to fund current operating expenses, spreading the wealth around in a short term way to the populace at large.
If it's not 100% managed by the government it's only helping evil rich people and multinational corporations... that's how economics works in certain political circles.
Despite the thousands of workers it employs directly, supply chain income it generates to countless smaller firms, the actual oil being transported and exported, etc etc. All of those are heavily taxed and all of that "distributes" income to regular people whether through (often high paying) jobs or a higher tax income for the state.
I think this "oil fund" will be an interesting target when countries and states start disappearing under water and their crops start failing for reparations.
Also, why does Norway not contribute the full 2% to NATO spending again?
Because of the GDP-measure, if we stop producing oil/gas we will be over the 2% but with a lot of value in the ‘bank’. So the GDP measure is not the best. We still try to get to 2% by building up our own industry around the money, not pending it blindly.
The NATO treaty is that every member will spend 2% of GDP and nothing about per person or per capita. This keeps it fair for countries that are less wealthy.
Yes, the solution to that is obviously to burn most of the oil money now, so there will be nothing for others to come after and give the rest to oligarchs (those guys know just where to hide it). Good to see that the rest of the world is working tirelessly at that.
It's interesting to me that they don't appear to hold private equity or venture funds, unless I'm missing something. Presumably at that scale they have unlimited access to any asset class in the world. Does anyone have any insight as to why they might be avoiding those?
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[ 1.9 ms ] story [ 252 ms ] threadTax any group too heavily and you create brain drain, which hurts in the long run.
Surely the government doesn’t burn it.
And a better metric would be to look at tax burden, because top marginal rates are just that: what you pay on our last dollar, not your first. Sales tax isn’t charged on rent/food/property so it’s only charged on a small percentage of one’s after-tax income.
But according to OECD taxing wages 2019, the median tax and social security contribution for a single person with no children in full time employment in Norway is 27.5% vs 23.8% for the US.
Of course the US varies significantly by state.
Sales tax has relatively low impact as you spend a relatively low portion of your income on things taxed at the full rate.
Someone with an income of 300 kNOK and a home worth 1 000 kNOK the tax pays half that:
About 20.5%.If you have children you pay less tax.
* 25% VAT on everything except food, which is 12%. Electric vehicles currently exempt
* 40% income tax on average including 8% public pension contribution. Highest marginal tax on income is 47%, which applies to incomes greater than $116k.
* Employer has to pay 14% of your salary as employment tax. Company profits are taxed at 24% (this is separate from the capital gains tax). Stock-based compensation is taxed as income, so no possibility of weaseling around the employment tax. You won't get stock-based compensation unless you're in a startup or a C-class executive at a (big) private company. The wealth tax does weird things to the valuation of stock options; they'll almost always be worthless unless your company is sold or goes public.
* Net assets above ~$175k are taxed at 0.85% p.a, primary residence contributes only 25% of its market value to net assets
* 29% capital gains tax, primary residence is exempt as is most tax income from renting out primary residence. Sell your home with $1 million profit? No tax.
* 22% tax on capital gains or "general" incomes that are not linked to securities ownership. Relatively small amounts are collected through this bracket.
* On average ~$10k tax on all new motor vehicles, electric vehicles currently exempt
* A tax of approximately 30% (~5 NOK per liter) is applied to gasoline, in addition to the 25% VAT. Annual tax of ~$1000 on all motor vehicles, increasing with how good the vehicle is. Electric vehicles currently exempt.
* Various taxes on alcohol, tobacco, air travel. Some municipalities have a property tax on the order of ~$500 p.a. for an average residence.
I've eyeballed most of the currency conversions.
An economic analysis in comparison to Finland and Sweden would be interesting.
We've had that profit stream, we just let it get captured by private corporations (or in Alaska's case, given away to garner votes).
Population of United States, 2018: 327.2 million
[EDIT] all non-renewables, that is, not just oil. Should easily make up the difference between population and extracted natural resource value vs. Norway.
Discovery of oil in Norway: 1969.
Imagine if we'd have had the foresight to take Norway's approach that natural resources are the nation's natural resources and let the returns build for 160 years.
Still sounds like quite the missed opportunity.
Norway is 5 million people.
https://en.wikipedia.org/wiki/List_of_countries_by_oil_expor...
And Canada has more than just oil.
But a lot of it seems to be privately squandered.
The argument could be made that it’s because they spent the money on long-term assets, but I’d argue they spent it on lower taxes.
