I’m having a bit of a socialist moment today. A somewhat different kind of socialist moment though, as I want to be a millionaire like every man woman and child is in Norway. I mean let’s face it, if you’re going to be a socialist, it might as well be a rich socialist.
So how did all these Norwegians become so wealthy? It was a pretty straightforward approach but it did take political will and an ability to think, plan and act beyond the constraints of election cycles. It required a government acting in the best interests of its citizens as opposed to its own short-term political interests.
In Norway, this type of long term planning became known as the Government Pension Fund (Global) of Norway. Some still refer to it by the old name, The Petroleum Fund, but regardless of title, it is the largest pension fund in Europe with a January 2017 valuation of 7.5 trillion NOK or about $1.1 trillion Canadian.
Unlike a true pension fund, Norway funds the plan through income from oil profits as opposed to personal contributions from Norwegians. The revenue comes in the form of corporate taxes, exploration licenses (leases) and from dividends paid by the state owned Statoil.
Started in 1990, the fund was seen by government as the best way to prepare for the eventual decline in oil revenues and a way to “smooth out the disruptive effects of highly fluctuating oil prices.” It has been hugely successful and the Norwegian Ministry of Finance forecasts continued fund growth through 2030.
It is a plan that has been in place for 27 years and has provided Norwegians with universal daycare, free university and per capita healthcare spending that is 30 per cent higher than ours. It also provides for 25 days of paid vacation for everyone, every year. It might also help explain why Norway was just declared the happiest place on earth to live.
Norway is saving about $1 billion NOK per week and has so far resisted the urge to use these revenues on state day-to-day budget items — something Canadian provinces have been unable to resist doing with our resource revenues. As a result, Norway is far ahead of any province in Canada and likely to remain that way unless thinking changes here.
In Canada for example, Alberta’s Heritage Fund had an asset value of $19.1 billion as of December 31, 2016. The Heritage fund was established in 1976 with the stated objective, “to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans.” Yet by the 1990s, just as Norway was launching its resource-based fund, Alberta had decided to put a significant portion of their income into general revenues.
Since 1976, the Heritage Fund http://finance.alberta.ca/business/ahstf/index.html has earned over $190 billion, but the savings account has been raided again and again by successive governments and the value in the fund by 2014 was only $17.3 billion.
The Canadian correspondent for The Economist suggested, as did the IMF, that every Canadian province should, “establish a sovereign wealth fund and treat non-renewable resource revenue as capital to be saved and invested, rather than income to be spent.”
Good advice, yet governments, including British Columbia, have been unable to resist the temptation of the quick political fixes these large ‘savings’ funds offer.
For any government unable or unwilling to balance its budget via traditional measures, a quick raid of the rainy-day fund solves its immediate dilemma. In the meantime, the concept of a fiscal ‘steady hand’ teeters on the brink of credibility while debt skyrockets in a world of artificial prosperity.
We have the tools to solve these issues. But unlike Norway, it seems we have neither the fortitude nor foresight to act decisively and on behalf of our future. It seems always to be about re-election and retention of power at any cost.
In Norway, the government does not just pretend to care about the future of its citizens. It actually does care and work towards long term strategic goals. Had Alberta followed Norway’s example, their Heritage Fund would be worth nearly $130 billion instead of just $19 billion.
Imagine where BC would be if we had treated our resource revenues as Norway has.