Norway - Is It The Perfect Combination of a Socialist & Free Market Economy ? -- The Nordic Model

The so-called Nordic countries: Sweden, Norway, Finland, and Denmark have a combination of high living standards and low-income inequality that has caught the world’s attention. At a time when the rising gap between the rich and poor has become a political hot button in developed nations, the region known as Scandinavia has been mentioned by many scholars as a role model for economic opportunity and equality. The Nordic model is a designation coined to capture the unique combination of free-market capitalism and social benefits that have brought forth a society that benefits from plenty of top-quality services, including free education and free healthcare, along with liberal, guaranteed pension payments for retirees. These benefits are paid for by taxpayers and administered by the government in the public interest of all citizens. The citizens have a high degree of confidence in their government and a history of working together to arrive at a compromise and tackle societal challenges through democratic approaches. Their policymakers have chosen a mixed economic system that decreases the gap between the rich and the poor through redistributive taxation and a powerful public sector while preserving the benefits of capitalism. Welcome to Atlantis Report. Norway is a remarkable country that has been time and time again being used as the poster child for a socialist, capitalist mixed economy done right. The country prides itself on one of the highest GDPs per capita in the world. Lagging only behind Switzerland and a select group of micro Nations. The country has a persistent trade surplus, one of the highest national life expectancies, an extremely skilled workforce with one of the highest proportion of university graduates of any country in the world. A very very low unemployment rate; and international recognition as a place that is very easy to do business. What is more remarkable is that Norway has achieved this while also being one of the most economically equal countries in the world. After taxes, a single individual from the bottom 20 percent of income earners in Norway still earns, on average, a quarter of what their top 20 percent income earner would. Now, this still sounds pretty unfair but compared to the OECD average, which has top fifth earners making an income ten times that of their bottom fifth counterparts. I think more typical labeling would be to say Norway is a mixed economy or a social democracy. My impression is that "socialist" is really just a rhetorical device used in the US to discredit Nordic style economies. "Socialist" isn't terminology used very frequently in Nordic countries to describe their economic system. I also think that would be misrepresenting the economic system. The thing that American's often label as being socialist is the fact that Nordic countries are high tax with extensive welfare benefits in the form of free (or heavily subsidized) education, health care, etc. But I think more proper use of the socialist market economy would be something like China. In China, a big part of the economy is state-run companies. That typically isn't the case in Nordic countries. China, on the other hand, doesn't have the extensive welfare programs found in Nordic countries. So the common American habit of putting countries like Sweden and China in the same category for economic systems really doesn't make much sense in practice. Norway is a mixed capitalist economy. It is quite easy to understand how are the economies measured. 1) By governmental involvement: Market - Mixed - Planned economy That's a specter, which includes many many varieties. 2) By socio-economic theories Capitalism or Socialism or Feudalism or Tribalism, which is either one or the other. All of those are diametrically opposed to each other. Norway is not really Socialist. Though it progressed towards a classless society, it's not Socialist in anything other than the name of one of its bigger political parties. Socialism means collective ownership of the means of production. Imagine a factory owned by all those who work there. Therefore neither wages would exist in a Socialist society. Norway isn't that. As long as you can be an employer or an employee in Norway, it's Capitalist. Norway is trying to be a free market economy the same as other modern economies. Important to say that Scandinavian countries have a lower degree of economic freedom due to high taxes (state redistribution of wealth). There is no such thing as a socialist market economy. That would be a paradox, and paradoxes don't exist. There is no market economy in a socialist country. That is a big part of the fundament for socialism if there is a market economy, no socialism. If there is socialism, no market economy , other than black markets, of course. 160 Norwegian Kroner per hour worth approximately 20 US dollars per hour. That’s your ‘minimum wage’ in Norway. Norway’s system does not require massively higher taxes and keep in mind how much higher wages are here. A little bit of extra sales tax is easily affordable, for obvious reasons. Twenty-one dollars an hour gives you a lot to play with. Obviously, Norway’s wage and tax structure is just better. The economic numbers show it. And their economy has fewer spikes in unemployment, no major spikes like the US has, and they have consistently outperformed the USA in terms of steady growth and not having recessions at all. Wages and jobs numbers outperform the USA, and the government doesn’t have budget issues, on the contrary, they have a lot of money saved up per person. The Norwegians are the oil sheiks of the north, with one of the world’s highest GDP per capita. It is expensive for similar reasons as Switzerland and Singapore, but also as the Gulf States and even Angola. #1. PROTECTIONISM: Opting to stay outside the EU primarily to protect domestic agriculture and food production, Norwegians pay 80–90% more for their food than, for instance, Germans and Dutch. Prices would have leveled out if Norway were to join the EU, but the expensive and inefficient “arctic farming” would have disappeared in the process. It simply would not be able to compete with the warmer climates and lower salaries of the EU member states. You see the same effects in Switzerland. #2. SOCIALIST TAX REGIME: The VAT is 25%, and anything that is bad for your health or the environment is taxed additionally. Cigarettes, alcohol, cars, and