Norway's irony: newfound oil threatens old economic mainstays

By , Staff correspondent of The Christian Science Monitor

Fishing in Norway's steep fjords in clean, stained-wood boats may well be one of the world's most picturesque industries. It survives, however, without paying for itself. But Norway can afford it.

Norway, some think, is steaming toward a sentimental economy -- sheltered from change and competition.

No one seems to want it, but political realities push toward it. And Norway, apparently, can afford it.

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Oil from the North Sea is stoking a controversy in Norway that other countries can envy them for. As Prof. Paul Samuelson of the Massachusetts Institute of Technology says, Norway's problems are golden ones.

At the center of the debate, some Norwegians say, is resistance to change. "People want to stay where they are, keep doing what they're doing," says Borger A. Lendt, vice-managing director of Den Norske Creditbank.

This often means staying in jobs that don't pay for themselves. Not economic , perhaps, but the Norwegians -- unlike the Swedes, unlike most of the world -- can afford it.

"We don't have that strict discipline you have to have when you're poorer," Mr. Lendt adds.

Norway is a welfare state with a silver spoon in its mouth. Oil and gas reserves, until last summer, were thought to allow for production that would peak toward 1990 and taper off quickly.

Now it's estimated they will last a century at present production rates. The state, through various taxes and duties, collects roughly 80 percent of the revenues.

The hardy Norwegians are still torn between the desire to keep their industrial feet under them by avoiding an oil-based econony and yet wanting standards of living to keep rising.

So far they have tried to do both. Oil revenues are going toward the immediate needs of the welfare state, including keeping jobs alive in specific, weak industries. Oil and gas, in other words, are sheltering the status quo.

It leaves Norway the King Midas of black gold.

The Midas touch lies in the nation's oil wealth pricing its traditional industries out of world markets. This happens as high-flying wages on oil rigs draw skilled workers offshore from mainland jobs, pushing up wage levels across the board. And oil exports bring in more money than Norway's 4 million-person economy can absorb. The result is inflation, which makes Norwegian goods more expensive overseas.

In fact, mainland industry has generally stagnated in Norway since the recession of the mid-1970s. By 1980, oil and gas exports accounted for a third of Norway's total exports.

This all makes Norwegians ill at ease.

"The great majority," says Prof. Henry Valen, a University of Oslo expert on Norwegian voter attitudes, "feels very uncomfortable with an economy that depends on oil."

But Norwegians know they're rich. Norwegian standards of living have risen steadily on a petroleum tide, as the government borrowed heavily against the promise of oil income.

The Labor government is trying to persuade Norwegians to hold down wage demands, hence manufacturing costs, to make industry competitive again. The challenge, says Premier Gro Harlem Brundtland, is "how to avoid that pressure to overturn reality."

So far, the pull has been too strong.

But Norwegians still balk at taking the full step: using oil income to create jobs in services for the elderly, better phone systems, and highways. This would imply letting the number of jobs in manufacturing, fishing, and farming shrink.

The argument is that energy will be short someday and Norway will need to support itself without oil again. "We must be realistic about this," warns Harald Norvik, undersecretary at the Ministry for Oil and Energy.

It has been Norway's policy since early in the last decade to go slow in producing its petroleum resources to protect industry on shore. The policy has been undermined to some extent by the explosion of oil prices, which amplified the inflationary effect of the oil produced.

Recently a growing number of voices are arguing the heresy that Norway should quit swimming against the tide.

One high-ranking economist, Odd Aukrust of the Central Bureau of Statistics, created a stir last year by suggesting that Norway should rethink its ill-kept decision to keep oil at arm's length.

His view is that the oil economy is politically inevitable. "Will the ordinary Norwegian look at this money . . . and not want his share for a better life?" he asks.

"With our will or against our will," says Mr. Aukrust, "my prophecy is that Norway will go on spending more and more of the oil money regardless of its effect on industry."

The sensible route, then, would be to invest as much of the oil revenue as possible overseas. Norway can't absorb it without provoking a roaring inflation.

And although Norway faces some local unemployment problems now, it doesn't have the labor pool it would need to turn oil money into new industry at home.

As for keeping a manufacturing industry alive until the oil runs out -- jobs for Norway's children's children -- Aukrust is skeptical. After the sweeping changes of the last century, he asks: "How can we guess what our needs will be in 100 years?"

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