Executive Summary

Strong, consensus-
driven democracy
As a typical consensus-driven democracy, Norway performs well in most international comparisons of governance, quality of life, and economic and social conditions. Continuity is the most conspicuous quality of the country’s governance, which is typically steady and based on the implementation of cautious, incremental legislative measures rather than spectacular, one-off reforms. Norway has been able to avoid the worst of the global financial crisis and subsequent economic turmoil, which severely affected most of Europe, and has pursued a healthy economic policy.
Economy depends on
oil and gas revenues
The country’s economy is heavily dependent on oil and gas revenues, and its maritime and technologically advanced petroleum-services industries. Many in Norway are concerned about the risks posed by an excessive dependence on the petroleum sector, and in recent years greater emphasis has been placed on developing and maintaining adaptability. In 2017, the government, together with the managers of the country’s oil fund, Norges Bank Investment Management (NBIS, an arm of the Norwegian central bank), decided to divest from investments in petroleum-related industries.
Oil price decline reveals vulnerabilities
Since 2014, the drop in oil prices has had a significant impact on the economy, exposing its vulnerability. Unemployment is rising due to reduced investment and increased economic uncertainty. Governance is responding to changing economic circumstances, and there is a greater awareness of the need to diversify the economy and reduce its dependence on petroleum. It remains to be seen how successful these efforts will be. For now, the country’s economic base remains strong but weakened and the country’s currency has depreciated. Public finances have tightened, but there is still a conspicuous continuity in economic policy, which includes relatively high levels of public spending, taxes and welfare services. There has been no shift toward austerity in economic policy.
State-centered approach to economy
Norwegian policymaking has long followed a strongly state-centered approach, resulting in a peculiar system of state capitalism. The state is by far the largest owner of capital in the country, holding about 40% of equity traded on the Oslo stock exchange. The state is virtually the sole funder of research, education and culture, among other areas. Nevertheless, the country has remained open to globalization and free trade, with some minor exceptions, and has been keen to ensure that the benefits of international trade are fairly distributed.
High taxes fund significant welfare transfers. Demographic shifts prompting reform calls
Citizens are subject to a relatively heavy tax burden. A large share of tax revenue is spent on welfare transfers to individuals, which contribute to low levels of inequality in Norway. The government spends significant resources on infrastructure and the provision of public goods, with an arguably excessive emphasis on remote regions. Policymaking is generally effective but often inert when it comes to implementation. The labor force is one of the most educated in the world. However, the country’s share of science degrees is low by international standards, which limits the impact that public investment in education can have on economic competitiveness and innovation. International education rankings such as PISA show an improvement in Norwegian students’ performance. The level of investment in research, development and innovation remains quite low. An aging population and increased migration, combined with a more challenging financial outlook, have increased pressure on the government to engage in welfare reforms and reduce welfare spending.
Back to Top