petrol are taxed a lot more than anywhere else. Additionally, free education through university, free and universal health care, social security, and some of the world’s most generous pension schemes are funded by really high-income taxes and company taxes. As a result, you need to make more gross to pay these taxes, and companies must recoup the additional taxes and salary costs in their prices. #3. OIL & GAS: At approximatly 20-25% of the GDP (depending on the oil price), this sector creates tremendous demand pressures, driving up salaries and prices. The oil companies are heavily taxed, which means our government adds to the demand side in the economy by spending this “free money” at levels not seen in other countries. You see similar effects in other small economies heavily reliant on the oil and gas industry, such as Saudi Arabia. #4. CLEVER COMPANIES . Many international (and Norwegian) companies take advantage of the fact that Norwegians have more disposable income than others. It is common that international businesses have separate price-lists for the Norwegian market. They can simply get away with charging extra when selling their goods in Norway. Why should the $99 Weber Original 22″ BBQ Kettle cost twice in Norway? It would set you back around $190. You can find many other examples. All this said some things are priced competitively in Norway. Fish and seafood are on the cheap, and some expertly skilled labor is cheaper in Norway, especially relative to the US. Electricity is the half price as compared to continental Europe, as they have cheap and abundant hydropower. Some of the world’s most beautiful nature is essentially for free, and you can put up your tent anywhere in nature for free. You can even catch your own fish for free (in the fjords), but expect to pay a small fee to fish trout in lakes and rivers. In Conclusion . Norway’s economy is relatively powerful, but you have to keep in mind that it’s a country with a population of only 5 million. That’s less than the average of the 50 United States. The Norwegian economy is the 30th largest in the world. It’s about as large as the economies of Egypt and Iran, countries with populations of 80–90 million and average incomes on the medium-to-low end of the scale. The Norwegian Government Pension Fund has a total value of about 900 billion USD. It owns about 0.8% of global equity markets and 2.3% of the European market, making it the largest stockholder in Europe. Norway has high taxes and a greater degree of government control than most other Western countries. Combined with the huge pension fund, that means Norway does have some financial muscle despite its small population. Yes , Norway is very rich, but it does not show the way it does in say rich gulf states. There are several reasons for this: Norwegian culture frowns upon flaunting wealth. Thus rich people avoid driving Bentleys and Rolls Royce like in Gulf states. The government is also not concerned with building large prestigious buildings. Thus there is no obvious sign of opulence in the center of Norwegian cities. Norwegian politicians are not racing to build the tallest high rise with gold plated ornamentations. A lot of Norwegian wealth is simply saved. E.g., Norway has a higher GDP per capita than the US, but Norway is saving a large chunk of generated wealth each year. The US, in contrast, borrows heavily. When you save rather than spend, it doesn’t leave a visible trace in the forms of grand buildings, fancy cars, and clothes. The rich simply are not as rich in Norway as in other comparably rich countries because the wealth is more evenly distributed. Norway spends a lot more money on people at the bottom of society. A tourist to Norway is not going to notice that Norwegian prisons are of a very high standard and offer a lot of education and activities to inmates. Norway spends a lot of money on maintaining a spread population and maintaining its own agriculture. This is costly but also means, e.g., that food is very safe in Norway. Animals are kept in small units that reduce disease and the need for antibiotics. Again self-sustainability in food and safe food is not something you can see. And it doesn’t really make the food taste any better either. Probably the opposite. So, in short, yes, Norway is very rich, but it does not necessarily LOOK richer to a visitor than most other European countries, Australia, Canada, or the US. Also, remember wealth is also tied to accumulated wealth. Many European countries such as Britain, France, and the Netherlands have a long history of being rich, which has thus left lots of grand buildings and palaces. Norway has none of that because Norwegian affluence is more recent. Norway is a pretty rich country. Their economy has largely relied on oil since they found oil in the North Sea in the 1960s - making them a pretty rich country. They also never joined the EU, so they could protect that industry. They also make a lot of money on fishing, salmon mostly. Norway is pretty rich, because it still has a lot of valuable oil and gas, and not many people, meaning that the income is high per capita. Also, the country has been extremely wise in how the oil income was spent. They realized it would not last forever, so they chose to spend heavily on permanent infrastructures, such as road tunnels through the mountains and hydro-electric schemes. For this reason, Norway will be pretty well set, even when the oil runs out. It is perceived as much richer than Germany, Austria, Sweden, Denmark, etc. for sure. But is it really richer? Well, there is no real evidence for it. Norway cannot afford better schools, better roads, better infrastructure, anything significantly better, really. The so-called Oil fund is now completely allocated to pay for public sector retirement. It is actually called “Pension fond utland,” i.e., pension fond abroad ; roughly translated. Norway has a public sector 50% of GDP, that is a lot of retirement that will be paid out. Collectively it may seem so on paper a rich country, but because of their taxes and government, it’s very hard to become rich there. Norway is a good place for people who want an easy, middle-class life. This builds the GDP and all those collective statistics, but individually the people aren’t rich. If you want to be something better like the upper class, it’s probably one of the worst places to get rich. Choose your poison










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