Norweigan oil fund

> I wonder if it's about being developed, vs being about having a high-trust society?

Thats a virtuous loop. You institutions work because you trust that strangers trust your institutions.

It's about Norwegian climate: you don't work - you freeze to death in winter. In a dozen of generations an idea that everyone must work hard becomes an obvious thing.

Probably high-trust, but those who support the Nordic model would argue that this trust is developed. One of the goals is to have cohesion. That is the idea behind for example having universal systems. This trust arguably didn't exist when ~25% of both countries population left the United Kingdoms of Sweden and Norway for the United States.

(I wouldn't be sure Norway could do this today either).

Most of the middle east is underdeveloped today. There's been some progress (sometimes huge progress, such as Iran), but it may be a generation or more before they really catch up.

That’s precisely the point the GP is making

Yes and it remained that way

In the US, and to a lesser extent Canada, the idea of the state benefiting too much is seen as lefty socialism (Canada briefly flirted with economic nationalism with the creation of Petro-Canada, but this was vehemently opposed by US energy companies). So we have a classic situation where the profits are privatized to the very few, and the costs are socialized (climate change, abandoned wells, pollution, etc).

as mentioned elsewhere, they don't export nearly as much oil

I'm sure some England has something from the resource but most of the wealth probably accumulated in the hands of one or two people.

No, this is what Brazil should've done decades ago but could not due to corruption and short-sightedness. Nowadays, the only model that they are trying to replicate is that of authoritarian regimes.

how so?

Forgot the link to the energy maps https://e-reports-ext.llnl.gov/pdf/473335.pdf

I agree that the fund's diversification helps some. But the fund is still fed from the oil income. And some of the oil income is spent in state budget, not all of it goes into the fund. And this is in addition to all the money being pumped into the economy from the oil industry (Norway has high wages, most Teslas per capita, etc). I think the financials of the citizens are much more connected to the oil profits than in other developed oil producing countries like the USA/UK/Netherlands.

Statoil did not rebrand their gas stations although it could appear to be the case. First they separated the operation into a new subsidiary called Statoil fuel & retail, which they then sold to Couche-tard, a Canadian convenience store multinational. The deal preserved the right to use the statoil brand for some time. Then couche-tard rebranded them to Cirkle K as part of a global strategy.

'appearing' being the word.

They won't stop extracting oil until there is no oil left.

The discoverer? And then whoever wants to buy the extraction rights from her at the market price? What’s even the problem?

> One step would be to move it away from an insurance model and raise the cap on contributions. Another would be to modestly increase the contribution rates.

This is essentially what happened in the mid-90s with the Canada Pension Plan (https://en.wikipedia.org/wiki/Canada_Pension_Plan#1996_refor...): an increase of contribution rates to move beyond PAYGO solvency to a partial advance-funding model. As a result, the CPP now has a few hundred billion dollars in assets (invested largely in equities) providing income to support long-term solvency.

If they do raise the cap on contributions people should have the option of either paying more in to social security or paying more into an uncapped IRA or 401(k).

One of my clients at my old finance firm was Alaska’s oil fund. They do pretty well for themselves and dole out 2k/year in cash to everyone living there. It’s unsurprisingly a very popular program, though I’m kind of morally opposed to a government function like that.

Lol. No.

Usually where there are significant amounts of minerals, there are separate mineral rights. Mineral rights trump surface ownership, and usually the rights were sold off decades or centuries ago. If you find something under your property, it probably doesn't belong to you.

Also, state laws vary in weird ways. Should you find gold in New York, it's the property of the state.

Exactly right. Many Americans are so ashamed of the US, when in many ways it's a shining example of how to do things right -- certainly relative to many other countries. The US is a spectacularly prosperous country, and all it seems anyone talks about is how to fundamentally change the systems that made it that way. There are always in which a society can improve, but man -- let's not forget what's worked well.

its GDP

That’s hardly surprising for anyone having been there.

>the Saudis do very well for themselves. The entire citizen population is given massive handouts,

Have you ever been to Riyadh and seen the poor state of housing, the laughable state of repair of motor vehicles, the constant complaints about the state of the education and health systems?

Perhaps they are given massive handouts but it doesn't seem to be translating into functioning infrastructure.

I think the difference is potentially that the Gulf countries - Saudi, Kuwait, Qatar etc - benefitted from being able to develop their economies and infrastructure and establish large social welfare systems in the 70s and 80s while their populations were small and oil prices and income were very high.