Source: https://data.oecd.org/gga/general-government-spending.htm
Though in terms of science I'm not sure you're correct. U.S. spends above age in R&D spending as a percentage of GDP. Source: https://data.oecd.org/chart/5Dtz
The USA certainly has such streams. The difference is priorities, not revenue.
It's weird to me that Americans have so much against taxes. If a country has a low degree of curruption, and has incentives to innovate in the public sector, then taxes are a good thing.
Obviously I can't speak for the general population, but as for my close proximity: My colleagues think taxes are good too. No brain drain here.
Honestly, the biggest difference between nations isn't so much in income/payroll taxes, but in the VAT. The US simply doesn't have one at the federal level, and state sales taxes are typically in the neighbourhood of 6% (https://en.wikipedia.org/wiki/Sales_taxes_in_the_United_Stat...).
The US spends more on K-12 education alone than on the military.
> Obviously I can't speak for the general population, but as for my close proximity: My colleagues think taxes are good too. No brain drain here.
I think that's the critical difference--Norwegians believe they are getting value out of their taxes and Americans do not.
EDIT: Obviously this is a generalization of groups; not all Americans think the government is inefficient. Hopefully we can forego the predictable and pointless digression into "well not all Americans are that way!"
Sweden and Denmark disagree. And they're among the most wealthy countries with the highest standard of living anywhere.
Topographically they are quite different, timber is more profitable in Sweden for instance because the country is much flatter and transport is much easier.
The two countries have different challenges to overcome and different histories that still affect the way people think.
> In 2017, Norway's immigrant population consisted of 883,751 people, making up 16.8% of the country's total population. This includes both foreign-born and Norwegian-born with two foreign-born parents, and four foreign-born grandparents. In this population, 724,987 are foreign-born immigrants, while 158,764 are Norwegian-born with foreign-born parents. The ten most common countries of origin of immigrants residing in Norway are Poland (97,196), Lithuania (37,638), Sweden (36,315), Somalia (28,696), Germany (24,601), Iraq (incl.Kurdistan region) (22,493), Syria (20,823), Philippines (20,537), Iran (incl. Kordestan province) (21,364) and Pakistan (19,973). The immigration population comprises people from a total of 221 countries and autonomous regions.
Taxation in general is very high, at approximately 55% of the gross domestic product. We could fund plenty of social welfare programs on tax revenue alone.
The electorate in the US would not accept a tax burden that is close to that of the Scandinavian countries.
https://www.wsj.com/articles/norways-sovereign-wealth-fund-b...
It's strange to me that people aren't protesting and complaining about this fund, when it's a big issue for future.
This is why I know it has nothing to do with science or actually solving the problem.
https://news.ycombinator.com/newsguidelines.html
Yet Norway, which is pumping out said oil and making billions of dollars in the process, is perfectly okay because they are using a fraction of it for renewable energy research?
Climate change has nothing to do with science and everything to do with politics if this is the case.
What people are saying "Norway use of limited resource exploitation proceeds is good, every other government sucks at it even when not outright corrupt".
What is admired here is prudent fiscal management, a government that is apparently not corrupt and not sold out to corporate interests, and just a rare example of whole country looking further than their own nose.
You can object to the source of the money but you can't object to the way they use it.
Thats why they changed the name from Statoil to Equinor, because of the shift away from oil+gas.
https://www.greencarfuture.com/electric/how-norway-so-many-e...
Why fund businesses in other countires? Shouldn't Norway try to set up some more industries at home?
Everyone claim Europe (was: EU) needs more VC funding to stop the brain drain. Well, here is a huge pool of money just waiting to be spent
Anyway, the point still stands. Why not make Oslo the silicon valley of Europe?
I mean the weather is roughly the same, give or take 30 degrees :)
The goal of this fund is not to invest in the economy, but to work as an insurance if ever the economy turns bad. If for whatever reason the economy in Norway collapses, they will still have this.
It'd be like investing all your savings in your company stock. If the company falls into tough times and you get laid off, you'd be out of money exactly when you need it real bad.
If it was Norway first the fund would be worth nowhere near a trillion dollars...
That's also the major difference between a sovereign wealth fund, designed to provide income to the state, and an economic development fund.
It also raises real political risks: it takes government competence over the long term to not use such a fund as an easy source of money for patronage-type "investments."
This is not a bad thing because EU is mainly about social benefits, and not politics as we are used to (and a lot of people think): http://www.europarl.europa.eu/legislative-train/
Updated: 1.3%
Edit: Oops, I misunderstood a question. Actually further in PDF they specify that US specifically is 39%, which is roughly 400 billion. If we go by this number of total capitalization of the US stocks being 30 trillion, then Norwegian oil fund owns 0.4/30 which is 1.3%
> North American stocks returned 14.6 percent and amounted to 41.4 percent of the equity portfolio.
