Too much wealth?

[luvdovz.livejournal.com]

Norway's wealth is probably nowhere near being as opulent and in-your-face like that in Beverley Hills or Monaco, but on the other hand its prosperity can be sensed in every corner. There are brand new cars around the Norwegian cities, and luxurious boats in the yacht ports. Let alone the second (and third) holiday houses that the average Norwegian has by the stunning seaside or in the gorgeous mountains (or both; or simultaneously - after all, sea and mountain are never too far away from each other in Norway). There's been a joke that all Norwegians are theoretically millionaires.

The money for all this is coming mostly from the state-run oil fund, where the revenue from oil and gas production is collected. It's thanks to those gargantuan resources and its small population that Norway has been able to afford investing massively into its future generations. The profit from its oil production also sustains the world's largest pension fund.

Estimates show that the oil fund must have accumulated well over 800 billion euros by now. Still, the Norwegians have one of the highest per capita personal debt in Europe. The reason? If you ask a Norwegian, they'd probably tell you that it's because they've become too complacent in their prosperity, believing that the money from the oil fund would guarantee them a cloudless future forever - so they invest and spend like crazy, despite the proverbial northern prudence they're supposed to be exhibiting. But some Norwegians have now started worrying that it's all beginning to smell too much like a bubble.

I had a conversation with a few Norwegian pals of mine the other day when I was in Bergen, and I was stunned by the level of self-awareness about these problems - and by the simultaneous unwillingness to divorce from the old habits. "Our wealth may've spoiled us somewhat", one admitted. "Maybe it's time our people learned a few lessons from other Europeans about managing their own money better". Granted, the Norwegian society as a whole is a smart one, and quite introvert - the upside of that being, they're prone to exploring their own flaws and looking for workable ways to fix them. And they don't shy away from taking new initiatives to tackle the problems - like this one, where young kids are being brought to banks and financial institutions, and taught on the spot how to manage their money in a smarter way - even before they've really had money of their own.

And that eloquent friend of mine does have a lot to share in that respect. Her father (a banker himself) has launched an initiative for about a year, where immigrant families are invited to join the school programs in finance - as teachers, rather than students. Because they've got a lot of experience in managing household finance that they could share. A few Polish, Lithuanian and Hungarian immigrant families have already sat in an informal atmosphere together with classes of young local students, and given lectures about their personal experience. A Lithuanian lady once said, "Norwegians do not think of their financial future that much, because they've gotten used to relying upon the state to do it for them". Not that this is necessarily bad, but sometimes one has to take responsibility for their own life, she argued. And her advice was that the young Norwegians should get used to keeping a personal monthly record of their finances, and asking themselves the question if it's really necessary to spend so much money on stuff they may not really need in the first place.

Turns out the East Europeans are much better prepared and wiser on the financial issues than Norwegians - because they've been compelled to be so by the circumstances. They're used to having economic difficulties, which is why they're quite skillful at controlling their expenses. It's just been part of their life all along.

No doubt, the Norwegians would do good if they heed these advices. Because, as OECD data suggests, about 1/3 of all Norwegian households are now deep in debt. Compared to the European average which is maybe three times lower, that's worrying. Because the shower of money won't last forever.

In a nutshell, the problem is not the nanny state. The problem is when the nanny state is taken for granted.

Curiously though (but not surprisingly), some of my young pals sitting around the table at that cafe in Bergen didn't seem too concerned about these sort of problems. One giggled and even said she doesn't spare any money at all. Neither does she need to know how to plan her expenses. "When I go out with friends in the weekend, I spend whatever I've got in my pocket", she said. Another admitted he didn't think about the long-term future too much. Despite finding his balance in the negatives at the end of the month more often than not.

Unemployment is low in Norway, just above 4%. The salaries are high. The unemployed have a vast safety net spread beneath them. And yet, how are we to explain the fact that the country with the world's highest per capita GDP has a great chunk of its youth deep in debt (and not giving a fuck about it)? Maybe part of the reason is that when they get away from their parents, too many Norwegian young people go through a real shock. They do want to maintain the living standard they used to have back home, but that's not possible, since they're newbies in their profession, and they naturally start at a lower wage than average. So they accumulate debt in order to sustain that lifestyle.

For the time being, the Norwegian economy is not showing any signs of growth slow-down, and the estate market is booming. But this could change pretty fast - because of the dropping oil prices. Which is why the youngsters now being taught by foreign newcomers how to deal with personal finance in tougher circumstances better do their best to learn fast, and remember the lesson. Lest they bitterly regret one day that the mistakes they had made in their youth might cost them the realization of their dreams - wherever they have them at all.

Comments

[dreamville-bg.livejournal.com]

Oh. Don't I wish to have Norway's problems...

Reminds me of a conversation I once had with a Norwegian. When I told him my country had been under Ottoman yoke for 5 centuries, he countered that Norway had been under Danish yoke for 7 centuries. "I wish we could've swapped our conquerors, then", I said.

[ddstory.livejournal.com]

What, you mean that a nation could be extremely prosperous if its natural wealth is distributed among the entire population, as opposed to being appropriated by a handful of corporate moguls?

BLASPHEMY!

[peamasii.livejournal.com]

In my limited experience although Scandinavians have a frugal attitude towards consumption they are more likely to burn cash on travel, activities and entertainment than on buying things. As "culture" consumers they are able to sustain innovation, the arts and charities. Debt secured by assets and cash flow is also sustainable, in any case more sustainable than other kinds of debt. I'd say Norway pretty much won the capitalist economy game without even having to do very much. Socially too, don't they already have living expenses pretty much guaranteed by the state? I believe some other similar rich countries basically hand out a minimum wage to any unemployed resident (at least according to some people from Lugano I was chatting with recently). The lack of dissent and struggle in their societies must be horrible to live with though ;-)