Here's a chart that shows Saudi per capita income from the 70s: https://d3fy651gv2fhd3.cloudfront.net/embed/?s=saunygdppcapk...

You can see that their per capita collapsed in the 80s along with oil prices. The royal families in those countries are incredibly corrupt by modern standards, but they have established a system that keeps everyone outside that circle in line with subsidies, religion and threats of imprisonment.

But I'm sure they're taxing natural resources exploration at a pretty high rate.

There is also the fact that, with the American playbook for regime change being what it is, there is quite a lot of skepticism about the sudden surge to prominence in the news cycle about the governance woes of a very oil-rich nation, irrespective of how legitimate reports of the mismanagement actually are.

And on the other side there are lots of people trying to show how it all does not work, while ignoring that the super power number one does all they can, except open military actions, to make it not work.

In other words, to me the situation in Venezuela does not prove anything, in terms of political ideology.

There's a bigger ideological drive to show that taking US oil assets in the country and diverting the funds toward social programs was a dire mistake.

Venezuela has less public ownership of resources than even the US. To say that they are 'communist' is an ideological farce.

People are opposed to regime change because the US government has a long history of destabilizing foreign governments in deference to US capital interests. It's unlikely their motivations are just, especially as the people involved were responsible for some of the worst atrocities in Southern American governments in the 50's-90's.

Furthermore, applying economic sanctions hurts the material conditions of poor Venezuelans without significantly affecting the corrupt government. This is evidence the US does not have a strong interest in helping poor Venezuelans, but primarily forcing regime change to a government more amenable to the interests of US oil companies.

If the US was truly a force for good, wouldn't we see the same pressure on the Bolsonaro regime in Brazil? The story is similar, a corrupt rise to power achieve through unjustly jailing political opponents. If you doubt this, read Glenn Greenwald's reporting in The Intercept.

You could ask a similar question of the UK.

Norway had a per-capita GDP 10x that of Venezuela when they launched their fund. The option was a luxury that they were granted by already being a fairly wealthy country.

Also, consider if 25% of Norway's oil revenue is sufficient to provide a basic functioning government. Now you have Norway saving 75% of their oil revenue every year, and Venezuela still sucking 5% out of other funds, resulting in a long-term extremely wealthy Norway and a destitute Venezuela.

Venezuelan oil costs more per barrel to extract than Norwegian oil...

Yes, thank you. I deliberately avoided attributing anything to ideology. At the end of the day, both countries are chiefly comparable in having nationalized their oil resources for the public benefit, at least de iure. Also Venezuela was actually doing quite well I believe in 2013 when prices were high. It was a singular failure of their stewards not to diversify the profits.

Not many people here probably know who Mosaddegh was. So for context, he speaks of the 1953 CIA backed coup against the iranian elected president Mosaddegh, who nationalized the oil from foreign companys. Which the foreign companys and their governments did not like. But, I am not sure if all would have been peace and harmony without that coup. Sudden oil richness in a very, very poor society, is just very hard to do right.

Only available to people who have the means or opportunity to invest. We're taking from everyone and giving to few.

I'm fully aware of that, however currently as a population we have nearly nothing to show for decades of oil extraction other than pockets of extremely concentrated wealth. If we make a wild assumption that we did exactly the same with our reserves and somehow contrived to create exactly the same sovereign wealth fund, that'd work out to around £13,000 per person. That's not enough to make everyone a millionaire, but it's much greater than the £0 we put aside the way we did it.

Of course this is speculation, featuring ifs/buts and using numbers plucked from our neighbour across the North Sea ... however it's pretty plain to see that we screwed this opportunity up.

And US is about 50% of the world market cap, so yea 1.4% sounds about right.

Oh, I’m not really opposed to a strong social safety net at all, if it came across like that. In fact, a basic income system would be very interesting to try out. Everything doesn’t have to be optimized for productivity; it’s quality of life and individual choice that matters.

I’m just opposed to some aspects of the sustainability and wisdom of the current Norwegian system, as well as slightly disillusioned regarding the lack of quality debate around this in the country :)

True but other countries also let poor countries burn the oil and do nothing useful with the money.

As was most of the western world, recovering from the oil crisis of 73, and experiencing chaos as a result through the rest of the decade. Hardly unique to the UK.

