Norway's Economic Success Story

welcome to this video exploring the fascinating history of Norway's economy Norway's unique geography and natural resources have played a significant role in shaping its Economic Development over the centuries from its early days as a small-scale farming and fishing economy to its current status as a highly Diversified and prosperous economy Norway has undergone a remarkable journey of transformation [Music] Norway's economy can be traced back to the Viking era which lasted from the 8th to the 11th century during this time the Norse people who inhabited the region relied primarily on agriculture and fishing for their livelihoods as well as on trade with other European nations as Norway became more settled and organized in the centuries that followed agriculture fishing and Forestry remained the primary sources of income for the majority of the population however the rugged terrain and harsh climate made large-scale industrialization difficult and economic activity was limited to small-scale operations despite these challenges Norway's economy began to modernize and diversify during the 19th century as new technologies and industries emerged [Music] one of the most significant developments in Norway's economy during this period was the founding of Norse Hydro a fertilizer company that utilized Norway's vast supplies of hydroelectric power to produce nitrogen-based fertilizers Norse Hydro was founded in 1905 and quickly became one of Norway's largest and most successful companies contributing significantly to the country's economic growth and development Norse hydra's early success was due in large part to the founder Sam AIDS Innovative approach to industrial production which involved the use of large-scale hydroelectric power to produce fertilizers and other chemicals he figured out that cheap electricity made hydros products have more competitive advantage the company's first fertilizer plant located in richardkin Norway was the largest in the world at the time and used a system of hydroelectric generators and transmission lines to power the plant and distribute electricity to surrounding communities norsk hydra's success in the fertilizer industry led the company to expand into other areas including aluminum production energy production and petrochemicals during World War II Norway's economy was heavily impacted by the German occupation as many industries were disrupted and resources were diverted to the German war effort however the post-war periods saw a Resurgence in economic growth driven in part by the Marshall Plan which provided Aid to European countries to Aid in their reconstruction the growth of the hydroelectric power industry was a major driver of economic growth in the 1950s as it provided the foundation for the emergence of new Industries such as aluminum production Norway's cheap electricity and abundant bauxite Imports made it an attractive location for aluminum producers and several new aluminum smelters were built during the decade another key industry that emerged during this period was shipbuilding Norway had a long history of shipbuilding but the 1950s saw a major boom in the industry as demand for new ships grew around the world Norwegian shipyards produced a wide range of vessels during this period including cargo ships tankers and passenger liners the 1950s also saw significant investment in transportation infrastructure particularly roads and bridges this investment helped to connect Norway's rural and urban areas making it easier for people and goods to move around the country it also facilitated the growth of Tourism which became an increasingly important part of Norway's economy during the 1950s [Music] in the late 1950s few people believed that the Norwegian continental shelf NCS could potentially contain Rich oil and gas deposits however the discovery of gas in groaning in Netherlands in 1959 led to a reconsideration of the petroleum potential of the North Sea this discovery generated enthusiasm in a region where energy consumption was largely based on coal and imported oil in the eagerness to find more energy sources attention turned towards the North Sea Norway's geological expertise at the time was skeptical of the presence of oil and gas deposits but this did not deter the enthusiasm after the gas Discovery in the Netherlands in October 1962 Phillips petroleum applied to the Norwegian authorities for exploration in the North Sea the company sought a license for parts of the North Sea on Norwegian territory that could potentially be included in the Norwegian shelf the offer was one hundred and sixty thousand dollars per month but it was viewed as an attempt to gain exclusive rights the authorities refused to hand over the entire shelf to one company and required more companies to participate if the areas were to be open for exploration in May 1963 einar gerhardson's government declared sovereignty over the NCS new regulations established that the state owns all natural resources on the NCS and that only the king government is authorized to award licenses for exploration and production the same year companies were given the opportunity to carry out Preparatory exploration including seismic surveys but not drilling despite Norway's Declaration of sovereignty over large offshore areas some important clarifications remained on how to divide the continental shelf primarily with Denmark and Great Britain agreements were reached in March 1965 on dividing the continental shelf according to the median line principle the first licensing round was announced on April 13 1965. 