How Norway Became so Rich

How Norway Became so Rich

Photo by Marius Schmidt

The world's seventh healthiest country and the world's most democratic country. Norway is at the top in all the indicators used to measure the prosperity of any country, but Norway was not always like this. At the end of the 18th century, the famous economist Thomas Malthus he visited Norway, he saw a country that had made a living by doing little farming, a mountainous country in which success was almost impossible, the towns were far away and isolated and their townspeople had very little education. There used to be 6 months of winter due to which survival was extremely difficult and people had difficulty in getting two meals a day. After a few years, the situation in Norway deteriorated and the economy of Norway was completely destroyed.

Then how did such a big change happen that Norway became such a rich and developed country? 

Photo by Nicklas Toft

These are all the countries which have 85% of the world's oil reserves. Saudi Arabia, Iran, Iraq, Kuwait, UAE, Libya, Russia and Venezuela But their combined GDP is only 8% of the GDP of the whole world and none of these countries comes in the list of top 10 richest countries of the world. On the other hand, Norway is the 13th largest oil producing country in the world. Due to the Quality of life Norway is the fourth best country in the world, then what is the reason that other countries despite producing so much oil is not even close to Norway in living standards.

Because of the phenomenon that Economists call its Oil curse. The problem of the oil curse is that it is just like winning the lottery. After the oil is released, money starts pouring on the nations overnight, but the rulers of the country use this money to reduce taxes. As these countries export oil, the demand for their local currency increases, making it easier for the citizens of that country to buy imported goods, and as a result, the local industry of that country starts to travel. Local companies start to close down, unemployment in the country starts to increase, money goes into the hands of only a few people and the anger of the common people starts to rise and this anger leads to protest and eventual revolt, this is what happened with Libya and Venezuela. But why didn't this oil-oil debt affect Norway?

Photo by Ela Yudhanira

In the 19th century, the entire economy of Norway was driven by sea trade. Due to its great port location, timber fish and various minerals from Norway went to Europe and Asian countries by sea. Norway controlled about 30% of the sea trade in the Northern Sea, and one of the biggest things Norway did was to create a parliamentary system, the main purpose of which was to keep political power and money out of the hands of a single individual or party. Norway also received another favor from nature and that was the potential of cheap hydroelectricity generation, but at that time 75% of Norway's hydropower generation companies were foreign and this thing was quite disturbing to the Norwegian government. Finally Norwegian Government decided Only Norwegians will exploit Norway's natural resources.

In this regard, in 1940, the Norwegian government passed a bill in which foreign companies were prevented from ownership of hydropower projects. GDP growth was 3.3 percent. Norway had the highest taxes in the world, but most of the taxes were spent on government education, people's welfare, and supporting local industry. By 1965, Norway had zero employment. It was now at par with the rest of Europe but still not at the level it is now, but all this was finally going to change.

In 1959, natural gas deposits were discovered in the Netherlands, and at the same time, speculation began among experts that there may be oil reserves under the North Sea. By 1969, all drilling had become disillusioned. Phillips Petroleum made one last try, this time full-deep drilling, and finally in 1969, huge oil reserves were discovered under the North Sea. Less than 10 years later. Norway's oil production exceeded that of any country in the world. The oil sector began to create thousands of jobs. Fishing towns were now petroleum powerhouses. So it happened with the Middle Eastern countries, then Norway did it differently.

Photo by Just a Dream Pictures

The government had already passed the bill that no single party or individual will control natural resources and all the income from it will be spent only on the welfare of the people. All the profits from oil will be spent on infrastructure and education. Like AE and Saudi Arabia, he could have reduced taxes, but by doing so, he kept putting it back on the people. The biggest benefit of investing in companies in other sectors besides oil in Norway is that other local industries of Norway also started to flourish, as a result, employment decreased further and Norway's dependence on the oil sector ended. In the export of timber, paper, metals and other minerals, Norway also rose to the leading position in the world and then rose to the top in the list of the most developed countries in the world.

The natural resources that Norway had, are also available to many other countries, but they could not replicate the success of Norway. Perhaps India and Pakistan are suffering from serious social and political issues due to lack of focus on education and corruption in national resources compared to Norway.