UK was largest recipient of Marshall aid for having the most need along with France only slightly behind. Being used as you say for maintaining world power status, and into the general treasury fund. We spent less on infrastructure during Marshall aid than without! They pissed that away just like was done with all oil revenues.

Considering the vast majority of oil revenues went on empty tax cuts and benefit spending through Tory created recessions, I'm not sure we'd have noticed the difference. 1 or 2p off income tax barely registers. I know I noticed none of Lawson's tiny bribes. At all. :p

The politicians would not, and should not be managing it being better served as some sort of apolitical hands off trust. I don't think politicians manage Norway's fund. Now there is little doubt that it would not have survived the privatisation and asset stripping of the eighties on unscathed, but, like the NHS there's no reason to suppose it would have been destroyed. The Tories debated but chose not to re-privatise the NHS in 51. Thatcher had a selection of industries that were felt were beyond the pale that were subsequently privatised by later administrations. Created in 75 might have been a bit late for achieving adequate perception in the public consciousness so who knows.

Still, it remains one of the very many great missed British opportunities that could easily have been a couple of trillion or more by now. 15 years of additional contributions and growth. There's many nations have sovereign wealth funds now, we easily could have too.

How is that relevant? Australian wages are high because of a long period of unionised action demanding better wages and working conditions in the 20th century. It's tangential to having a lot of natural resources.

Norwegian wages are good too, Venezuelan and Saudi wages are terrible.

We squandered all our mineral wealth on nonsense, have huge respect for what the Norwegians have achieved with their fund.

Which is exactly why UBI is generally suggested to give below the poverty line. Enough to survive but not enough to be comfortable. Enough to get you through downturns but not enough where you'll abandon a well paying job.

That's what it's always sold for. Instead of staying in soul crushing jobs in order to survive people could pursue new things and be creative.

The fund is not distributing to citizens like that.

41% of all US stocks would be about $13 Trillion

Just anti-tax propaganda

No

That would be a very interesting study. Anecdotally, only one person in my group of ambitious acquaintances has left Norway due to better opportunities elsewhere. Some super-wealthy (>$20 million net worth) have left to avoid paying the annual wealth tax of 0.85% of the market value of all taxes.

Sales tax is 25% (lower on food + public transport). Income tax is close to 50% for most of people (progressive), in addition there is a 14% tax per employee that the companies have to pay. If you take out dividend there is a 25% tax that don't earn you pension.

Income tax comparisons will dramatically underestimate the tax burden for Norwegian citizens, but even then I believe you are only quoting the capital gains rate for non-securities investments. Summarizing from a comment I posted elsewhere:

* 25% VAT on everything except food, which is 12%. Electric vehicles currently exempt

* 40% income tax on average including 8% public pension contribution. Highest marginal tax on income is 47%, which applies to incomes greater than $116k.

* Employer has to pay 14% of your salary as employment tax. Company profits are taxed at 24% (this is separate from the capital gains tax). Stock-based compensation is taxed as income, so no possibility of weaseling around the employment tax. You won't get stock-based compensation unless you're in a startup or a C-class executive at a (big) private company. The wealth tax does weird things to the valuation of stock options; they'll almost always be worthless unless your company is sold or goes public.

* Net assets above ~$175k are taxed at 0.85% p.a, primary residence contributes only 25% of its market value to net assets

* 29% capital gains tax, primary residence is exempt as is most tax income from renting out primary residence. Sell your home with $1 million profit? No tax.

* 22% tax on capital gains or "general" incomes that are not linked to securities ownership. Relatively small amounts are collected through this bracket.

* On average ~$10k tax on all new motor vehicles, electric vehicles currently exempt

* A tax of approximately 30% (~5 NOK per liter) is applied to gasoline, in addition to the 25% VAT. Annual tax of ~$1000 on all motor vehicles, increasing with how good the vehicle is. Electric vehicles currently exempt.

* Various taxes on alcohol, tobacco, air travel. Some municipalities have a property tax on the order of ~$500 p.a. for an average residence.

I've eyeballed most of the currency conversions.

Population of Norway, 2017: 5.258 million

Population of United States, 2018: 327.2 million

The Us exports 3x times as much oil as Norway

Norway is 5 million people.

https://en.wikipedia.org/wiki/List_of_countries_by_oil_expor...

I do wonder if Canada could have been like Norway for the same reasons.

And Canada has more than just oil.

But a lot of it seems to be privately squandered.

