norway is using the interest of its oil revenue to provide health care education and a safety net to
families hit by hard times yo norwegians y'all need to teach me how to do that what i like it
i love it this is beautiful hey guys welcome back to foreign reacts i do hope you guys are having a
really good day today we're going to be checking out a video titled how norway got insanely rich so
like i said before do you hope you guys are having a really good day welcome back to foreign reacts
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you're from norway but uh without further ado guys let's get right into this video
in the late 18th century one of the great historical economists thomas malthus toured
the picturesque but climatically harsh danish controlled norway the tiny population that resided
lived a meager existence subsisting off of their small farms and whatever they could catch in the
sea the winters shrouded the country in near darkness for half the year and the amount of
land suitable for agriculture was minute at best efficient travel in this mountainous country was
almost impossible towns were remote and isolated and its citizens were poorly educated if at all
long gone was the age of viking conquests bringing their riches and plunders back with them norway
was not rich but in fact very poor in the decades after the visit things got even worse plagued with
war sometimes i hate watching these videos because right now i feel so sad like sometimes history is
not a very happy place you know and um right now i'm not very happy watching this i really feel bad
like you know just thinking about the past just sometimes hurts like just listening like they
were poor they were hardly educated in fact they were uneducated you know it makes me kind of mad
when i hear today people talk about slavery um and um privileges you know because a lot
of us don't even know that so many countries went through slavery but i think majority of the world
thinks or believes to themselves that africa the continent african countries whatever you want to
specify however you want to specify are the only ones that went through that when i found out that
you know finland went through their own trauma i was like man i had no idea
right so just to hear that norway also did that and i actually don't know much about denmark but
i'm gonna actually try to get into a video about denmark because he just said something about
denmark which kind of caught my ears blockades and embargoes norway's economy was in ruins and famine
spread across the land norway in a lot of ways was destined to remain underdeveloped and unimportant
yet today if you don't include micronations norway is the second richest country on earth
one of the happiest the seventh healthiest and it's ranked the most democratic nation
in almost every metric that measures the prosperity of a nation norway is near the top
and all of its citizens are technically quarter millionaires but how many countries have tried
to do what norway has done and ended up even more impoverished than before how did norway become so
insanely rich while other nations failed and is norway's economy just too good to be true
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these are the countries with the world's largest reserves of oil collectively they account for
84.9 percent of the remaining supply yet they only make up 7.9 percent of the world's gdp
venezuela has almost a fifth of the total yet it's the poorest country in the western hemisphere
in fact most countries on this list have severe economic or social issues saudi arabia iran iraq
kuwait and the uae all suffer from human rights abuses and extreme inequality russia has been in
decline for decades and libya has been in a state of anarchy since gaddafi was overthrown in 2011.
this is what many economists call the oil curse today oil and gas accounts for 27
of all energy generation even as the world inevitably tries to move toward better
in cleaner sources of energy oil today and for a long time will be a necessity with oil nearing its
highest price ever you would think that having a large quantity of it would be a blessing for
a nation's economy the problem with oil is that it's like winning the lottery all of a sudden
sometimes overnight nations start to get inundated with mountains of money they use it to lower taxes
and dramatically increase spending as the oil industry starts to snowball into the most
powerful sector of the economy it starts to box out and overshadow all other industries as more
oil is exported the demand for the local currency increases boosting citizens buying power abroad
but also crippling domestic manufacturing new politicians promised to spend more to get elected
and dictators do the same to remain in power choosing to spend today instead of saving for
tomorrow often the government becomes corrupt the wealth is funneled to a select few and before you
know it the economy is rich on paper yet the average citizen suffers but there seems to
be a single extraordinary exception to the oil curse as you might have guessed that
country is norway but why didn't oil destroy norway's economy what makes it fundamentally
different from libya venezuela saudi arabia and all the other small oil exporting nations
about a hundred years after malthus's visit norway had just gained its independence when
it separated from sweden it was still uneducated and still poor its economy was centered around
shipping raw resources like timber fish and men is this one of the reasons why i watched the video
what country does uh norwegian hate and a lot of them said sweden one one of them said finland
