Sunday 5 August 2001

Pic of the day: I have no idea whose house this is, I just wanted to show a building site. There are plenty of them around here, as people scramble to use all the money that's sloshing around. Or so it seems.

Pre-election frenzy

The general election in Norway is drawing near. Pre-voting has begun, and the parties are in an auction frenzy. Even the largest parties ... in fact, especially the largest parties are bidding over each other like rural housewives with credit cards. The current Labor government now promises to lower the taxes they increased this spring. The Conservatives will give huge tax breaks, as always, and still improve our educational system. (Which, incidentally, they have only vague ideas about how works.)

It is wilder than usual, and the reason is that the state coffers are overflowing. Foreigners may remember the last US presidential election. This is worse. There is a lot of money to barrel out to the people. Except there isn't. It's all a misunderstanding.

***

Much like the USA, only worse, we have social security mixed up with the national budget. "Only worse" because in Norway private pensions are small and unimportant. The overwhelming majority of pensions are in the form of a beefed-up social security, which has added elements similar to private pensions funds. Only it is entirely financed by taxes. I don't actually envy my parents' generation their current pensions, but the fact remains that my generation (not to mention the next) will not be so well pillowed.

Norway urgently needs to pull the whole pensions system out of the national budget and hand it over to an independent agency. And by "independent" I mean that the politicians should not be able to put their hands into it to grab money without going through an amendment of the constitution. That's how far I trust them, and I think most of my countrymen will agree to that particular part.

The point is, if we do this, the surplus is gone. Poof. Instead we have a deficit. That would probably end the pork-mongering for a while, or at least tune it down a few notches.

***

Even without this necessary overhaul, things could have been better. If the economic downturn in the world economy had hit Norway in time, we would have been a much more sober country. Norwegians are good at weathering hard times, but we don't do too well in good times. And it was so close!

I had expected the economic downturn to start in autumn 2000. (My friends will remember that I've been harping on this for years.) For various reasons it was delayed; mostly the overwhelming success of the Y2K process, in my opinion. The productivity growth after the upgrade convinced the whole world that a "new economy" had risen, where productivity would grow forever and share prices with it. By now we know what happened. But it's just a tad late.

Sweden is already gearing down. Germans are fastening the seat belts and bracing for a rough landing. All over the world, the storm is coming. Except in Norway. This is because we are the world's second largest oil exporter, and until petroleum prices come down we'll stay high. Sadly there is a lag between an economic downturn and the drop in oil prices. First the reserves need to be filled. It should still happen within a year, unless the Middle East crisis blows up badly. But it will be too late for us. We'll have a government elected mainly for its spending skills.

***

Sometimes I feel like Cassandra of Greek mythology, urging the Trojans to not let the big horse into the city. But there is nothing supernatural about this, only knowledge and intelligence. To me the economic crisis is as easily visible as the clouds in the sky. It is far too late to stop it now. The chain reaction has started. The only question is how far it will go.