Norway has achieved an unusual combination: great national wealth from oil while not operating entirely like Venezuela. In fact, the central bank of Norway, Norges Bank, recently reported that it has saved a whopping one trillion dollars in a wealth fund meant to pay future pensions.
That makes it one of the largest investment funds in the world, and for a tiny nation of 5.2 million, it means that each citizen owns a share of $190,000 – in theory. Whether they could cash out is another matter entirely. One thing, however, is beyond doubt: Norway is by far the most successful welfare state in the history of the planet. Bernie Sanders must be proud.
But wait, don’t socialize the economy just yet. You need to know a few more things.
The Illusion of Wealth
Yes, it is true that Norway is the richest welfare state ever, but to assess the actual condition of the economy, it is necessary to include public debt and future liabilities in the equation. Just these two factors often make the difference between real wealth and the illusion of it. For example, California is not wealthy and self-sustainable, as they like to claim, but bankrupt beyond repair.
Things are not as bad in Norway. The Scandinavian country has no public debt, but the future pension liabilities are ginormous. In fact, they are greater than the entire oil wealth fund. Worse, they are snowballing due to demographic decline.
What this means is that even with the biggest pile of cash per capita in the developed world, Norway’s welfare state is still operating at a massive loss, which will cost future taxpayers blood, sweat, and
tears. In short, Norway enjoys the illusion of wealth right now, but they don’t have enough money to pay everyone when the bill comes due.
The Completely Avoidable Problem
So how did this arctic nation get trapped in this conundrum? It all started in 1967 when Norway decided to socialize pensions. Before that, people had to save for their retirement, and they had to rely on their kids to take care of them in old age. This all changed, however, with socialized pensions. The new benefit created a massive incentive for exploitative people to opt out of having children. Why have kids when you can have someone else pay for your retirement and care?
Lo and behold, the birth rate plummeted from 2.5 children per woman in 1970 to 1.7 only five years later. It remained far below replacement level for twenty years. The radical leftist hippie generation who preached solidarity in the 1960s went on a narcissistic party-to-party spending binge instead of investing in future generations – and taxpayers.
The demographic decline did not happen only in Norway. It happened across the west, but more so in welfare states than in countries with private retirement saving. When personal responsibility was taken away, many unfortunately embraced the opportunity to live “for the moment” with no thought to the future.
The youth deficit was and still is so pungent in Norway that even a huge pile of oil money is not enough to make up for it.
The Unfortunate Solution – Immigration
So how has the hippie generation decided to solve the problem they created? By importing people from the third world. The only issue is that they are actively saying no to talents who want to come to Norway to work, and instead only accept refugees. Many of these immigrants can barely read and write – even in their native languages. Various studies show that they don’t integrate well and are a net burden on the taxpayers. Just to make this solution perfectly unfortunate: 80% of them vote for even more socialist policies. So rather than solve the issue, their presence compounds it in two ways: more mouths to feed and more government benefits for each of them.
So what is the moral of this story? Welfare states are inherently unsustainable, and this is true even for the greatest success of them all: Norway. They create incentives for mooching and irresponsible behavior that percolates through generations. When people think they don’t have to work to be taken care of, the worst of human nature often comes out. And in the end, it is as former British prime minister Margaret Thatcher said: “Socialist governments traditionally do make a financial mess. They always run out of other people’s money.”
