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The history and economy of Norway

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Published: Thu, 11 May 2017

Civilization in Norway can be traced back to 7,000 BC, when the country became habitable due to the rising temperatures after the end of the last ice age. The first Norwegians survived by hunting elk, deer, whales and seals, until farming was introduced in 3,000 BC. In the 9th century, Norwegian Vikings raided Scotland, England, Ireland, France, and even Spain, who at time was in control by the Muslims. At the same time, Norway was divided into several Kingdoms, while other Scandinavian states were united. Several Kings attempted to convert the nation to Christianity. Olaf, who ruled from 995 to 1000, was successful in converting the coastal area of the nation to Christianity. Olaf Haraldson, who ruled from 1015 to 1030, was successful in converting the inland areas during his reign. It was not until 11th century that the entire nation of Norway was converted to Christianity.

Norwegian society at the time was split into three classes. There were the thralls, the freemen, and nobles. The thralls were considered slaves and were forced to do the most difficult and unpleasant work. The freemen could be very rich or very poor depending on the amount of land that he owned. Finally, the nobles were considered the highest class in society and therefore were the wealthiest.

During the early middle ages, Norway endured a long series of civil wars. It was not until Haakon IV’s rule, which lasted from 1217 to 1263, that stability was restored in the nation. Under his rule Norway was very prosperous, and during this time Norway annexed both Greenland and Iceland. In the late 14th century Norway, Denmark and Sweden all joined together. Sweden broke off the group 1523, but Norway and Denmark stayed together until 1814.

Beginning in the 16th century and going into the 18th century commerce and trade in Norway grew, yet the majority of the population was still farmers and fishermen. However, in the early 19th century Sweden invaded Denmark, which led to Denmark surrendering Norway to Sweden. Although this led to Norway being under control of Sweden, they were still given a considerable amount of autonomy. The population of Norway also grew considerably during the 19th century, growing from 883,000 in the beginning of the century to 2,240,000 by the end of it, despite the fact that many people left Norway for the United States during this century.

Norway was neutral during World War I, but as a result of German invasion during World War II, they decided not to be neutral and instead turned to collective security. During the war, 736 Norwegian Jews were killed; however, over 900 Jews were saved as a result of Norwegians hiding them and taking them across the border into Sweden. In 1949, Norway signed the North Atlantic Treaty and was also one of the founding members of the United Nations. Norway was voted twice into the European Union, both in 1974 and in 1994, however they rejected membership both times. This opinion still holds strong today, with the majority of the population wishing to remain independent of the European Union.

Although Norway is not part of the European Union, they are still able to engage in free trade with the EU, with the exception of the agriculture and fishing industries. Under the European Economic Area framework, the four freedoms of the European Union’s internal market, which are goods, persons, services, and capital, are applied to Norway as well. As a result, Norway usually adheres to the European Union’s directives.

Predominant Economic Model

The Norwegian economic model is a combination of free market enterprises and government intervention. The government controls several important areas of the economy, such as the petroleum sector, which accounts for 50% of the nation’s exports and nearly 30% of the nation’s revenue. It was in the 1970’s when Norway became a major player in the petroleum and natural gas industries, which led to a transformation of its economy. Investment Capital began to pour into the offshore oil sector, which led to greater increases in wages than the rest of Europe. This also resulted in a massive increase in state revenue, which allowed Norway to grow its already sizeable welfare system even larger.

Today, Norway produces roughly 2.35 billion barrels of oil per day, which makes it the 14th largest oil producer in the world. It also exports around 2.06 billion barrels of oil per day, which makes it the 9th largest oil exporter in the world. However, due to the anticipation of future declines in oil production, Norway now saves nearly all of its revenue from the petroleum sector in a sovereign wealth fund, which by the end of 2009 exceeded $457. Norway is also the world’s sixth largest natural gas producer and second overall exporter. Unlike petroleum, natural gas production is expected to increase in the future, considering that only an estimated 30% of the expected resources have been extracted. Besides petroleum and natural gas, the nation is rich with other natural resources, such as hydropower, fish, forests, and minerals.

