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Comment by baccredited | Hacker News Reader

The comments here are very negative so I'll share a little background on this Norway fund in case you haven't heard of it. Norway started making money from oil reserves and knew they wouldn't last forever. So they invested all the profits in a fund that bought stocks. Now the value of the fund, if liquidated, would net over $1 million per Norwegian citizen.

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It's interesting to compare with the UK, which had less North Sea oil, but still a significant amount.

When North Sea oil was first starting, Tony Benn, Energy Minister at the time, wanted to start a fund exactly as the Norwegians later did. We didn't, and unlike the Norwegians we didn't control production.

As oil revenues peaked through the 80s and 90s, Thatcher used them to pay for pre-election tax cuts, welfare and generally squandered the inheritance. Britoil was one of the early Thatcher privatisations. With the benefit of 40 years hindsight many feel the wrong choice was made. Unsurprisingly perhaps, especially Scots. Though who we would have trusted to invest such a fund is another matter.

Woah, I only moved to the UK in 2001, but it's pretty clear to me that Norway != UK in many fundamental ways

  1) WW1
  2) WW2
  3) Crippling Pension schemes like final salary ( don't know to much about Norways tho )
  4) Crippling strikes in '70s

The U.K. Only finished paying back the USA for WW2 a few years ago. Many died and a lot of infrastructure needed rebuilding. Norway had much less of that trouble.

Norway was not affected by WW1 directly, but Hitler occupied Norway during WW2. When the Soviets came to the rescue, the Germans burned down everything as they withdrew from the northern parts.

The most populated areas were largely not affected though.

As for infrastructue, Norway was one of the poorest contries in Europe 100 years ago, with similarly poor infrastructure - so it was not a matter of rebuilding, rather a matter of building.

In this sense oil helped, and foreign oil investments were welcome in the late 60s, but at a 78% tax rate.

> Crippling Pension schemes like final salary

Interesting. Final Salary schemes generally only became crippling as funding regulations were progressively lightened and removed during the Thatcher years. In allowing less investment, loaning back from the fund, funding holidays etc, many pension funds were hugely underfunded for a decade or two. Tied in nicely with wanting to promote personal pensions. Little surprise we then got the pension crises and failures, most notably Maxwell. More recently we had the pension miselling scandals and compensation claims stemming from this.

> Crippling strikes in '70s

Hah! Doing my A level homework by candle light. The unions absolutely had too much power in the 70s. Now they probably have too little, well nearer none. I remember the 3 day week and power cuts because the electric co was on strike. Every week someone else would be going on strike. I seem to remember even grave diggers went on strike in 78/79. A pony could probably have got elected wearing a Tory badge in 79 :)

With hindsight, the Thatcher "solution" was far too dogmatic, but much of the change was needed and backing away from the excessive taxation (80% top rate in 79). What's less well remembered is when Howe cut top rate in 79 from 80 to 60% he more than made up for it by doubling VAT and collection rates were far improved at 60% too, and again when they dropped to 50%. So tax take went up. Unemployment went from 1m to 3.5m (infamously they got elected in 79 with help from an election poster "Labour isn't working" [1]), and gave her the escalating welfare bill on which to squander oil revenues. Scotland and the industrial centres were hit especially hard under Thatcher which is why the Tories are unelectable there, even today.

[1] https://en.wikipedia.org/wiki/Labour_Isn't_Working

>Final Salary schemes generally only became crippling as funding regulations were progressively lightened and removed during the Thatcher years.

This isn't even slightly true - you can look at a company such as BA which is now a pension deficit with an airline attached - the liabilities drastically outsize the company turnover. That means Interest Rate changes and Mortality expectation changes cause changes in funding requirements which are completely un-sustainable.

The changes to pension funds under Thatcher (and let's not forget Gordon Brown, too, wanted a piece of that money and was willing to screw people over to get it) definitely had a negative impact - but final/average salary defined benefits pensions are by design unsustainable because they never considered the current economic environment as a possibility.

Back when interest rates were 10%+ and most people died before taking 10 years of pension, they seemed like a good idea.

Hmm you're probably right - I didn't consider sustained low interest rates. The decline started long before rates came down but I've no idea how 30+ years of differently funded schemes would look (ie without the funding changes). That's a lot of compound interest.

> let's not forget Gordon Brown

Oh he gets no free pass on pensions - he raided them for billions.

