Why is Norway so rich? Part 1. History of Norway and the Oil Adventure

Norway, the socialist heaven on earth. Often brought forward as an example of how socialism could work. But is Norway really socialist? And is it rich because of socialist elements, or are those elements inhibiting even more wealth?

A brief introduction of Norway's economic history

Contrary to popular belief, and also announced by former prime minister Kjell Magne Bondevik in the 2005 jubilee for Norway's independence (1905) "In 1905 we were one of the poorest nations in the world, but today we belong to the worlds riches elite" Norway has not been a particularly poor country, at least not after the 15th century.

In the 18th and 19th century Norway was about 25% poorer than our western european neighbours. We were on the same economic level as our eastern european friends. Our economy was based on agriculture and fishing. But also keep in mind that the cost of living was cheap, and there were strong property rights.

In the mid 19th century almost 800.000 norwegians immigrated to America. Reasons for that were issues with free speech, freedom of religion, over-population and wanderlust. Contrary to popular belief, Norway did not experience more hardship than other countries in this period. Actually, we had a positive growth throughout the entire 19th century.

In the early 20th century shipping became a big part of Norway's economy, and we did not have a big depression in the 30'.

After the second world war there was a strong unity between people working together towards prosperity. The world came closer, and we got rock'n roll, american cars, coca cola. At the same time the workers party (Arbeiderpartiet) came into power togheter with the communist party. The working party did however trash the idea of class warfare, and decided they wanted to create a new industrial state, much like America. Most of the influence in popular culture came from America.

The oil

In 1966 Norway introduced the "Folketrygd" (social security) the same year as the first oil rig, Ocean Traveller, was installed by Esso. They came up with nothing. In 1969 Philips Petrolium could inform the Norwegian government that oil was found on the oilfield later known as Ekkofisk which turned out to be the biggest off shore oil field ever discovered.

In the following years more oil fields were discovered; Statfjord, Oseberg, Gullfaks and Troll. These large oil fields are to this date where our oil revenue comes from. In the beginning there were mainly foreign oil companies who dominated these fields. But Norway had a plan and a goal to build up an Oil Nation.

In 1972, Statoil was founded. Before 2001, it was 100% state owned, but after 2001 it has been 50/50.

After the creation of Statoil, the government saw the increasing importance of controlling the oil itself. In june 1972 the Government made 10 rules for Norwegian Oil politics that would be central in the wealth of Norway. The central points are:

1. All activity on Norwegian Shelf must happen under national governing and control
2. Oil findings shall be exploited in a way that it supplies Norway with oil.
3. Oil from Norwegian Shelf shall be taken to land in Norway
4. The government shall be engaged on every level of oil production.

One can only imagine the tuff negotiations that happened in this era. New agreements with Great Britain and Denmark of off shore parting lines

So what happened after this. We all know Norway would become one of the richest countries on earth. But was it only due to oil? Usually finding oil is a curse for most countries. Were there other factors? Was the rest of Norway going socialist? Or did we move towards a more capitalistic society? How free were the norwegian markets in the 80's and 90's? How free are they now?
When Bernie Sanders point to Norway as a socialist heaven - is he right? Is Norway really socialist? And if it is - is it a promoting factor for Norway's wealth, or is it an inhibitor? One can certainly argue that the Norwegian Government did a fine job making sure the oil reserves came to benefit to the norwegian people. Or did it?

Stay tuned for part 2...