I’m very intrigued that you should ask such a question, because it was precisely this query (as pondered by Rothbard) that sparked the development of anarcho-capitalist theory.
There are a lot of factors here. In the case of Norway in particular, they depend a lot of oil revenue. We are talking about the world’s third top oil producer here, and they export a lot of natural gas as well. All the firms that explore oil are (at least in part) owned by the state.
Anyway, Sweden and Finland in particular, may have more taxes than the USA (especially in income, though corporate taxes I think are lower), but they enjoy much less regulation and are more prospicious to businesses in other ways. They are welfare states, or tax states, not socialists. I doubt the welfare state is even bigger than e.g. what we have here in Portugal – we have public health care, housing, education and all kinds of social programs. Anyone that qualifies as “poor” can have a highschool diploma by going through a year of classes (just showing up, no exams). You get a good government allowance for each kid, which has becoming polemic because of cases of feral children – junkie parents keep their kids in a room to collect welfare for them, and then these kids don’t even develop language. We even have the minimum income garantee. As I understand, even the USA has all kind of safety nets if you go broke – how are nordic countries “better”?
Not necessarily. The only reason Norway is able to continue it’s welfare state path is because it’s using the nationalized oil revenues to pay for all of it. If taxes were used, the economy would be in ruins. Sweden has abandoned the welfare state since it failed, while Denmark has very, very little regulations in business (far less than the US) which generates more wealth and thus allows it to have high taxes.
The key is to know that both Norway and Denmark would be far better off with more privatization, but economic ignorance and special interests are preventing that from happening.
Is the nationalization of oil going to cause problems down the line, or is it causing problems already? If Norway is suceeds due to nationalization of certain industries, then why not have the government nationalize whatever industries are profitable in X nation and do the same thing as Norway? What problems has/is it causing?
By the way, I leave for vacation tomorrow where computer access will be limited, so I probably won’t be back to finish looking over everything for a while, but thanks for everyone’s help.
Oil, as other natural resources, is a different beast of other industries. I mean, most industries have some increasing returns to scale, but oil is a very peculiar case at this. After the capital built and management structured, you just stand there sucking on the earth’s t-i-t-s. (hyphens so it doesn’t get censored) A lot of socialists states managed to live for years while they were living off of the capital accumulation of the past… But I don’t think this matters much for the “black gold”. You can make so much money out of it, it doesn’t really matter if your model isn’t the most efficient. Oil is one of the most limited resource out there, so nobody is going to get you bankrupt if you’re not efficient.
The major problem I see with nationalizing oil fields is that you won’t get many people investing on exploration and research of how to explore new sources of it. But then again, there’s so much money to be made, it doesn’t matter you don’t have the most efficient structure to look for it. Especially, in Norway I think they have good ways to capture some of the renewable energies like from water and wind, so their economy doesn’t depend much on oil. Efficiency then only matters on the global market, so it’s a win situtation for the people of Norway.
As I already mentioned in the Iraqi oil thread, I don’t see much problem in the state nationalizing natural resources, especially when it’s disputable who their owners are. I personally would rather the oil money be spread among the people, but if it replaces taxes, it’s still better than forcing the people to work extra to maintain the state.
fuzzybunny, something I think you seem to be assuming in your question is that a good firm always keeps on having profits. It should be mentioned however that as a market matures, assuming no disruptions, profits approach zero, as firms compete for customers and workers. It doesn’t make sense for the state to own much more than stuff like oil fields. A monopoly will always be more innefficient at finding the appropriate scale for the economy. In the case of the USA however, you don’t have nearly the same oil as does Norway and you consume half of the oil produced worldwide, so it seems like it would be pretty bad for your economy if you nationalized oil fields. Some windful taxes that aren’t enough to discourage investment on oil might make more sense.
EDIT: notice that profits is not the same as revenue which you’ll have to take from for labor and other costs. An industry can be healthy while having profits close to zero or even zero (though of course life is not static so it never quite gets to zero, though they can have some profit-losses waves). Older industries like manufacturing have much lower profits than the service sector, which has even less profits than computer and high tech stuff.
Norway is really one of the lucky few nations that can feed off of a nationalized industry. The only other ones are Russia, Saudi Arabia, Libya, and some other nations in the Middle East and North Africa. The problem with any nationalized industry is that it is inevitably sub-par compared to what the market would do. The problem of economic calculation comes up, and the government produces a lot of waste. All that money that is lost in the government system would go out and raise people from poverty in a free market system.