That's to say 41% of their equities are North American stocks, not that they own 41% of all North American stocks!
This blew my mind.
They have some $700bn in stocks. The market cap of the S&P 500 is $25tn. If they held US large cap stocks only they would have almost 3% of each one of the S&P 500 companies.
Developed countries are not immune to this. For example, in late 1990s and early 2000 US budget deficits were falling, then budget went into growing surpluses. But those surpluses were quickly spent on tax breaks and war on terror and US went back into large deficits. Politics :(
In a lot of places people will immediately get suspicious if you say you're setting up a government fund to hold everyone's money. For the benefit of society, of course.
Thats a virtuous loop. You institutions work because you trust that strangers trust your institutions.
And well north of the city/further from the sea you can feel proper winter better, sure. Even so close as Lillestrøm it's crisper. But again, nothing unusual by North/central European standards.
Norwegian climate is not so harsh that it makes life an perpetual fight for survival. But it's nasty enough to slap one's lazy nose every once in a while.
Norway has its natural limitations though which made for a tougher life. Like insufficient options for agriculture, one thing that made feudal system here impossible and diets fairly lean.
We look down on many countries, like the US, because they tend to overwork and prioritize work over life.
Our success, like the oil fund and high ratings, has much more to do with a series of smart efforts on building a mutually beneficial society where people trust each other, the media, businesses, the police, the government etc than just hard work. Many people from all around the work hard, but just hard work doesn't lead to good societies. In fact the mantra of "hard work" often leads to the opposite - survival of the fittest to the detriment of others.
(I wouldn't be sure Norway could do this today either).
Being from the Netherlands, which has/had large gas fields, it makes me jealous our government didn’t have a similar foresight.
So that does go with what you said (I don't know their oil history, but I assume they build a society that was culturally western European before they discovered and started extracting oil resources).
Australia is the largest exporter of LNG and gets about 3% of the Royalties that Qatar earns. it is simply incompetence and corruption.
The big difference between the two suggest an unequal distribution of wealth.
This is particularly visual. Not taking away from Farouk al-Kasims contribution but find Norway to see how unique their particular situation is.
But ignoring that, Norway's chart don't seem that different from Iran, Iraq etc. What did you intend to demonstrate via these charts.
There are fewer vested interest with a megaphone that would stand to personally lose or gain massively, so more rational discussions can be had.
The fund grows from oil revenue, but it invests in all sorts of things that are specifically not oil. So there's not much conflict regarding oil divestment.
They won't stop extracting oil until there is no oil left.
My point is not to actually get into these details but to point out that capitalism does not give the answers. Capitalism can only start after you have nailed down the rules about how public and private property work.
One step would be to move it away from an insurance model and raise the cap on contributions. Another would be to modestly increase the contribution rates.
This is essentially what happened in the mid-90s with the Canada Pension Plan (https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor...): an increase of contribution rates to move beyond PAYGO solvency to a partial advance-funding model. As a result, the CPP now has a few hundred billion dollars in assets (invested largely in equities) providing income to support long-term solvency.
https://www.nytimes.com/2019/07/07/us/alaska-university-budg...
Yes, it's much better for the government to allow a single person to appropriate all that wealth for themselves. /s
https://en.wikipedia.org/wiki/Alaska_Permanent_Fund#Annual_i...
Usually where there are significant amounts of minerals, there are separate mineral rights. Mineral rights trump surface ownership, and usually the rights were sold off decades or centuries ago. If you find something under your property, it probably doesn't belong to you.
Also, state laws vary in weird ways. Should you find gold in New York, it's the property of the state.
Yeah, they squandered their natural resources on the way to becoming the richest, most powerful nation in the history of the planet...
How can people say things like this with a straight face? The fact that there are some tough political issues that have or may span a couple decades doesn't erase centuries of history, or millennia of future prospects.
The things that made America so wealthy were changed pre-2000. It takes time for those changes to really impact society, and for people to realize it. And no one really talking about "fundamental" change. They're talking about raising taxes back to what they used to be like in the 60s and 70s. Not just in terms of the rate, but the percentage of the tax burden that falls on each segment of society.
https://qz.com/74271/income-tax-rates-since-1913/
1) There is a tendency to focus on the negative
2) The general trend of wealth inequality has been going in the wrong direction for many, many years and it is only getting worse
https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
US prosperity is largely a function of imperialism and military might, not some magical economic formula.
