Fears "Dutch Disease" In Norway

The Norwegian professor of economics at University of California, Espen Henriksen, is concerned about the conditions in his home country. Ha says that the Governments unwillingness to cut in the sick-pay-scheme is a sign that Norway will meet the same economic problems that hit the Netherlands in the 1970’s.

“When petroleum investments are phased out, will we see it. In the meantime, we built a public sector that is not possible to maintain.”

Espen Henriksen

Professor Espen Henriksen. (Photo by Sigbjørn Sandsmark/Dagens Næringsliv)

“The Government’s unwillingness to cut in the sick-pay-scheme is a sign that Norway will meet the same problems that hit the Netherlands in the 1970’s,” says visiting professor of economics at University of California, Espen Henriksen.

Professor Espen Henriksen notes that the public expenditure grows far more than the Governments fiscal rule would imply, and he’s is concerned about a lack of will to implement measures that could reverse the trend.

The Hangover

The “Dutch Disease” is a term for a economic hangover that hits a country when it has used all it’s income from a natural resource to blow up the sheltered sectors at the expense of competitive sectors, and must reverse the development.

“A “Dutch Disease” in Norwegian will hardly be the downsizing of the industry, but rather the refusal to changes what may be painful in the short term, but necessary in the long term.  We should not grant us a sick-pay-scheme in the good economic times that are better than we can allocate about 15-20 years,” says Professor Henriksen to the Norwegian news paper Dagens Næringsliv.

He believes that the explanations of from (among others) the Norwegian Workers Union (LO) that the increasing  absenteeism in Norwegian companies is due a brutalization in the labor market is not a valid explanation, and argues that most economists agree on that incentives are the most effective tool to increase productivity.

” If we are to do something about absence due to sickness among the workers,  individuals must have incentives such as longer term support the standards of work ethics that we hold so high in this country, ” says Mr. Henriksen.

Same As In The Netherlands

Also Professor Hilde Bjørneland at the Norwegian School of Management (BI)  believes that Norway is moving into the same situation that the Netherlands has experienced, but the symptoms are more hidden in Norway than they were in the Netherlands.

In the Netherlands, unemployment rose sharply as a result of the downsizing of the industry. In Norway unemployment is around three percent, while an increasing number of workers ends up on public disability support.

“When the petroleum investments are phased out, will we see it.In the meantime, we are building a public sector that is not possible to maintain.  We’ll see it when the authorities no longer are able to stick to their fiscal rules,” says Professor Bjørneland.

Link to original article in Norwegian.

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