Free markets naturally lead to increasing wealth and prosperity. However, when government gets in either via taxes, quotas, unions, cartels, nationalization, etc. it slows the process of growth and severely retards increasing wealth. Denmark, for example, is only able to tax its people so heavily because they “make up for it” with their loose business regulations. They would be better off with lower taxes too, because then they’d achieve high growth rates like Hong Kong, Singapore, Ireland, etc.
Why should a state own oil fields at all? Did it homestead them? No. Is it the most efficient producer? No. It has no right to them, nor does it make any economic sense for it to manage them.
-Jon
I don’t see much calculation problem unless the state tries to produce something horizontally. The fact that Norway manages to produce oil shows there is no calculation problem. For instance, if the state wants to offer police services, you’d just have the calculation problem if they built the police stations, weapons, computers and all capital necessary and all the intermediary goods (like bullets, handcuffs, paper, electricity) to run the thing. Of course, you’ll have waste because only free enterprise can figure out and is flexible enough to adapt to the most efficient model to provide some good/service, and you may have an incentive problem, but not the calculation problem.
fuzzybunny already said he likes libertarianism in philosophy, but he isn’t sure about it in utilitarian grounds (whether it’s the system that maximizes the greater good). In the case of oil fields, if you tackle it in an utilitarian view, it’s clear that for the Norway people benefit the most if it’s nationalized. Venezuela can only maintain its socialism because of oil, as have other nations that don’t have much of an economy outside of that.
Imagine that some foreign guys owned the oil fields. Norway is a small market for oil, so at most, they would contribute to the Norway economy by hiring some workers from there. For the people of Norway, it’s much better to have them nationalize, even if the exploration is less efficient (land is the most important factor of oil production, so they don’t have to fear about competition anyway), and then have the revenue spread among the people.
How’s it clear? Especially since all it’s doing is propping up socialism, encouraging welfarism and parasitism, and promoting inefficiency. What’d be justifiable from a utilitarian POV would be to open up the oil fields for homesteading, since the government has no real title to them, and let those who want to sell their stocks in this venture do so. This would be both efficient and moral. All the government does is prop up an irrational system that is doomed to failure, given that eventually Norway’s oil will dry out anyway, and its people will have experience in being little else but leeches.
Again, why? All it does is oust the market from providing goods, with all the attendant problems and inefficiencies of government-provided services. Not only can the government not calculate efficiently wrt production, but it will also waste its profits by spending them inefficiently.
-Jon
We are making an utilitarian argument here – morality stays at the door. If letting every young men rape Angelina Jolie maximizes social utility, then that’s the utilitarian position – doesn’t matter if you find the idea abhorrent. fuzzybunny already heard his share of taxes evil and all that stuff.
Efficiency also doesn’t necessarly matter. Does the Norway people benefit from foreigns exploring their oil fields efficiently while they use wind power? No. The Norway people will be better off if the oil money is distributed among them.
Even if the state is wasting the oil money, some of it must be going to schools, hospitals and stuff, even if lousy ones. I personally think they should just give the oil money to the poor, so they would go buy the stuff they need in the private market. But if they want to provide those services themselves, it’s still better than just having the oil sent abroad. The real problem with Norway is when they disrupt the free market from providing better alternatives – they may have less taxes than Sweden, but their government is much less business friendly.
Yes, I know what a utilitarian argument is (BTW, utilitarianism is an ethical system, so it is a moral argument.) My point is that an argument for nationalization is not one that will maximize this elusive phantom called utility. A free market will. They’d stand to gain more by owning the oil fields outright, and doing what they will with them, rather than having some useless behemoth in the middle, that does not know how to spend its proceeds sfficiently and which has every incentive to amass and grow its power. Do you disagree that this instead will yield higher utility overall? So even if one were to grant that oil nationalization maximized utility for the time being, I’d argue that if it were used to prop up socialism, it would indeed be antithetical to such a goal. Who’s to say it’d maximize utility even in the short-run? Perhaps the utility of those who are prevented from owning it is so great that it exceeds that gained by the “people” net losses in efficiency, so that this doesn’t matter. This is also a likely possibility. Utilitarians cannot answer this absent cardinal utility, as anything else is mere guesswork.
-Jon
Welfare states may be sustainable in a small country with abundant resources and a rather homogenous culture. Everybody’s “family,” to a certain extent and you take care of family. And at the same time, as a family member you pull your own weight. In such a setting welfare is a social safety net, not an entitlement. It’s difficult to see such a model applied with success to a nation of over 300 million people.
And I think even the Scandinavian nation-state model always breaks down eventually. The taxation and inflation necessary to fund the welfare state discourage affordable family formation, so those countries are all in demographic decline.
And economic. Investment from abroad is dwindling in Sweden IIRC. It is rapidly burning up the wealth it had created decades ago under a freer system.
-Jon