My personal pension has performed disastrously from 2 bad years it'll probably never recover properly from. There went my early retirement thoughts. My parent's generation retirement options look pretty good.

We're probably still understating the deficits by assuming interest rates will increase soon™ - and yet the deficits are somewhere in the region of 1.5 times GDP in the UK[1]. It's terrifying

I empathise with you on the personal pension - but that's the reality of risk/reward investments. I'd have thought a lot of the bad performance should have recovered based on current markets? Depending on your age the solution is usually to: -Contribute more -Risk on (aiming for higher rewards) -Work longer.

I think it's really really important to recognise that early retirement probably means finishing work ~65 years old if you want a comparable "lifetime in retirement" to earlier generations who retired at 55. One simply cannot expect to spend 25 years in full retirement after only working 25 years. I think as a society we've got to make some huge adjustments in expectations, because we're stuck in a mindset from 70 years ago that isn't really viable. Personally I expect to aim to retire "early" into a different role that is less stressful and in the countryside - but I don't intend to stop working until much later.

[1] I haven't seen updated numbers in a few years, maybe it's better now..

It's not as lopsided as you make it appear.

Norway was poor before they found oil. They basically had a fishing industry and that's it.

Britain was an empire that never saw the sun set.

This is something people fail to realize. Scandinavia today is associated with wealth and strong social welfare programs.

Norway before the discovery of North Sea oil was one of the poorest nations in Europe.

> Norway before the discovery of North Sea oil was one of the poorest nations in Europe.

Not really. In 1969, the GDP per capita of Norway was $9,899. Compare that to Sweden ($12,540), UK ($10,552), Ireland ($6,089), Germany ($10,440), Finland ($8,878), Italy ($9,566), Portugal ($4,987) etc.

http://www.worldeconomics.com/Data/MadisonHistoricalGDP/Madi...

You're off by a few years. Norway in the first half of the 20th century was certainly one of the poorest in Europe. This held true through the (global) great depression, which was coupled with and compounded by their own home-grown economic crisis.

However, the Norwegian economy had made substantial progress in the post war years - prior to and independent of oil.

Half-Norwegian / Half-American here. Comparing the stories I was told from the grandparents and great-grandparents on each side, this checks out at least anecdotally. Norway in 1900--1940 sounded like absolute dirt poverty compared to the USA in 1900-1940.

Also my (Norwegian) mother born just after WWII grew up without electricity and farmed with hand tools

Ah, my bad. Thanks for the information, I got to learn something today :)

> They basically had a fishing industry and that's it.

While it certainly wasn't a rich nation in the first half of the 1900s, Norway in 1938 was actually the world's 4th biggest shipping nation, and owned 7% of the world's tonnage[1]. The forest industry was also significant (pretty interesting historical overview at [2]).

[1] https://en.wikipedia.org/wiki/Nortraship#Norwegian_merchant_...

[2] https://eh.net/encyclopedia/the-economic-history-of-norway/

Your grasp of European history and economics - specifically that of the UK and Norway - is absurdly poor, to the point you should not be trying to make any serious conclusion about either.

There is a reason why Jeremy Corbyn is popular right now (despite what the papers tell you, in polling, he is).

That is demonstrably nonsense, Jeremy Corbyn has among the lowest ratings ever seen for the leader of a large political party, because he is a far-left political extremist.

Read the polls.

Seriously, go read them. Labour is ahead.

http://ukpollingreport.co.uk

https://twitter.com/jamesrbuk/status/722110121212526592

My grasp of European matters is extremely good, though thank you for the insult. You offer no rebuttal beyond ad hominem.

By saying I arrived in the UK in 2001 I wanted to distance myself from the partisan nature of UK debate. That of Labour versus Tory.

You then underscore this partisan straightjacket by mentioning Jeremy Corbyn.

In addition to the other comments, regarding the debt repayments to the US: The only reason it took so long was that the interest rate was fixed at such a low rate that there was no compelling reason to pay it back early - most years the interest rate was below inflation. It'd have been trivial for the UK to pay back faster, but it'd have been silly to do so all the time the debt has basically gotten cheaper and cheaper by the year.

The debt was crushing.

http://www.theguardian.com/politics/2001/mar/14/past.educati...

1956: "Britain itself was only beginning to emerge from postwar austerity, its public finances crushed by an accumulation of war debt."

