Norway the odd country. The fear of Dutch disease, a democratic problem.

Abstract

The impressive increase of Norwegian national wealth since the 1970s is mainly attributable to endowment in natural resource and the well-working of institutions. This work highlights how in addition of the traditional man-made capital, human capital, and natural capital, the Norwegian model, relies greatly on a particular type capital that is not explicitly enough mentioned in economics, namely the “institutional capital”. The “institutional capital” can without hesitation be included among the inputs used to create value in Norway because the Norwegian institutions do not just constitute a resource but also are the source of its economic solidity. The great role played by the institution has resulted in an enormous fortune kept in a sovereign fund (the Government Pension Fund). This work second finding is that the increase of the national wealth does not guarantee the end of economic problems; the origin of the wealth conditions considerably the way it has to be allocated to the population. The case of the Norwegian oil-rent allocation has been a good illustration of this fact, as a free inflow of the oil-rent into the economy (that is for instance, an important allocation of the oil-rent to the provision of more welfare services) might bring with it the Dutch disease. Thus, the fear of the Dutch disease has forced politicians to embark in “fiscal consolidations” measures, which they delusorily justify by forecasting future potential economic gloom in Norway. This strategy of “story telling”, which is nothing but what is known as the Government House Ethics (Sidgwick), violates the principle of transparency. Though the politicians’ choice has a real economic efficiency, this choice may impair the “institutional capital”, which highly determines the Norwegian economic model.