The Great Norwegian Utopia

Oil Has Made Norway Rich, Not Its Socialist Economic Model

I recently overheard a couple of acquaintances discussing the pros and cons of health care reform. In an attempt to sway the other's opinion on the matter, I overheard one of the woman exalting Norway for its stellar, near perfect socialized health care system. She went on praising the frozen utopian paradise for its high standard of living, free secondary education, and other cradle to grave subsidies. "The people in Noway," she said excitedly, "they pay 60% in personal income taxes, but look what they get in return!"

It was the hardest thing I've ever done, but I managed to keep my mouth shut.

I never cease to be amazed at how people get suckered into believing this stuff. We've all seen supporters of the welfare state point to the Norwegian model as an example of a successful mixed economy. But, when you peel the onion, so to speak, you find that Norway is actually in big trouble economically speaking. Do a little digging, and you'll find that it is one of the most unfair and economically repressive nations in the world due to government profiteering and extremely high prices.

First of all, everyone needs to understand that the U.S. could never copy Norway's economic model, because they have something we don't: the North Sea Oil Reserves. Right now, Norway is benefiting in an enormous way from their oil, and is sort of the "Jed Clampet" of Europe. To give you an idea of the enormity of their jackpot oil production, the national oil company, Statoil, took in over $600 billion in revenues in 2008. The GDP of Norway was $247 billion. So, the revenues of the government-owned oil company were almost 3 times the output of the entire Norwegian economy. Imagine; what if the U.S. government had an income source that was 3 times larger than the total economic output of our economy? Of course, we could buy every citizen (and maybe even our 20 million illegal immigrants too) a Porshe and a McMansion, and provide every American a sizable stipend for the rest of their lives, and still have money left over.

See the chart below (Figure 1). Oil is the number one source of revenue for the Norwegian government. Look at the top two bars on the graph. The U.S. does not have this revenue source.

(Figure 1 - Click on Image to Enlarge)

What is unimaginable is that the government of Norway continues to tax their people at one of the highest tax rates in the world, even though this huge windfall of money exists. Think about this for a moment: the government of Norway took in $226 billion ('07 est) in total revenue (income taxes, oil profits, fees, etc.), but it only spent a total of $159 billion for the same time period. That is a $69 billion profit or a 42% revenue surplus, all made on the backs of the average Norwegian who pays 60% of their income to the government in taxes and $16 to McDonald's for a Happy Meal! And what has the government of Norway done with their 42% profit? Well, it's done what any good, responsible, liberal government would do; it created a slush fund.

Please explain how this is an ethical model for governance of a democratic people?

The embarrassingly high taxes have caused Norway to rank as one of the top 5 most expensive countries in the world in terms of cost of living, which is more than double that of the U.S.

See the table below, which shows a comparison of prices between the U.S. and Norway. By the way, keep in mind that the average Norwegian's after-tax income is roughly the same as that of an American. So, imagine how you would feel going to McDonald's and paying $16 for a hamburger on your present income. Not good, I'd guess.
















(Figure 2 - Click on Image to Enlarge)
(Source: http://www.numbeo.com/cost-of-living/)

Is this really what we want our nation to look like: $111 for a grilled chicken at Chili's and a 60% income tax rate to boot?

The prohibitive cost of living trend is directly caused by the astronomically high tax rates as business compensates for the cost of high taxes by increasing prices. To illustrate this inflationary effect, let's look at an average McDonald's employee as example. If a McDonald employee in Norway pays 50% of their income in taxes, and the employee earns $8.00 per hour (that's about the average for McDonald's in the US), then they take home only $4.00 per hour. Well, no one is going to work for $4.00 per hour. If presented with such a measly wage, most people would probably figure it is better to stay at home, and opt out of work altogether. So, because labor is a mandatory component of business, McDonald's must pay $17.00 per hour to sufficiently remunerate labor at a level that attracts and retains employees. This way, the employee actually takes home $8.50 after taxes. People are willing to work for $8.50, but not $4.00 per hour. McDonald's then passes the cost of their sky-high labor on to the consumers who buy the burgers, which is why a Big Mac in Norway is $16.00. This is repeated all throughout the economy across virtually every sector, and confiscatory taxation is the core impetus of the present inflationary price trends that afflict, and will someday cripple, the Norwegian economy.

So, not only do Norwegians have the illustrious honor of surrendering 50 - 60% of their income to the government, they also get to pay double for everything they purchase.

Many economists predict that Norway is so overly dependent on the oil sector, that once world demand for oil drops, the nation could be thrown into a severe economic crisis. Business growth outside of the oil industry is virtually non-existent, and shrinking. Companies would rather do business on the moon than in Norway. Think about it. Have you heard of any companies flocking to set up shop in Norway lately? The high taxes, burdensome regulations, and cost of living have totally killed business development. When the Norwegians lose their oil revenues, and they will eventually, they will lose their present state of prosperity, and Norway as it is known today will slowly decline as their slush fund is exhausted over a 5 - 10 year period.

This is not what we want for our nation.

So, the next time you overhear someone singing the praises of European socialism, think twice before you believe them. Either they do not know the whole story, or they are intentionally leaving you in the dark to make socialism appear better than it really is. The latter is right out of Lenin's propaganda playbook.

ha en vidunderlig dag!