On the Edge with Siv Jensen: Oil, employment and the Dutch disease

Siv Jensen, leader of the Progress Party. Photo courtesy of Stortinget.no.

Siv Jensen, leader of the Progress Party. Photo courtesy of Stortinget.no.

The current Red / Green-government suffers wear, and shows signs of illness. Currently, the leader of the Socialist Left party, Mr. Audun Lysbakken, focuses on the “Dutch disease.” His view is that the Norwegian economy is at full throttle, and thus Norway needs to reduce petroleum-related activities, so that the workforce can shift to public sector and traditional land-based industries. This is probably the wrong medicine.

It is crucial to ensure the Norwegian long-term competitiveness. The petroleum industry is highly profitable, and the industry has a special responsibility to contain the wage pressure. However, to hinder our most profitable industry, to shift workforce to the public sector, that would be a recipe for Dutch disease.

In the 1950s through the 80s, the Dutch mistake was not over-investment in resource-based industries, as Lysbakken and parts of the environmental lobby contends. The actual problem was that the windfall-inflated public budgets and welfare. Traditional industries lost out. As income from natural gas dwindled the public sector was already too expensive to maintain. The diet was painful.

Norwegian unemployment is very low (currently 3 percent). Petroleum-related activities have laid the foundation for a strong economy, even while countries around us struggle. However, if we are to shift workforce, is it really sensible to shift it away from our most profitable sector? Maybe it would be better to shift it from a bloated Public sector, which has grown considerably while the Red / Green government has been in power. Maybe we should mobilize the hundred of thousands of unemployed that can and want to contribute.

I don’t believe the Socialist Left when they claim they want more employed in traditional industries. Our experience with the Socialist Left tells us they don’t. An example: To the newspaper Dagsavisen, the Socialist Left stated that we have to accept that jobs in the traditional industries are lost as a consequence of CO2 cuts.

If Lysbakken and the Socialist Left are worried about jobs, they should have a look at the regulatory regime for the energy- and environment-related activities. The current government has banned the industries from owning their own hydro-power plants, reduces the maximum hydropower contracts, and introduces a stifling quota system. The effect is to inflict increased cost on Norwegian industry.

Will we lose a lot, if we to take a break in the petroleum sector? The answer is yes. Norway exports more than just oil and gas. We export related technology, knowledge, skills and products. The Norwegian petroleum industry is on the highest level in the World. We should ensure the current R&D level is sustained. At the same time, long-term planning and development of fields is needed, so that infrastructure development is rational.

If Lysbakken is serious, he should start by changing the Government economic policies. The current guidelines for fiscal policies are too restrictive, and hinder investment in infrastructure, R&D and cripple the non-petroleum-related industries. The curious part of the guidelines is that the petroleum industry, according to the government, does not create inflationary pressures.

Last summer, Parliament passed legislation to start development of four large-scale petroleum developments, at a value of USD 15 billion. No politician stated that it would create inflationary pressure. Not even the Socialist Left. The same money could have bought the Intercity railway triangle (around Oslo). Or made the Coastal highway E39, from Kristiansand to Trondheim, ferry-free (new bridges and tunnels). But when we propose such projects, we are met with accusations that they will create inflationary pressure. Even if we suggest foreign construction companies could do the job. So, if petroleum is the “problem,” why does the government policies accept unlimited petroleum investment?

The answer is obviously because the limit of irresponsible fiscal policies is not one or 100 billion (NOK) more or less. Particularly when the funds are invested. Increased public budgets are quite a different thing. They must be reduced. Thus it is how public money is spent that should concern the government, not just how much. This is crucial understanding, which is vital to build a competitive Norway. Unfortunately, the Red / Green politicians are blinded by the current public wealth, and do not understand how private sector must be allowed to develop. A Prime minister that abroad boasts about the Norwegian level of tax, is the “Dutch disease” patient most in need of a cure.

Please bear in mind that opinions expressed in “On The Edge” are not necessarily those of the Norwegian American Weekly, and our publication of these views are not an endorsement of them.

Siv Jensen is the Leader of the Progress Party (Fremskrittspartiet) and also the parliamentary leader for the Progress Party’s group in the Storting (The Norwegian Parliament). The libertarian-conservative Progress Party is the second largest party in Norway and the leading opposition party. Ms. Jensen has been elected member of the Storting since 1997, representing the district of Oslo. Ms. Jensen is member of the Standing Committee on Foreign Affairs and Defense and member of the Enlarged Foreign Affairs Committee.

This article originally appeared in the Oct. 12, 2012 issue of the Norwegian American Weekly. To subscribe, visit SUBSCRIBE or call us at (800) 305-0271.

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