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Comment by throwaway2037 | Hacker News Reader

throwaway2037

What is wild to me: The United Kingdom, The Netherlands, and Norway took very different paths. For those unaware, the UK shares the North Sea with Norway and there is plenty of oil and gas extract in the UK area of the North Sea. And, the Netherlands has an enormous gas field in the northern part of its country. The UK and Netherlands left it up to private industry and (mostly) taxed it as regular business profits. They didn't create a national petro fund from these profits. However, Norway took a very different path. They created a state-run oil and gas company (Statoil/Equinor) that operate many of the oil and gas extraction sites, and famously created a national petro fund to manage most of the profits. I always wonder why... Was this a missed opportunity for UK and Netherlands?

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I wonder the same thing about high taxes and state run energy companies.

I don't think the UK ever really had an option to create a fund though. Deficit was too high. Doubt there would have been anything left to invest even with an increased cut for the state. UK had an IMF bailout in the 70s and was in a mess. Norway was in much better shape I think.

You're missing what happened in the Netherlands when the gas reserves were found. The social-democratic government headed by Joop den Uyl - who thought the reserves should be extracted and sold within 30 years - used the proceeds to increase social benefits while lowering the acceptance rules to get government benefits. This had a large pull effect which ended up with more than 10% of the labour force getting benefits under the 'WAO' (an acronym for 'Wet op de ArbeidsOngeschiktheidsverzekering' or 'law governing insurance for those not fit for employment'). This way of spending temporarily available resources on expanding the welfare state got a name: The Dutch Disease. It was an example for Norway on how not to squander income from the oil reserves and a deciding factor in creating the oil fund.

>...This way of spending temporarily available resources on expanding the welfare state got a name: The Dutch Disease.

The term "Dutch Disease" is a bit more general than that:

>...The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen gas field in 1959.[1][2]

>The presumed mechanism is that while revenues increase in a growing sector (or inflows of foreign aid), the given economy's currency becomes stronger ("appreciates") compared to foreign currencies (manifested in the exchange rate). This results in the country's other exports becoming more expensive for other countries to buy, while imports become cheaper, rendering those sectors less competitive.

Ideally a temporary windfall should be used to invest in the future. Taking a temporary windfall and spending it on basically buying votes should have a name, but that isn't generally what the term Dutch Disease refers too.

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

In the Netherlands it was surely a wasted opportunity. They used the money mostly to prop up some services and fill short-term gaps in the budget. Should have saved it like Norwy. It's awful

Both the UK and the Netherlands budgets relied heavily on wealth extraction from India and Indonesia respectively during the colonial era (~$50 trillion over 200 years for the UK and around $34T for the Netherlands). That kind of money spigot is hard to wean a country off from, and tends to mask all sorts of governance failures, so it was inevitable the oil windfall would be used to plug the imperial shortfall. The difference with Norway is it was never a colonial power.

    > $34T for the Netherlands

Woah, that is pretty wild claim between Netherlands and Indonesia. I tried to Google for more info. It seems like this claim can be attributed to the current president of Indonesia, Prabowo Subianto. He said 31T USD in a recent speech. I follow Indo news a little bit. This guy makes some pretty wild claims. I doubt the previous president Joko Widodo (who is much more reliable) would make such a claim. It does not seem that Prabowo has offered any serious evidence to defend this claim.

    > That kind of money spigot is hard to wean a country off from, and tends to mask all sorts of governance failures, so it was inevitable the oil windfall would be used to plug the imperial shortfall.

Again, I can speak more for the Netherlands here. Indonesia became independent in 1949. The Groningen gas field was discovered in north Netherlands in 1959, and full scale extraction started in 1963. So what did Netherlands do between 1949 and 1963 to "plug the imperial shortfall"? (No trolling: That is a lovely turn of phrase. Is it your own?)

    > The difference with Norway is it was never a colonial power.

As understand, Norway alternated between a colony of Sweden or Denmark. (Please correct if I have that wrong.)

My turn of phrase, yes.

The immediate after-war years were quite grim, even after £1B Marshall plan ($13B in 2026 dollars) reconstruction aid, almost as much as Germany got. In 1850 the colonial income represented half of all government revenues, but in 1870 that was dismantled and privatized to benefit the elite. Most of the UK’s imperial looting went to the elite from the very beginning, of course.

Norway was in personal union with the kings of either Sweden or Denmark, so not quite the same as being a colony, but they themselves were not colonizers (unlike Denmark in Greenland).

What are you talking about, the North Sea was first drilled by a British state-run (at the time) oil company.

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