Norway is the model country for handling oil revenues and distributing it to society. In 1990, the government established the Government Pension Fund Global or the Norwegian Oil Fund, as we know. Starting from 1996, the fund began investing in foreign countries. Today, the fund reached $1.1 trillion or, in other words, $200,000 per capita.
Behind this policy, there was a social awareness of nearly three hundred years. Throughout history, Norwegians suffered the intervention of Denmark, Sweden, and Nazi Germany, respectively. After the Second World War, they have decided to participate more in the global affairs and joined NATO. It was the first step in preventing further foreign threats, especially from the Soviet Union, which had a border with Norway.
Simultaneously, the elected governments implemented substantial labor rights and extensive social welfare benefits while investing in industrialization. In this era, the trust in the government and desire to become an independent state helped Norwegians to want to save and invest for the future.
As the development of this mindset followed significant oil discoveries in the offshore, Norwegians prosperity increased rapidly. Instead of spending all the revenues within the generation, they have decided to reserve it for future generations. It was the major difference for the rest of the rentier states that diverged Norway.
Norwegians survived each economic crisis with minor setbacks with this policy and had a very stable current account balance. On the other hand, other countries such as Venezuela suffered huge fluctuations that impacted the social order and economy. While the Norwegian citizens’ life quality increased slowly but steadily, other oil countries’ citizens developed bad spending habits when the prices high and could not afforded essential services such as education, health, or safety when the prices are low.
By keeping the oil income abroad, the Norwegians also did not face a resource curse in their economy. In recent years they have also decided to invest only in the companies that are healthy for humanity and the environment. In Turkey, the Norwegian Oil Fund has shares in Turkish Airlines, Turkcell, Hürriyet, Şok Marketler Zinciri, and many other well-known firms operating in a different sector 0-4 percent on average.
Up to this year, the Norwegian government used 3-4 percent of the oil revenues in their spendings annually. In the first half of 2020, the oil companies had lost nearly 40% of their revenues due to COVID-19 and a decline in oil prices. Despite that, the Norway Oil Fund also had shares in the U.S. tech companies, which generated an additional $41 billion in the third quarter of 2020. As a result, they managed to repair the part of the damage caused by the oil sector due to their careful investments.
Under COVID-19 circumstances, the government withdrew the record of money to finance social services. In May 2020, they used $37 billion, and to reach the targets, they intend to use $12 billion for the rest of the year. Similar but smaller spending is expected for the next year as well. With the help of this money, Norway’s GDP decline remained 3 percent while the rest of Europe was reaching 8-9 percent.
During this period, Norway also survived a major labor strike this month. The union, Lederne, demanded the Norwegian Oil and Gas Association to equalize the wages and working conditions between the workers operate onshore and offshore fields. The parties reached an agreement, and the strike ended after ten days. During this period, oil prices increased by 1 percent and returned to the initial level.
Overall, carefully designed long-term investment strategy with integrity and commitment of the Norwegian society helping them to survive one of the major pandemics of the history with fewer losses than the rest of the world. They are dealing with economic and social problems without creating unrest in their societies and continue to remain a good example for other countries.