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NYT sings the praise of Norwegian economic management May 14, 2009

Posted by Sverre in : Norwegian politics, Political economy, Public Policy , add a comment

“As a socialist, I have always said that the market can’t regulate itself,” she said. “But even I was surprised how strong the failure was.”

These are the words of Norway’s Finance Minister Kristin Halvorsen from the political party Socialist Left (SV), which is part of the current centre-left government coalition in Norway. The words come from an article in the Global Business section of The New York Times, which praises the economic management of the Norwegian state, among other things  how it has stuck with its social democratic welfare model through boom and bust.

The global financial crisis has brought low the economies of just about every country on earth. But not Norway.

With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.

And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.

The debt free government is of course something the current centre-left coalition can’t take the credit for alone. The Norwegian government has passed between Labour, centre-right and centre-left governments for the last decade.  Since 1990, there has been a broad consensus in the Norwegian parliament for a programme of  national savings in a government pension fund, to preserve value for future generations and avoid “Dutch disease“. I mentioned this policy in an earlier post on this blog.

The description of Norway as always sticking with its welfare model is another issue, though. Norway did go through a phase of privatization of welfare, for example the schooling system, during the last government, but this was abruptly stopped by the centre-left Stoltenberg administration when it came into power four years ago. Of course this didn’t necessarily affect government expenditure.

If the right wing were to come into power in the upcoming parliament elections, we might see another shift in this policy. Although supportive of the need for government stimuli to the economy, their preferred stimuli come in the form of tax cuts rather than the countercyclic government expenditures the current government favours. Last week’s conservative party congress heavily emphasized this.

(Hat tip to Tromp for bringing this to my attention).

A sad story of cost-benefit analysis April 5, 2009

Posted by Sverre in : Public Policy , 1 comment so far

In public policy, it’s very popular to do a cost-benefit analysis as background for an investment decision. And I’ve got the impression that more often than not, some important cost gets lef out of the equation. Either accidentially or by design to make it easier to get the project passed. This is the true, sad story of such an analysis.

Today was Saturday. I was going to be a good student and go to campus anyway, but my bus pass had run out. But the snow has mostly melted by now, and we haven’t had frost for a while, so I decided today was a good day to take out my bike from the shed. So I did and went to campus. (more…)

Norwegian roads and swing voters February 24, 2009

Posted by Sverre in : Norwegian politics, Political economy, Public Policy , 2comments

navarseteIn recent weeks, there has been som controversy in Norwegian media over an article by Leif Helland and Rune J. Sørensen of the Norwegian School of Management (BI) about a systemic skew in Norwegian road building. Their research shows that there appears to be systematic self-serving rational choice behavior by Norwegian politicians, as districts with important swing voters tend to get more grants for road building, and that this affects the social efficiency of road building in general. Read the article (link at the bottom) for more on their findings.

This was picked up by Norwegian media when Norwegian parliamentarians met with Swedish counterparts and presented under the heading “Met by laughter in Sweden”. What the Swedes were laughing at was the level of micromanagement in road building that the Norwegian parliament is involved in. In Norway, every road builiding project is a parliament issue, and Helland and Sørensen have proved that this leads to non-optimal distributions of road construction money.

Norwegian Secretary of Transportation Liv Signe Navarsete doesn’t get the most important point:

(more…)