It may have been crushing early on psychologically. Debt to GDP reached around 200% in 1945. But despite that, the UK interest payments as a percentage of GDP were far lower in 1945 (at around 6%) than after WWI, when it reached a peak of around 9%. It also rapidly dropped.

By 1956 it was down to about 4%. When the last parts of the load was being paid back it was around 2%.

And note that this was total interest on the total British national debt, not just the wartime loans.

Consider that when the debt was taken out, it represented about 10x as much in 2016 dollars as what was paid back in absolute terms including interest. The total amount paid back in 2016 dollars would be higher, as some was obviously paid back all the way back in 1950, but on the other hand, by the time of the final repayments, inflation had reduced the overall value of the repayments drastically. Overall, I believe the UK profited immensely on the loan over time - certainly for most of the period of the loan, the UK would have been able to repay in full but didn't because it received more interest on its dollar reserves than it cost to service this loan.

There are still bonds around predating the Napoleonic wars for the same reason: The interest rates are so low that you can get a better return investing the money elsewhere than by cutting your interest payments by paying off the debts.

The problem with Thatcherism is that you eventually run out of other people's money to buy votes with.

And the problem with socialism is that you run out of other people's money.

And who owns the money from the north sea oil?

That's funny because in my country the right won the elections and they shifted money from welfare programs to tax exemptions for big co and stimulus packages for companies that are still firing people anyway. All that with tax payer's money.

But I admit that slogan is a communication gem of the highest caliber.

Ironic, because socialist powerhouses in Europe have lower debt:gdp ratios than the United States which avoids crafting relevant socialist programs like the plague

To be fair to Thatcher - and as a Labour member, it's not often I feel compelled to be so - it was Callaghan's cabinet that made the call to use it as tax cut fodder first, but that does not mean Thatcherism is blameless.

Good article on this topic (and Thatcher messing it up further) here: http://www.tribunemagazine.org/2014/03/thatcherism-a-complet...

True. Essentially it was so the moment the fund idea was not successful. Benn was a politician I respected enormously. I didn't often agree with him, although on this I did, but he had rare integrity for a politician.

"Even though the U.K. extracted nine per cent more oil and gas by 2011, they collected $156 billion less in petroleum taxes and royalties than the Norwegians"

Interesting link, closing sentence says it all really.

The major difference between how Norwegian citizens have benefited from oil extraction and how British citizens have benefited from it is still less a matter of policy differences and more a matter of oil extraction per capita though

$156 billion sounds huge until you divide it by a population averaging 60 million and make it accrue over 40 years.

Such is national scale finance. We can cut it up to sound worthless, or make it sound like a fair chunk of change. Would have bought a lot of infrastructure or regional development.

Perhaps most relevant to today, it's 1/8 the national debt.

That's quite a lot to just leave on the table. Per capita? That's where the Scots, especially SNP, angle starts. They do have a similar population to Norway after all...

Over 1 million kr (not $) per citizen. Big difference.

The math seems to be a bit off

$860B / 5000000 people (2013, wikipedia) = $172000

"The fund, worth about $800bn (£483bn), owns 1% of the entire world's stocks, and is big enough to make every citizen a millionaire in the country's currency, the kroner."

$860B USD = 7T KR / 5M people = 1.4M KR each

I'm not sure why you responded to the parent, instead of the grandparent, which first asserted "$1 million" implying dollars.

Because the parent was the one I was clarifying for.

I suggest you use "," when writing long numbers -> 5,000,000

This way it's easier to read for the rest of us.

Sorry about that, I'll keep it in mind for the future :)

Comma is the decimal separator in many countries (including Norway). ISO and several other standards bodies recommend space for digit grouping: 5 000 000.

Only if 'the rest of us' is located in one of the blue areas:

https://en.wikipedia.org/wiki/Decimal_mark#/media/File:Decim...

His point isn't about commas over periods, it is that "5000000" without any delimiters is hard to read.

Yes and i dont use Arabic numerals. Whats it in Roman?

To be fair, considering China and India are included, I think that's more than half the world population. China, India and the US make up more than 40% of the world population alone, apparently:

https://en.wikipedia.org/wiki/List_of_countries_and_dependen...

(The US is the 3rd most populous country by the Wikipedia hivemind's reckoning. Who knew?)

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