22 production licenses for a total of 78 blocks were awarded to oil companies or groups of companies the production licenses granted exclusive rights for exploring Drilling and production in the license area the first well was drilled in the summer of 1966 but it was dry the Norwegian oil Adventure began in Earnest with the equifist discovery in 1969. production from the field began on June 15 1971 and in the following years a number of major discoveries were made in the 1970s exploration was limited to the area south of the 62nd parallel the Shelf was gradually opened and only a restricted number of blocks were awarded in each licensing round foreign companies dominated exploration off Norway in the initial phase and were responsible for developing the country's first oil and gas fields stat oil was created in 1972 and the principle of 50 state participation in each production license was established its rule was later changed so that the Norwegian Parliament can evaluate whether the level of State participation should be lower or higher depending on the circumstances extraction of North Sea oil started in the 1970s and the production volume has increased over the years [Music] in the 1970s Norway's economy was fueled by the discovery of oil in the North Sea and expectations of future oil revenues led to the rapid expansion of the welfare state and support schemes for businesses however this led to a tug of war for resources between the exposed and sheltered sectors as the cost level in manufacturing industry was driven upwards and competitiveness deteriorated in the 1980s the Norwegian economy had to undergo a severe economic turnaround as the cost level in the manufacturing sector led to a loss of competitiveness and high inflation to restore confidence in the Crone and avoid persistent inflation very high interest rates were required as a result the Norwegian economy entered the worst recession experienced since the interwar period unemployment Rose from about 2 percent in 1987 to almost six percent in the winter of 1992 to 1993 and many companies went bankrupt while households face debt problems the financial sector was also hit by the crisis however through the 1990s inflation has been on a par with or below inflation in Europe while the average annual rise in prices was a good eight percent in Norway in the 1970s and 1980s the annual rise in consumer prices has been confined to two and a quarter percent in the 1990s despite the difficult Economic Times the number of employed persons in Norway increased by 10 percent between 1990 and 1999. Norway is a country that is heavily dependent on its oil industry as it generates a significant portion of the country's income while this has been a boon for the Norwegian economy it also poses some problems one of the most significant problems is managing the resources generated by the oil industry in a way that benefits both current and future Generations one way in which oil revenues can be used is to increase the consumption potential of the country if this is done too rapidly it can lead to what is known as Dutch disease Dutch disease occurs when the rapid expansion of a single sector such as the oil industry causes the rest of the economy to become less competitive and therefore less productive to prevent Dutch disease Norway has developed a strategy of managing its oil revenues carefully one aspect of this strategy is to save a portion of the revenues for future consumption rather than using them all at once this allows for the redistribution of income and consumption between generations and helps to prevent the economy from becoming too dependent on oil revenues Norway has created the government petroleum fund to help manage its oil revenues the fund receives revenues from the petroleum sector uses the amount necessary to produce a balanced government budget and invest the Surplus abroad by keeping the increase in petroleum income outside the domestic economy there is less need for structural change and thus less need for exchange rates to change the petroleum fund serves many purposes including storing wealth redistributing income from oil extraction between Generations buffering against changes in oil prices and facilitating demand management thus fund helps the government to maintain the desired size of the exposed sector and stabilize the economy let's hear the former ministers describe the fund's main purposes experts told us that it was a bit naive to believe that a Democratic Society and democratic system could manage such a big cash flow in a sustainable responsible way but the experience so far in over is that we have been able to do exactly it is the important in managing the fund that the fund is transparent that Investments are responsible that we have ethical guidelines it really makes a difference I think the size of the fund that we see today has exceeded all our expectations before wonders people's savings which means that it needs to invest in a long-term perspective to make sure that we can benefit the living generations and coming Generations as a result Norway is consistently ranked as one of the happiest and wealthiest countries in the world with a high standard of living a well-functioning welfare state and a strong social safety net thank you for taking the time to watch the creative mind video we appreciate your interest and hope you found it informative and engaging if you enjoyed the content please consider subscribing to our channel to stay updated on future videos

Channel: The Creative Mind

Views: 6,734

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Id: 1vJy0-URNK4

Length: 13min 20sec (800 seconds)

Published: Mon Feb 27 2023