For instance, in South America:
https://en.wikipedia.org/wiki/United_States_involvement_in_r...
The US government overthrew a democratically elected government for the prosperity of a _fruit company_.
> all it seems anyone talks about is how to fundamentally change the systems that made it that way.
Many of the people are fighting the systems that have heavily exploited poor countries around the world for the last ~100 years because they see it as fundamentally immoral. The US doesn't _deserve_ the standard of living it has achieved, and it's built on the blood of dead South Americans and Middle Eastern people.
It's honestly pathetic that poor Americans aren't provided for given the absolute spoils of war the elite have enjoyed.
The USSR was imperialist, and did achieve massive increases to the standard of living of the elite through imperialism. It's much easier to feed Russia when you can starve Ukraine.
Colonial Britain and the Dutch East India company both achieved massive gains in wealth through imperialism.
The only argument you've made is that strong property and contract rights with rule of law and low corruption can prevent squandering the spoils of imperialism. I'm not sure if I agree with that, we're too early into the US's age of dominance to tell, but it's adjacent to my point.
The oil curse is very real and, for Venezuela, largely unavoidable.
Also Kuwait is doing good as well, and they have a retarded amount of oil.
But, in general, I agree that it often hurts instead of helps. But select countries like the US, Norway, Kuwait, and Saudi Arabia have become very prosperous from natural resources and nothing terrible has happened because of it.
Have you ever been to Riyadh and seen the poor state of housing, the laughable state of repair of motor vehicles, the constant complaints about the state of the education and health systems?
Perhaps they are given massive handouts but it doesn't seem to be translating into functioning infrastructure.
Here's a chart that shows Saudi per capita income from the 70s: https://d3fy651gv2fhd3.cloudfront.net/embed/?s=saunygdppcapk...
You can see that their per capita collapsed in the 80s along with oil prices. The royal families in those countries are incredibly corrupt by modern standards, but they have established a system that keeps everyone outside that circle in line with subsidies, religion and threats of imprisonment.
[0] https://youtu.be/rStL7niR7gs?t=733 (Relevant segment is about 60 seconds)
There is a big ideological drive to show that communism works, and as such all the problems Venezuela faces are just imperialism at work (In their argument).
In other words, to me the situation in Venezuela does not prove anything, in terms of political ideology.
People are opposed to regime change because the US government has a long history of destabilizing foreign governments in deference to US capital interests. It's unlikely their motivations are just, especially as the people involved were responsible for some of the worst atrocities in Southern American governments in the 50's-90's.
Furthermore, applying economic sanctions hurts the material conditions of poor Venezuelans without significantly affecting the corrupt government. This is evidence the US does not have a strong interest in helping poor Venezuelans, but primarily forcing regime change to a government more amenable to the interests of US oil companies.
If the US was truly a force for good, wouldn't we see the same pressure on the Bolsonaro regime in Brazil? The story is similar, a corrupt rise to power achieve through unjustly jailing political opponents. If you doubt this, read Glenn Greenwald's reporting in The Intercept.
Venezuela produces ~70k barrels per person per day. Norway produces a little more than half as much total oil, but with one-sixth the population it works out to ~330k barrels per person per day. An order of magnitude per-capita difference.
Even then, so, Venezuela produces 1/5th per capita the oil of Norway. Why doesn't there exist a fund with $37k/person in Venezuela?
The UK policy was, effectively, 'paaarty!'
Sceptical.
Also, consider if 25% of Norway's oil revenue is sufficient to provide a basic functioning government. Now you have Norway saving 75% of their oil revenue every year, and Venezuela still sucking 5% out of other funds, resulting in a long-term extremely wealthy Norway and a destitute Venezuela.
https://en.wikipedia.org/wiki/List_of_countries_by_oil_produ...
Second - the output itself depends on management, so I'm not sure it would be fair to compare current production numbers to show the potential help to the population. In fact - Venezuela has more proven reserves per-capita than Norway, by an incredible margin:
https://en.wikipedia.org/wiki/List_of_countries_by_proven_oi...
Venezuala's problem was just overleveraging
They basically got margin called on their long oil position, and then their political ideology became apparent
There is no dichotomy here- their market size increases magically with UBI. If the answer to that question was even remotely close to yes, the tech sector would be full of hungry workers.
But that's also assuming the fund doesn't grow. Which it will. And it UBI works then there is absolutely no reason to think this fund won't get bigger.
