While its Nordic neighbours are flirting with free markets, Norway is embracing state capitalism. Its national oil champion, Statoil, is the largest company in the region. The Norwegian state owns large stakes in Telenor, the country’s biggest telephone operator, Norsk Hydro, its biggest aluminium producer, Yara, its biggest fertiliser-maker, and DnBNor, its biggest bank. It holds 37 percent of the Oslo stockmarket, but it also controls some non-listed giants such as Statkraft, a power-generator, which if listed would be the third-biggest company on the stockmarket.
The simple explanation for Norway’s penchant for state capitalism is oil. When it was discovered in the North Sea in late 1969 it transformed the country’s economy. Today Norway is the world’s eight-largest oil exporter. Petroleum accounts for 30 percent of the government’s revenues as well as a quarter of the country’s value added. There is also a more nuanced explanation. Norwegian have always looked to the state to help manage their abundant natural resources –minerals, fjords, forests, waterfalls,- and to look after isolated and thinly spread comumities. Norway has a population density of only 13 people per square kilometre. Norway also came up with the idea of the state owning shares in private companies : after the second world war the government nationalised all German business interests in Norway and ended up owning a 44 percent of Norsk Hydro’s shares. The formula of controlling business through shares rather than regulation seemed to work well, so the government used it wherever possible. «We invented the Chinese way of doing things before the Chinese », says Torger Reve of the Norwegian Business School.
In recent years the Norwegians have been adjusting their model to get the best combination of state control and global competition. In 2007 they merged two state companies, Statoil and Hydro, in order to create a national champion. They also reduced the state’s share to 62.5 percent. For some this shows that Norway is liberalising. But the strategy is remarkaby similar to that being adopted in China and other state-capitalist countries. Norway’s state capitalism has resulted in several oddities. The country has become a significant oil producer, though it is not a member of the OPEC club. But unusually among oil-producing nations, it is also a big advocate of human rights –and a powerful one, thanks to its control of the Nobel peace prize. Norway has been able to cling onto more of its old social democratic habits than its neighbours. The oil boom led to a boom in public spending : since the 1970s the number of people employed in education has doubled and that in health and social services has quadrupled. The public sector continues to account for 52 percent of Norway’s GDP*.
Oil wealth is bringing its own problems. The oil sector is monopolising the nation’s technical talent, with more than 50,000 engineers currently being employed offshore. Property prices are rising by nearly 7 percent a year. McDonalds charges $7.69 for a Big Mac against $4.37 in America.
Fellow Nordics like to dismiss Norway as the world’s most northerly Arab country, but the most striking thing about Norway is how quintessentially Nordic it is. Oil may have filled its coffers and reconfigure its political economy, but it has not changed its culture. Oslo is singularly free from the soaring skyscrapers and bling-filled shopping malls that sprout in other oil capitals. The Norwegians are well aware of oil’s terrible ability to turn riches into rages and sages into fools. Back in 199à they established a sovereign-wealth fund (formally known as the Government Pension Fund Global) to prepare the country for a post-oil future and to prevent deindustialisation. They also used the oil industry to promote other local industries such as shipping.
The oil wealth has not destroyed Norway’s egalitarian spirit. The country has some of the world’s best-paid manual workers and some of the worst-paid CEOs : blue-collar workers earn three times as much as their British peers, whereas the boss of Statoil earns just a couple of million dollars a year. Many of Norway’s richer citizens live in London to escape from high taces and a somewhat claustrophobic society. Like its neighbours, Norway wants to occupy upmarket niches and sel lits expertise to the rest of the world. Its government created Statoil out of nothing by compelling private oil companies to hand over some of their expertise in return for their contracts and by building on the country’s established skills in shipping. It badgered the company to innovate by taxing profits heavily but providing generous tax relief on R&D spending.
Norway is now the world’s deep-sea drilling capital. Statoil is a leading global company in its own right as well as being at the centre of an elaborate network that includes Norwegian companies such as Aker Solutions and Kongsberg Maritime and the deep-sea divisions of foreign oil companies such as Schlumberger. Norwegian companies have learned how to drill horizontally as well as vertically. They also have cut the cost of exploratory drilling by developing technnologies for mobile rigs that allows then to be kept steady in rough weather. The demand for this expertise is booming.
* GDP: Gross domestic product