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The Norwegian investment fund
The government began salting away its oil proceeds in a special reserve in 1996. Known until last year as the Petroleum Fund, it was renamed the Pension Fund, which is supposed to make Norwegians aware that the fund’s purpose is to provide for future generations.
With the spike in oil prices, it has become the biggest public fund in Europe. At the rate it is growing, experts say it will be worth $800 billion to $900 billion in a decade. That translates into $180,000 for every man, woman and child in Norway.
“Inevitably, Norwegians feel bad about having all this money,” said Gro Nystuen, a human rights lawyer who is chairman of an ethics council that screens investments. “Our job is to make the Norwegian people feel less guilty.”
The Norwegians won't invest in Wal-Mart, but they will invest in Saudi Arabia. And get this:
Blacklisting companies that worsen climate change, she said, would put Norway in an awkward spot as its national fortune rests on fossil fuels.
Here is the full story.
Posted by Tyler Cowen on May 25, 2007 at 05:05 AM in Economics | Permalink
Comments
Ah -- but what about investments in gaming...?
Pension fund stakes in gambling spark outcry
April 20, 2007
Norway's huge public pension fund, fueled by oil revenues, is supposed to be governed by strict ethical guidelines. Now some Norwegians are crying foul after learning that the fund has invested in the gambling industry, which is illegal at home.... [Except, of course, for the State-run lottery.... ;-) ]
http://www.aftenposten.no/english/local/article1747195.ece
Posted by: Theresa at May 25, 2007 1:57:36 AM
"At the rate it is growing, experts say..."
At the rate my friend is having children this month, he should have another 12 by next year.
Posted by: Pedro Bento at May 25, 2007 4:25:40 AM
I've often been curious as to why governments don't take advantage of the arbitrage opportunities available to them. They are able to borrow very cheaply so surely they could engage in a 'carry trade' from gilts/t-bills to securities? As they ought to be able to hold for the long term and should be able to diversify it seems like a no-brainer. Does anyone know why they don't.
Posted by: Sam at May 25, 2007 4:27:52 AM
I am more annoyed by Wal-Mart’s response: it looks like an excommunicated king groveling at the feet of a capricious pope. Surely the world capital market is sufficiently fluid that Wal-Mart does Norway’s spite will have zero effect on Wal-Mart stock. Given the response, though, I cannot blame the Norwegians. After all, when a word or action elicits overly earnest genuflections, the temptation may be too great to resist.
Posted by: blink at May 25, 2007 7:49:26 AM
What will happen to Norway when alternative fuels and green technology become more in demand and thus making the need for oil less?
Posted by: Seymour Butts at May 25, 2007 3:14:43 PM
seymour--
That's kind of exactly the point of having a "Pension Fund, which is supposed to make Norwegians aware that the fund’s purpose is to provide for future generations."
Emphasis on future, they are saving (part, I think a good deal of) the money in order to smooth petro-based govt expenditure into a non-petro future.
Posted by: vm at May 25, 2007 4:22:56 PM
Vm--
What would happen to Norway, if there is a mass movement of immigrants to become citizens to get a piece of the action?
Posted by: Seymour at May 25, 2007 4:31:14 PM
WHAT? Immigrants trying to get into Norway!?! Those filthy Swedes, I bet. BUILD A WALL! THEY SHALL HAVE NONE OF OUR CARBON BOUNTY! NORWAY FOR NORWEGIANS!!!
Posted by: vm at May 25, 2007 5:23:29 PM
No, they should open their borders to all and sundry. After all, what ill could possibly come of that?
Posted by: fustercluck at May 25, 2007 8:14:09 PM
The argument that Norway is guilty of double-standards is undoubtedly true in a strictly conceptual sense but does not carry much weight in practice. This is because actual moral behaviour can never be entirely free from all contradictions, and this is all the more true for real-life governments pursuing various objectives. Take the US administration, for example: strictly speaking and according to the original justifications given North Korea should have been an even more "necessary" target of invasion than Iraq under Saddam.
Norway is setting an example and sending a clear message that ethical considerations can play a role in today's capitalistic system, even if their approach is not 100% logically consistent. It would be sheer hubris if anyone claimed to have such a record...
Posted by: Eddy at May 27, 2007 2:24:38 PM
seymour, increased demand for green technologies probably won't hurt Norway all that much, since world oil supplies are also being depleted, and viable alternatives are few and expensive anyway.
A more important point is the north sea production. It's in steep decline, it peaked around 1999/2000, but I doubt one norwegian in a hundred knows that. Actually, I doubt very many of our elected representatives know that...
Posted by: Harald Korneliussen at May 29, 2007 8:13:39 AM
Petroleum Fund renamed as Pension Fund....What if the need for the oil
demnishes considerably?
Posted by: Smart Card Development Solutions Consultancy at Jun 7, 2007 3:58:02 AM
The movement of immigrats to become the citizens of some other area is
not a good idea at all i guess!!
Posted by: Outsourced Product Development Center at Jun 7, 2007 4:00:07 AM
While I understand the point made about the unfairness of the system where American companies are more at stake then others, I must say I still think Norwegians are doing the right thing: unlike a lot of countries, Americans CAN make a change on their companies policies, and starting with them I believe, will cascade all the way to foreign countries. (I'm thinking of Gap and its policy to ban children work on all the production chain, recent scandal showed). I believe asking educated, wealthy nations to stand behind good practice policies will force a lot of countries in development to do the same. See for example, China is now conducting research of goods (foods and drugs) sold in its own country. Would have it happened if all the recalls of goods from America and Europe did not have happened? the answer if optimistic, would be "yes". But not that fast and not with this consistancy.
Leading the world gives also great responsibility, I think Norway is beginning to take its, and if it'll help the US doing the same, why not!
I agree however the funds should withdraw from Saudi Arabia, where women's rights are a shame for the planet.
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Posted by: 謝文豪 at Apr 2, 2008 4:08:30 AM