But saying we can't try because this can only fund 15 years is kind of an obtuse statement. Indefinite finding requires infinite funding. If that's your requisite good luck funding anything.
So the hope with UBI is that you should never need it for your entire life because you're not making any money at all.
If they cant fall back on UBI then it’s exactly the same situation as we have now where a lot of people stay in careers they hate because they are afraid of losing what they have.
15 years is a long time. 2 years can be enough to try something new for a lot of things. If it doesn't work out, you can go back to the career you had before, or maybe even find one you hate slightly less. Or maybe you didn't hate your job, you just wanted to try something new. If it doesn't work out, go back to the job you liked well enough.
What a waste.
UK was largest recipient of Marshall aid for having the most need along with France only slightly behind. Being used as you say for maintaining world power status, and into the general treasury fund. We spent less on infrastructure during Marshall aid than without! They pissed that away just like was done with all oil revenues.
Considering the vast majority of oil revenues went on empty tax cuts and benefit spending through Tory created recessions, I'm not sure we'd have noticed the difference. 1 or 2p off income tax barely registers. I know I noticed none of Lawson's tiny bribes. At all. :p
The politicians would not, and should not be managing it being better served as some sort of apolitical hands off trust. I don't think politicians manage Norway's fund. Now there is little doubt that it would not have survived the privatisation and asset stripping of the eighties on unscathed, but, like the NHS there's no reason to suppose it would have been destroyed. The Tories debated but chose not to re-privatise the NHS in 51. Thatcher had a selection of industries that were felt were beyond the pale that were subsequently privatised by later administrations. Created in 75 might have been a bit late for achieving adequate perception in the public consciousness so who knows.
Still, it remains one of the very many great missed British opportunities that could easily have been a couple of trillion or more by now. 15 years of additional contributions and growth. There's many nations have sovereign wealth funds now, we easily could have too.
We have also managed to completely hollow out the economy - there is nothing really left as all capital has flowed to the most profitable sectors (house building and resources) encouraged by public policy.
Norwegian wages are good too, Venezuelan and Saudi wages are terrible.
We squandered all our mineral wealth on nonsense, have huge respect for what the Norwegians have achieved with their fund.
https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...
The city have so much nature, is even hard to explain.
https://elbil.no/english/norwegian-ev-policy/
They're really setting themselves up for them and their future generations to remain rich and comfortable for the forseeable future even when oil dries up or demand goes down.
- CalPERS[1] has about $360 billion in assets under management.
- The US Social Security Trust fund (which, depending on your POV you might count as an accounting fiction) is about $2.9 trillion.
- Vanguard has about $5.3 trillion in AUM.
1. California Public Employees' Retirement System
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.
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.
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 :)
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.
Every time I hear someone talk about socialism, whether its pundits or politicians or columnists, they talk about welfare. Everyone seems to have forgotten that that public ownership of capital is by definition the more important part of socialist policy that makes welfare possible. Norway is probably the best example of this idea's power. I'm not saying socialism is without weaknesses, but I don't understand how anyone can look at Norway and think that it doesn't work or is somehow evil.
While you're technically correct, the stock market primarily benefits those with enough disposable income to generate large investments where they do not need to draw down the principle, and that certainly isn't the majority of Americans.
Of course this is speculation, featuring ifs/buts and using numbers plucked from our neighbour across the North Sea ... however it's pretty plain to see that we screwed this opportunity up.
This doesn’t follow. I think Alberta mostly used its oil revenues to fund current operating expenses, spreading the wealth around in a short term way to the populace at large.
Though royalties probably also have been too low.
What a odd comment.
Despite the thousands of workers it employs directly, supply chain income it generates to countless smaller firms, the actual oil being transported and exported, etc etc. All of those are heavily taxed and all of that "distributes" income to regular people whether through (often high paying) jobs or a higher tax income for the state.
I think this "oil fund" will be an interesting target when countries and states start disappearing under water and their crops start failing for reparations.
Also, why does Norway not contribute the full 2% to NATO spending again?
1. US = 1894 USD (3,5% GDP)
2. Norway = 1483 (1,61%)
3. UK = 899 (2,1%)
4. France = 787 (1,81%)
5. Canada = 643 (1,23%)
https://www.regjeringen.no/no/tema/forsvar/innsikt/budsjett/...
Because of the GDP-measure, if we stop producing oil/gas we will be over the 2% but with a lot of value in the ‘bank’. So the GDP measure is not the best. We still try to get to 2% by building up our own industry around the money, not pending it blindly.