because it's cold which is totally understandable um and i had a psycho reaction but a lot of them
did say sweden and a lot say america for some valid reasons but some reasons were not so valid
and it had little in common with its rapidly industrializing southern neighbors but it did
have some things going for it over the prior half century in the age of free international
trade norway built the world's fourth largest merchant fleet gaining them valuable expertise
in shipping trade and technology and being an important source of foreign currency
norway had also coalesced a strong parliamentary system during its struggles for independence and
with it arose universal suffrage workers rights and strong social reforms its wide distribution
of political power and checks and balances served as a strong backbone to future prosperity
their geography while harsh also enabled immense amounts of cheap hydroelectricity laying the seeds
for industrialization however almost 75 of all hydro power was owned by foreign companies the
new government saw this as a risk and believed the resources of norway should be owned by and for
norwegians a bill was passed limiting such foreign ownership and putting constraints on any attempts
at monopolization this experience in controlling natural resources would prove incredibly important
later in the story but all of this coincided with the introduction of new technologies which
significantly reduced the burden of transportation railways roads and new methods of transmitting
communication greatly narrowed norway's inherent disadvantage against its european neighbors
all of these forces kick-started rapid economic growth and industrialization but one way in which
norway differed was its very strong ties to welfare education and public industry
that would serve them well later on norway would largely keep on growing but being small
and reliant on international trade meant it was swept up in the global economic and geopolitical
forces of the early 20th century it was officially neutral in both world wars but its merchant fleet
took a massive hit in the first and on april 9 1940 it was invaded and then occupied for five
years by the germans by the end like many other nations norway was left to pick up the pieces
of its country and economy it joined many international organizations and was one of
the largest recipients per capita under the united states marshall plan the labor party seized the
blank slate and worked to establish strict social democratic rule with a large emphasis on the
public sector and centralized planning while also allowing the inherent economic benefits of private
competition to thrive from 1945 to 1975 norway produced an incredibly reliant and strong 3.3
gdp growth per year taxes were some of the highest in the world but government spending on education
shaped the workforce into one of the most capable on earth and had a strong social safety net
and inequality continued to fall lower than comparable countries inflation remained subdued
and unemployment was almost non-existent norway's economic performance during this time was strong
and steady but it was a far cry from being the economic powerhouse it is today right
by the 1960s norway was no longer poor it had largely caught up with the other european nations
but it was still just an average performer that was about to change with the discovery of large
reserves of natural gas found in the netherlands speculation started to arise about oil being
located in the north sea but there was a problem if there was vast amounts of oil beneath the waves
whose was it after some back and forth norway asserted its claims over these waters
the norwegian government was skeptical about the idea of oil residing on the continental
shelf but it nevertheless started to divide up and sell licenses for oil exploration one such
company phillips petroleum started drilling well after well try after try they continued to find
nothing due to some technicalities in their contract phillips gave it one last shot but
this time deeper at last in 1969 the first drops of north sea oil was extracted and not
just a little but massive quantities of it a black gold rush quickly ensued and in less than a decade
norway was producing more oil per resident than any other country on the planet the oil sector
became a titan thousands of high-paying jobs opened sleepy fishing towns became petroleum
powerhouses billions of dollars started rolling in and norway's economy was forever transformed
but we have heard about this before the beginning of norway's oil story had many similarities with
other oil-rich nations while foreign companies rushed into venezuela profiting handsomely
and returning little more than propping up its dictatorship norway tried another way unlike in
venezuela where absolute power was already in the hands of a single man norway's political power was
already widely distributed making it impossible for a single person or group to benefit themselves
at the expense of society therefore norway's government was not only able to but restricted
in making decisions based on the utility to the whole nation norway had also watched the oil
curse happen across the world it knew that oil luck did not mean permanent luck much like its
battles with the hydro companies immediately after independence norway took the same approach with
oil to the government the natural resources of norway belonged not to foreign oil companies but
to the people of norway these companies could help explore drill and extract the oil but a majority
of profits earned was to be funneled to the state at the same time its own public oil company stat
oil was to study replicate and eventually surpass their expertise norway also knew that to squeeze
