The economic downturn has meant a reversal of fortune for energy producers, but in Norway, frugal management of oil money has limited the damage. A gas line near Budapest, Hungary.

Russia’s gas monopoly struggles with plunge in global demand.
China takes the lead in reducing coal emissions.


By LANDON THOMAS Jr.
OSLO, Norway

WHEN CAPITALISM SEEMED on the verge of collapse last fall, Kristin Halvorsen, Norway’s Socialist finance minister and a longtime free market skeptic, did more than celebrate.

As investors the world over sold in a panic, she authorized Norway’s $300 billion sovereign wealth fund to increase its stock buying program by $60 billion - or about 23 percent of Norway’s economic output.

“The timing was not that bad,” she said, smiling with satisfaction over the broad worldwide market rally that began in early March.

The global financial crisis has brought low the economies of just about every country on earth, and Norway has not been immune. The government reported this month that the gross domestic product contracted by 1 percent in the first quarter of 2009, after a decline of 0.8 percent in the previous quarter. It is the first time Norway has slipped into recession since early 1993.

But compared with the rest of the industrial world, Norway has fared well, and it has done so by going its own way. When others splurged, Norway saved its money, earned largely from oil exports. When others sought to limit the role of government, Norway strengthened its welfare state.

The Norwegian government enjoys a budget

surplus of 11 percent, and its ledger is entirely free of debt. By comparison, the United States is expected to run a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.

Norway is a relatively small country with a population of 4.6 million and the advantages of being a major oil exporter. It counted $68 billion in oil revenue last year as prices soared to record levels. Even though prices have sharply declined, the government is not particularly worried. That is because Norway avoided the usual trap that plagues many energy-rich countries.

Instead of spending its riches lavishly, it passed legislation ensuring that oil revenue went straight into its sovereign wealth fund, used to make investments around the world. Now, at $300 billion, the fund is close to being the largest in the world.

Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue during the boom years. British government spending rose to 47 percent of gross domestic product, from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of gross domestic product.

“The U.S. and the U.K. have no sense of guilt,”said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington.“But in Norway, there is instead a sense of virtue. ”

Eirik Wekre, an economist, describes Norwegians’feelings about debt this way:“We cannot spend this money now; it would be stealing from future generations.”Mr.Wekre, who paid for his house and car with cash, attributes this broad consensus to the country’s iconoclasm.“The strongest man is he who stands alone in the world,”he said, quoting the Norwegian playwright Henrik Ibsen.

Still, even Ibsen might concede that it is easier to stand alone when your nation has benefited from oil reserves that make it the third-largest exporter in the world. The money flowing from oil since the early 1970s has prompted even the flintiest of Norwegians to relax and enjoy their good fortune.

As in much of the rest of the world, home prices have soared here, tripling this decade. But there has been no real estate crash in Norway because there were few mortgage lending excesses.

Norwegian banks remain largely healthy and prudent in their lending, said Arne J.Isachsen, an economist at the Norwegian School of Management. But they certainly have not closed their doors to borrowers. Mr.Isachsen, like many in Norway, has a second home and an open credit line from his bank, which he recently used to buy a boat.

Some here worry that while a cabin in the woods and a boat may not approach the excesses seen in New York or London, oil wealth and the state largesse have corrupted Norway’s work ethic.

“We have become complacent,”said Knut Anton Mork, an economist at Handelsbanken in Oslo.“We have more holidays than most countries and extremely generous benefits and sick leave policies. Some day the dream will end.”

But that day is far off. For now, the air is clear, work is plentiful and the government’s helping hand is omnipresent - even for those on the margins.

Just around the corner from Norway’s central bank, for instance, Paul Bruum takes a needle full of amphetamines and jabs it into his muscular arm. He says the $1,500 he gets from the government each month is enough to keep him well fed and supplied with drugs.

Mr.Bruum, 32, says he has never had a job.“I don’t blame anyone,”he said.“The Norwegian government has provided for me the best they can.”