Executive Summary

Pragmatic, consensus-driven democracy
As a consensus-driven democracy, blessed with generous natural resources managed in a responsible way, Norway performs well in most international comparisons of governance, quality of life, and in rankings of economic and social conditions. Continuity and pragmatic solutions are the most conspicuous qualities of the country’s governance. Reforms and legislative measures are prepared through broad participation of societal interest and stakeholders, and implemented by cautious, incremental steps rather than through spectacular, one-off reforms.
Resource revenue
wisely invested
The country’s economy is heavily dependent on revenues from the production of oil and gas, and on the maritime and technologically advanced industries linked to the extraction of natural resources. A significant part of the state’s income from taxes on oil and gas has been invested in financial assets globally, and the Government Pension Fund Global, also known as the Oil Fund, is now four times the nation’s GDP. Income from investments and a broad tax base provides Norway with a solid economic foundation for a generous welfare state. The economic muscles of state finances explain why the financial crisis in 2008/10, volatile energy prices and the COVID-19 pandemic that began in the winter of 2020, have been handled without austerity measures or any dramatic rise in unemployment. A 2021 general election terminated eight years of conservative rule, and a new center/left government took over.
Transformation of economy underway
The gradual depletion of the petroleum reserves, global warming and policy targets of making Norway a climate neutral economy by 2030, have ushered in a new political agenda. Energy sources must shift from carbon-based to renewable sources. New jobs and employment opportunities must be created in green industries not yet developed. There is a broad political consensus that a combination of economic incentives, state-sponsored research and innovation, and a more extensive use of water and wind to produce electricity, are needed in order to transform the economy and achieve sustainability.
Open yet state-
driven economy
Norwegian policymaking has a long tradition of taking heavily state-centered approach, which results in a specific kind of state capitalism. The state is by far the largest owner of capital in the country, holding about one-third of the equity traded on the Oslo stock exchange. The state is virtually the sole funder of research, education and culture. Social insurance and welfare services for all are tax-financed. Combined with progressive taxation, social class inequalities are moderate and general levels of trust are very high. Nevertheless, with the exception of a protected agricultural sector, the country has remained open to globalization and free trade.
Highly taxed, highly educated population
Citizens are subject to a relatively heavy tax burden. The government spends significant resources on infrastructure and the provision of public goods, although arguably there is an excessive emphasis on remote regions. Policymaking is generally effective but often inert when it comes to implementation. The country’s labor force is one of the most highly educated in the world. Nonetheless, 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 (e.g., PISA) show an improvement in student performance in Norway. 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 levels.
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