The Independent Market Observer

Norway: Big Mountains, Big Government, Big Oil

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Jun 9, 2014 3:31:00 PM

and tagged Europe

Leave a comment

NorwayGreetings from Norway!

After a great three days in Oslo, we’re on the train stopped at Ål on our way to Flåm, up in the fjord country. Based on my time here so far, Norway is a wonderful place: the people are nice, the scenery spectacular, and the weather terrific (at least this time of year).

Great public transit, high taxes

The stellar public transit system points to a key difference between Norway and the U.S.—the role of government.Taxes are extremely high, as are prices, with a value-added tax included in everything. (Restaurant food is actually taxed at a significantly higher rate than takeout food, so guidebooks recommend buying food and enjoying a picnic in one of the many parks.)

It’s not immediately apparent that Norway is an unapologetically socialist country (at least from a U.S. standpoint), but there are subtle clues. In an open-air museum that reminded me of Old Sturbridge Village in Massachusetts, the banking system is described as serving the common people—a far cry from how Americans view banks today. Guidebooks and histories emphasize the role of regular citizens and the working class.

What makes Norway tick?

From a U.S. perspective, you might expect a society in trouble, especially given the challenges elsewhere in Europe. On the surface, though, Norway—at least the bits of it I’ve seen—works.

  • Oil is a big part of that. Over the past several decades, Norwegian oil production has paid for much of the welfare state.
  • Staying out of the European Union may be another factor. Norway has avoided EU regulations and maintained control of its own economy. 
  • Clean, effective government probably accounts for much of the rest: if you have to have a big government, it sure helps if it’s competent. And, if public transit here is any indication, Norway’s government is.

Judging by the cafes (and prices!) of Oslo, Norway continues to do quite well—better, certainly, than countries further south. Overall, economic stress is much less apparent here than it was during my trips to Amsterdam and Dublin in 2013, and I don’t think it’s just the passage of another year.

Will the U.S. oil boom have similar results?

Looking at Norway, hopes for widespread benefits from the growing U.S. oil sector are far from pipe dreams. Our current oil boom may well boost the entire economy, as it seems to have done here. And, if politically desirable, that wealth could pay for higher levels of spending (or for substantial deficit reduction).

A note on U.S. employment

Friday’s jobs report came in above 200K, as I had expected. Some commentators are disappointed that it wasn’t higher, and I agree that more would have been better. But as I said last week, a slow and steady pace, with gradual acceleration, is indeed returning us to normal. The recovery continues.


Subscribe via Email

Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®