SGI 2022 | Norway | Key Challenges (2024)

Norway features a well-functioning democracy characterized by stability and continuity, a sound economy, a generous, tax-financed welfare state, a high degree of interpersonal trust, legitimate governance, and high levels of internal and external security. Effective public administration, and cooperative tripartite relations between government, employers and unions have helped mitigate conflict and enhanced the ability of stakeholders to implement joint reforms.

The overarching challenge in the coming decades is to shift the economic base from one that relies on producing oil and gas to one involving climate-neutral, sustainable green industries while, at the same time, maintaining high levels of employment and a generous welfare state.

Phasing out the dependency on petroleum raises a strategic choice between a politically enforced downsizing of the sector (with the ultimate goal of ending all production) versus implementing policy measures to reduce Norway’s contribution to global CO2-emissions from continued petroleum extraction and use. So far, the latter strategy has been followed with measures like carbon taxes, the purchase of emission quotas, plans for the electrification of the industry by hydro and wind sources and in the future, carbon capture and storage. Tensions between environmentalist concerns and continued petroleum activity may grow, as well as the tension between concerns for nature conservation and the increased use of wind and hydro power.

Building up new industries and employment opportunities in so-called green jobs requires heavy investments in research and innovative, risk-taking developments and, potentially, the introduction of taxes and subsidies designed to promote this transition. An extensive upgrading of the skills and competencies of the workforce is also needed, lifelong learning must be more than a slogan. In Norway, only the state has the resources to fund investments of the required magnitude, this raising fundamental questions on the role of the state versus market mechanisms as the key drivers of economic development.

The state resources needed to facilitate a transition of the economic base for the public sector may easily come into conflict with a continued high level of welfare state benefits. State revenue from the petroleum sector may decline before new tax bases are established, while a rapidly aging population expect pensions, health and care services to be of high quality. This may highlight the question of productivity in the tax-financed production of welfare services, as well as the limits to the state’s obligations. The role of private welfare providers has grown to be one of the most contested issues in Norwegian welfare policies, dividing the electorate and organized interests between those who see a cooperation between public and private providers as a means to sustain a more effective welfare policy, and those who fear that the high level of economic and social equality is undermined by privatization.

The handling of the coronavirus pandemic by the government has been largely successful; the initial phase was managed by a center-right government, which was followed by a new center-left government that came into office in October 2021. Public policy measures have consistently been based on achieving a consensus among all political parties. Vaccination rates are extremely high, and there has been no palpable opposition to the coronavirus-related restrictions placed on social and everyday activities. Fatality rates are very low, and those in need have received proper healthcare. Economic actors that have suffered financially from lockdown periods have received compensation from the state.

A more lasting effect of the coronavirus pandemic is likely to be a strengthening of the Norwegian political system’s capacity to foster consensus-based decision-making. Also, as all governments have relied heavily on expert advice, and the fact that the experts themselves have been very active in promoting scientific arguments and advice across all media channels, the legitimacy of evidence-based policies has been consolidated. However, it remains to be seen if this consensus will remain robust when bold decisions must be taken in environmental, energy and welfare policy areas.

Norway’s political system relies on a long tradition of consensus-building. The level of polarization between political parties is relatively low. Agrarian and Christian-Democratic parties in the center have, in order to produce a parliamentary majority, cooperated with those on the right as well as those on the center-left. There is a broad consensus on many key political issues (e.g., climate policy, pension reform, and security and defense issues) that includes the political left and right. However, the question of Norwegian EU membership and immigration polices divides the parties. For the last two years, the government’s handling of responses to the coronavirus pandemic has strengthened the consensus-making character of Norwegian politics. (Score: 8)