Jonathon W. Moses and Bjørn Letnes, Managing Resource Abundance and Wealth: The Norwegian Experience

Abstract

When oil was discovered on the Norwegian Continental Shelf in the late 1960s, Norway was already an established democracy enjoying a modest level of wealth. Its government had long experience in promoting economic development and infrastructure investment. With its competent bureaucracy, its tradition of public control over natural resources, and its strong labour movement, Norway had a head start over many other oil-exporting countries at the moment when their oil industries were born. Nevertheless, Norway’s subsequent experience of managing its oil industry and the broader national economy contains lessons from which other oil producers could benefit. Norway was able to cushion the impacts of its early oil boom on domestic prices, wages, currency value and employment in non-oil sectors: parameters whose collective disruptions can cause serious economic damage, commonly referred to as the Resource Curse, the Paradox of Plenty or the Dutch Disease. Some of the mechanisms that tempered the impact were purely Norwegian, such as the relationship of trust enabling the government to contain, temporarily, rising wage demands. The authors credit immigration also for easing labour market pressures. An even more important step that minimized economic overheating due to the new oil industry was a conscious government decision to restrict the pace of oil sector development, at least through the first two decades following the initial discovery.