There’s no doubt in the mind of researcher Hilde Bjørneland; Norway suffers from a mutated form of the Dutch Disease. And it’s much more serious than the original one. The main issues in further research is the extent to which oil prices affect economic activity, and to what extent the facility in the fiscal policy affects economic activity.
“Norway is characterized by the striking disparity.”
25 percent of all Norwegians are living on some kind of public support or another form of social security. One third of all workers are employed in the public sector. The real test for Norway will come when the country get the first declines in the petroleum revenue, according to the respected professor at The Norwegian School of Management, BI.
She has just been awarded the Prize for Excellence in Research Communication, after she launched the debate about a possible “Dutch Disease” in Norway last fall.
“The Dutch Disease” is a term that describes the economic situation in the Netherlands in the 1960’s when the public sector swelled as a result of large gas revenues. When the gas revenues ended, the country was in a worse condition than before. It ended with a tough fiscal rehab all through the 80’s, with unemployment rising sharply. The economic growth eventually returned in the 1990’s.
“In Norway, there has been a strong growth in the underlying public expenditure, with high costs that can weaken the industry. Increased import, and use of, capital has pumped up the real exchange rate, which weakens the competitiveness of the Norwegian businesses, “ she says in a interview with the news paper Dagens Næringsliv.
“The high use of oil money has made it possible for Norway to have the largest share of disable pensioners in the world,” Mrs. Bjørneland points out.