I think Alaska's system is fine. I don't think it's morally worse to give people their money up front instead of holding on to it "for them" but only letting the majority decide how to spend it.

Most spending in the US is squandered around war and socialism to the rich. The country has doing little int the last few decades to support science and combating global warming; they're also cutting social programs.

I believe that the problem in most countries is that rich people have successfully brainwashed the population into thinking that is bad to support their own people with schools, health care, cultural programs, etc. On the other hand, they successfully brainwashed the masses into believing the socialism for the rich is necessary: for example, you will see people crying on the newspapers because the rich are paying "too much" in taxes, when in fact they never payed so little.

> I think anything below 20% in taxes simply means a country's public functions will suffer.

Honestly, the biggest difference between nations isn't so much in income/payroll taxes, but in the VAT. The US simply doesn't have one at the federal level, and state sales taxes are typically in the neighbourhood of 6% (https://en.wikipedia.org/wiki/Sales_taxes_in_the_United_Stat...).

American here. I have no problem paying taxes. I just hate to see my tax dollars mismanaged. Baltimore MD has been in the news lately, largely as people have focused on a certain public official's tweets. Baltimore receives a huge amount of taxpayer dollars, federal, state, and local. Its per pupil school spending is by far the highest in the state. The percentage of public secondary school students who demonstrate proficiency in mathematics is less than 1%. 2 of its last 3 city mayors have resigned due to corruption charges. I consider this mismanagement.

Take a look at what the American government budget is spent on: https://www.nationalpriorities.org/budget-basics/federal-bud... (scroll down to "Total Federal Spending 2015"). The three largest parts of the spending pie, constituting over two thirds of government spending, are "Social Security, Unemployment and Labor", "Medicare and Health", and "Military". Less than 20% goes to education/infrastructure. Many conservative Americans oppose welfare and socialised medicine, and similarly many liberal Americans oppose high military spending (which makes up over half of "Discretionary Spending"), so it's easy to see why they think their taxes are being wasted. There are countries like Singapore that have extremely good infrastructure and schooling with government spending under 20% of GDP, because they spend only on infrastructure, not welfare, so high spending isn't a prerequisite for good infrastructure.

All of the amenities that people like in America come from their local governments - police, roads, emergency services, courts, you name it. The surprising thing is that the local governments usually levy only a small fraction of the tax burden. Most of an American's tax goes to the federal government, where nobody knows what happens to it. It's stirred around, and a lot of it comes back to the local governments in the form of strings-attached funding that is used as an end-run around the individual state's rights to govern themselves. When the strings-attached money circles back to the local governments, they swear fealty to the federal government (which is what they're being paid to do) and then re-brand it as local services. That's why the average American sees a tiny fraction of their tax going to the local entity that does all the work, and a big fraction of their tax going to the federal system that only interacts with them when they haven't sent enough money.

Middleclass Americans' income taxes are around or above 20%. Americans generally are opposed to taxes because there is a perception (rightly or wrongly) that our government is inefficient (due to some combination of corruption and incompetence), and we should sort that out before increasing taxes on programs with a (perceived) high probability of mismanagement.

> Obviously I can't speak for the general population, but as for my close proximity: My colleagues think taxes are good too. No brain drain here.

I think that's the critical difference--Norwegians believe they are getting value out of their taxes and Americans do not.

EDIT: Obviously this is a generalization of groups; not all Americans think the government is inefficient. Hopefully we can forego the predictable and pointless digression into "well not all Americans are that way!"

But is does have more and more easily used land. And while it looks very similar from outside Scandinavia it doesn't look quite so similar close up. Culturally similar but far from the same.

Topographically they are quite different, timber is more profitable in Sweden for instance because the country is much flatter and transport is much easier.

The two countries have different challenges to overcome and different histories that still affect the way people think.

So because Norway is a bastion of liberal policies, they get a free pass when it comes to climate change?

This is why I know it has nothing to do with science or actually solving the problem.

Oil isn't going anywhere soon, this is the least evil thing you can do and we should do so with all oil money.

Do we need another SV? It's not really putting out the same quality of startups it used to.

If all it took was money, New York would be Silicon Valley.

Do you think they need even more money?

The goal of this fund is not to invest in the economy, but to work as an insurance if ever the economy turns bad. If for whatever reason the economy in Norway collapses, they will still have this.

EU is also about single market (to simplify life for businesses), which iirc Norway is mostly part of.