The Resource Curse Avoided in Norway

The Resource Curse Avoided in Norway

In the literature on resources (often with attention to oil, although does not have to be the case), scholars have found that there is often a “resource curse” or an “oil curse” amongst states with these rents. Namely, they tend to be authoritarian in nature, and often do not have the strong economic development programs that some would anticipate.

A number of scholars have written on this. One excellent work on this is the book The Oil Curse: How Petroleum Wealth Shapes the Development of Nations by Michael Ross, where he discusses how oil has led state leaders to continue their hold on power by using oil to buy off opposition or to provide enough social programs as an informal exchange on their unquestionable political power.

In a recent BBC article written by Sarah Treanor, she wrote on how Norway has been able to avoid this oil curse or resource curse. For example, they have mandated that a percentage must be saved for future use. This contrasts with many other states that have used the oil immediately, and in return, have dwindled their supplies.

In the case of Norway, Treanor writes,

“For while other countries have struck oil and then binged on the revenues, by contrast Norway is continuing to invest its oil and gas money in a giant sovereign wealth fund. 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. In effect, it is a giant savings account.”

One reason for this depends on the type of government in power when the oil is found. For example, if it is an authoritarian regime, they are able to use the resources to solidify their control for decades, which is exactly what we have seen in many of the Gulf Monarchs. And thus, there is little checks on their spending, and thus, often leading to this resource curse.

This contrasts with Norway, where there is a strict rule that no more than 4 percent of the surplus is used (BBC).

And one other important point when thinking about the resource curse is the need for diversification of one’s economy. States that have suffered the resource curse have relied heavily on the oil sector, often at the expense of building other parts of their economy. Contrast this to Norway, for example, where the government, knowing that there is a slow decline, has been able to adjust to these new conditions with new economic policies.

The resource curse is a very interesting phenomena in international relations, and as oil production is declining for some states, it will be important to follow how they adjust to these new realities. And, it will also be useful to view how states with long-term oil productions (Saudi Arabia) use their oil resources. States that are able to spend carefully and diversify their economies may be better off long-term (and thus avoid the resource curse) compared to states that are spending in ways that is primarily used to shore up their support and hold onto power.


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