Norway’s economy is fairly small, with its labor force of 2.59 million people ranking 110th in the world. Despite its small labor force, the nation’s GDP of $268.3 billion ranked 41st in 2009. After slow growth of only 1.5% from 2002 to 2003, GDP growth went from 2.5% to 6.2% from 2004 2QWto 2007, respectively. This was mainly driven by an increase in oil prices. However, GDP growth dropped to 2.1% in 2008 and it contracted by 1.4% in 2009 due to the faltering world economy and the decrease in oil prices. Although GDP growth has been slow recently and its overall rank was 41st in 2009, Norway is in fact one of the richest nations per capita. Its $57,600 output per capita ranks Norway at 5th overall in this category.

In terms of GDP consumption by sector, services accounts for the largest bulk, comprising 58.3% of total GDP. That is followed by industry and agriculture, which represent 39.7% and 2%, respectively. The nation is also a strong proponent of open trade, with total exports accounting for roughly 45% of GDP and total imports accounting for roughly 28%. Most of its trading partners are from the EU, while the United States is its sixth largest trading partner.

World Bank/IMF Report on Observance of Standards and Codes (ROSC)

The World Bank/IMF Report on Observance of Standards and Codes “provides a review of Norway’s data dissemination practices against the IMF’s Special Data Dissemination Standard (SDDS), complemented by the in-depth assessment of the quality of the national accounts, consumer price index, producer price index, government finance, monetary, and balance of payments statistics. The agencies that compile the statistics assessed in this report are Statistics Norway (SSB), Norges Bank, and the Ministry of Finance (MOF).”

In terms of the IMF’s Special Data Dissemination Standard (SDDS), Norway was in observance and met the specifications for coverage, periodicity, and timeliness for the data categories, with two exceptions. The two exceptions, which are the “timeliness of data on general government operations and the periodicity and timeliness of data on central government operations,” two flexibility options were used which Norway was entitled to.

Norwegian statistical agencies were given praise for recognizing quality as an important factor of statistical work. The IMF reported that Norway has a legal and institutional framework that promotes quality and high level of coordination among national statistics. However, the IMF did recommend additional staff resources for the producer price and government finance statistics.

Norwegian statistical agencies were also deemed by the IMF to have a high degree of integrity. This was due to the agencies having a high degree of professionalism, transparency, and guidelines on ethical conduct for staff members. The IMF has stated that the Norwegian Macroeconomic statistics “follow internationally accepted guidelines on definitions, scope, classification and sectorization.” However, the IMF also stated that “the recording basis for transactions in the monetary statistics and the scope of government finance statistics could come closer in some respects.”

The IMF also reported that the national accounts, consumer and producer price indices, and monetary statistics were all very accurate and reliable. The IMF did state, however, that the source data for government finance statistics could be more complete and timely and also that the source data for the balance of payments may have been affected by economic changes and are under review.

In terms of serviceability, Norwegian macroeconomic statistics were deemed by the IMF “relevant, consistent, and available on a timely basis with good frequency.” The IMF did, however, state that some government finance statistics were deficient in terms of periodicity and timeliness. The IMF also stated that “information about revision practices in the producer price index could be more transparent.”

Finally, in terms of accessibility, the IMF deemed that all datasets are readily accessible to the public and are accompanies by convenient, although in some cases, “brief documentation on concepts, scope, classifications, basis of recording, data sources, and statistical techniques.” The IMF suggested that “service to users could be enhanced by the provision of better information on links between the different presentations of data on central government operations.”

Sources:

“Central Intelligence Agency: The World Factbook” URL:

https://www.cia.gov/library/publications/the-world-factbook/geos/no.html

Halvorsen, Kristen. “The Norwegian Economic Model – prosperous and sustainable? URL:

http://www.regjeringen.no/en/dep/fin/News/Speeches-and-articles/minister-2/finansminister_kristin_halvorsen/2007/the-norwegian-economic-model-prosperous-.html?id=449023

Lamber, Tim. “A Brief History of Norway.” URL:

http://www.localhistories.org/norway.html

IMF Country Report. “Norway: Report on the Observance of Standards and Codes-Data Module;

Response by the Authorities; and Detailed Assessment Using Data Quality Assessment Framework”

URL: http://www.imf.org/external/pubs/ft/scr/2003/cr03207.pdf

U.S. Department of State. “Background Note: Norway” URL: http://www.state.gov/r/pa/ei/bgn/3421.htm


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