Norway vs. Venezuela Economies— Natural Resources: Blessing or Curse?
I recently got addicted to economics history around the world. It’s interesting to look at the economies of different places around the world through the lens of history. Hindsight is 20/20. I’m going to compare some economies for my own understanding and amusement.
First up: Norway vs Venezuela
Norway — A socialist-capitalist mixed economy done right. It is the poster child of economic boom and development after it nationalizes its oil production. It has a very low unemployment rate, high GDP per capita, robust trade plus, highest proportions of university graduates. It’s internationally recognized as a place to do business with. What’s more remarkable is that Norway did all this while also being one of the most economically equal countries after tax in the world. Norway has extremely robust workers protections. The way Norway achieved this phenomenon economic status is after it transitions its fishing economy to an oil-based economy after 1960, the country puts away its oil wealth in a sovereign wealth fund which is probably one of the biggest hedge funds in the world. In 2017, Norway has generated an impressive $137 billion return on it’s an investment. Its portfolio is quite diversified over foreign securities, bonds, cash, commodities. It also doesn’t invest in additional fossil energy or any business that harms the environment and labour laws. Norway has done everything right with the opportunities they have been given. This is a perfect example of sustainable economic policies and development.
Venezuela — Similar early economic boom from the oil money. However, the government went on a spending spree and went on a government handout to boost the short term economic boost. Instead of diversifying its economy, Venezuela nationalizes its oil production and rely on oil export to support its economy. That has caused an increase in their currency value and, as a result, makes its domestic industries less competitive compared to its surrounding neighbours. This further makes the country rely on its oil sector and the riding of the oil boom and bust has caused economic instability in the country. At the downturn, the government will just keep printing money to boost the economy which causes high super inflation.
Similar opportunities. The fate is at your own hands.
