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Comment by mediaman | Hacker News Reader

Norway doesn't care. It is a country with a reputation for good governance and northern-European economic strength. But economically, it is a country that is largely a gas station: like a democratic Russia with more competent governance.

Over half its economy is based on oil and mining. It has failed to develop meaningful economic diversification, and, because it has wisely banked so much of the proceeds of its oil (over US$300k per capita), there's not a lot of pressure to adapt.

Norway will not be a center of innovation anytime soon, except in oil-related fields. Eventually, as oil gets replaced as a source of energy, they may feel more pressure to change. But for now, they suffer from a more sophisticated version of the resource curse.

Sweden is an interesting counterexample, which has a lower GDP per capita but a much more diversified economy. Sweden abolished a wealth tax they used to have almost 20 years ago.

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Over half of the value of exports is oil and mining, but oil production, mining and quarrying directly employ only about 23,000 people, compared to 190,000 in manufacturing for example.

Because such a large portion of the oil proceeds are banked, it also distorts the rest of the economy far less than it otherwise would. Unless you live in very specific parts of Norway, you can go your entire life with hardly any exposure to the oil industry directly, or secondary interactions with major suppliers to the oil industry.

Warning: not an economist :)

I recognize your point but am wary of it being supported with direct job creation numbers, as that doesn’t reflect the scale of secondary industries (ie. indirect jobs created by oil & mining may be a larger number than direct jobs created) and also, job numbers don’t reflect the scale of the companies creating the jobs.

There's now doubt it'd have secondary effects, which is why I didn't try to make a precise comparison. Shutting down the oil industry would certainly make a difference. Hence the focus on shuffling so much of it into the oil fund (the Norwegian sovereign wealth fund owns ~1.5% of all listed shares globally at this point) to compensate, but there's no realistic scenario where it'd account for a large proportion of jobs.

In terms of value, yes, it'd have a much greater impact, which is why they're being taxed at rates that even for Norway are absolutely extreme, and why the oil fund does not invest inside Norway, and why such a small proportion of the oil funds investment returns are spent each year - it's been a very intentional government policy for decades to both prepare for a future without the oil income and to reduce the effect it has.

I thought sweden did the same sort of thing until some famous person had > 100% tax rate and got politicians voted out in outrage.

EDIT: stackoverflow question:

https://skeptics.stackexchange.com/questions/15235/did-swedi...

I bet they do care. "Reputation for good governance" is usually a cultural thing. I doubt they want to turn into Venezuela.

In a nutshell, Norway can afford to have some mildly self-sabotaging economic policies.

The rest of europe absolutely cannot (but that won't stop them, just like with rent control).

Norway has a good oil refinery industry though. They refine oil from other places because they're so good at it.

Is this tax because the state needs the money or is it social engineering?

All tax regimes, including zero tax, are social engineering.

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