everything out of this opportunity it needed to not only extract crude oil but to create its own
petroleum processing industry that meant massive investment in infrastructure careful central
planning and the generation of its own engineering workforce it could have easily slashed taxes
and blew its lottery on popular policies but it didn't it also worried about the petroleum sector
dominating the rest of the economy so it set a 90 million ton per year limit oil was not to replace
the norwegian economic engine it was to become its supercharger but things were not perfect norway
knew it wanted to spend the money to benefit its people but it was not entirely sure how best to
do this the oil industry expanded and so did prices more money came in then the government
knew what to do with it then in the early 80s oil prices plummeted and a recession began economic
growth stagnated for almost a decade a time old tale about economies based on oil norway was not
squandering its oil revenue but it needed to do something more when your economy is at the mercy
of a single commodity price the solution is to diversify investment this is exactly what norway
did when it created its government pension fund in 1990. other governments tried this but their
political climates enabled them to become personal piggy banks to whomever was in charge voiding them
of their initial intended purpose to save for when oil no longer showers the economy and money
norway's sovereign wealth fund was different and the government structured it in such a way
as to not become corrupted the government can only spend the profit it expects to generate that means
that new politicians cannot run on the promise of spending more today at the expense of tomorrow and
it also follows strict investing rules it cannot invest in oil companies nor companies that follow
unethical practices and maybe most importantly it cannot invest in norwegian companies this
might seem strange at first but the purpose of the fund is to diversify risk if the norwegian economy
was to hit a steep recession the fund wouldn't because it's not invested in norwegian companies
and therefore it provides a safety net to short-term domestic shocks today the fund
has become the largest such in the world owning 1.5 of all public companies in the world at its
peak it was valued at 1.35 trillion dollars enough for every norwegian to be handed 250 000 and this
amount is expected to keep on growing while other scandinavian countries have had to reduce their
social spending norway is using the interest of its oil revenue to provide health care education
and a safety net to families hit by hard times yo norwegians y'all need to teach me how to do that
what i like it i love it this is beautiful norway still has some of the highest taxes in the world
but its people never have to worry about paying medical bills that they can't afford
norway has managed to get lucky but it maneuvered carefully and set itself up for the foreseeable
future oil is a massive part of the norwegian economy it provides high-paying jobs but it still
maintains many other productive industries if oil went away tomorrow norway would hurt but it would
still manage to be one of the wealthiest nations on earth does this mean it has the perfect economy
or one that other nations should seek to replicate the answer is no norway has been given an
incredibly fortunate situation not every country has trillions of dollars of oil sitting off its
coasts but its reliance on the public sector has reduced competition and potentially growth and its
cost of living is among the highest in the world norway's economy is not perfect for the world
it's perfect for norway but what about all the other oil-rich nations unfortunately it appears
strong democracy needs to have already been established before being blessed with oil
otherwise politicians and strong men jockey for power seeking short-term gains at the expense
of the future not only that but established productive industries must already be in place
along with strong educational institutions to fully utilize the oil revenue's potential for a
more in-depth look at how oil can destroy nations check out my video on how venezuela went from
being the fourth richest nation on earth to one of the poorest norway in a lot of ways got lucky but
luck alone can often be fatal for a nation while most nations squander their oil lottery dumping
money into social spending for votes buying luxury villas or sprawling desert highways and stuffing
the pockets of politicians norway invested its money and now lives off the interest economics
is the study of scarcity everything is scarce particularly luck nations that know this tend to
thrive was beautiful i can't lie to you guys that was really beautiful that was very beautiful
hats off man hats off to them uh it's really you know interesting how he puts this because that
is so true like they got lucky in a very good sense because imagine if they had like greedy
politicians before they had the oil right and the education system right so everything just happened
in a perfect timing you know they're that's good that's good stuff i'm happy for them you know
it's really really good like obviously he said it not everything is just golden in norway they pay
high taxes you know cost of living is one of the highest in the world but at the same time you know
they're pretty decent they're pretty good their economy is doing great because of what happened
for them so that's pretty solid so yeah i'mma get a body here guys tell me what y'all think
about this video uh leave a like on the video and subscribe i'm out of here for now guys peace