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The red-green dilemma

The promises in the Soria Moria Declaration cannot be fulfilled.


[economy] In the Soria Moria Declaration, the governments parties Ap, Sp and SV promised extensive development of the welfare state, significantly lower unemployment, continued membership in the EEA, and that the tax level should not be higher than in 2004. It is impossible to fulfill all these promises.

A step further from the Holden Committee. The Holden Committee consisted of economists and representatives of business and public administration. It was appointed by the government, and in June 2001 submitted a report advising the authorities on what policy they should pursue.

The committee took it for granted that there should still be a large degree of free flow of capital between the industrialized countries, and drew the following main conclusion: "Norway must appear as an attractive country for localization of business". This is justified as follows: In all industrialized countries, many jobs are held every year. Therefore, if a country is to avoid rising unemployment, jobs must also be created there. This requires capital. However, free flow of capital causes the capital to flow where it yields the highest return. Therefore, if a country is to avoid rising unemployment, it must be attractive to capital owners. The investment of capital in the country's business sector must yield a high return.

The Holden Committee gave these advice on how Norway should be organized to appear as an attractive country for localization of business: The tax level must not be higher than in other countries; the distribution of "the values ​​created in business" on wages and return on capital, respectively, must evolve in the same way as in other countries; the labor market should become more flexible and protection against redundancies and the use of overtime should be weakened; great emphasis should be placed on education and research needed by business; and infrastructure, such as power plants, airports, ports and roads, must meet the needs of business.

These five tips can be called "the requirements for equally good framework conditions for domestic companies as for foreign ones". I shorten it to the "framework condition requirements".

Public poverty means that the central and local government revenues – or at least revenues that the authorities think they can use – are not large enough for them to solve their tasks in an acceptable way.

According to the Holden Committee, if Norway is to be an attractive country for locating business and industry, the framework condition requirements for the tax level, education, research and infrastructure must be satisfied. But taxes are the public sector's most important source of income, and the framework condition requirement for the tax level sets a limit on how high domestic taxes can be. At the same time, the requirements for research, education and infrastructure will increase costs. We can therefore conclude as follows: Public poverty is inevitable if there is a free flow of capital between Norway and other industrialized countries.

Development of the welfare state?

Nor can the government fulfill both the promise of developing the welfare state and the promises of the EEA agreement and the tax level.

The EEA Agreement. The Soria Moria Declaration states that Norway will continue to be a party to the EEA Agreement. This means, among other things, a large degree of free capital flow between Norway and the EU. If this part of the declaration is to be fulfilled, Norway must, as mentioned, be an attractive country for locating businesses. I have already shown that this will lead to continued public poverty in Norway.

The tax level. Suppose that Norway instead leaves the EEA. Then we can get rid of public poverty if the government increases the tax level significantly. However, the Soria Moria Declaration states that the tax level in the coming parliamentary term will be as it was in 2004. In 2004, taxes were not high enough to prevent public poverty.

The welfare state. The Soria Moria Declaration also promises a comprehensive development of the welfare state: Poverty will be abolished; there will be full kindergarten coverage; a maximum price for a daycare place will be introduced, and it will be gradually lowered; there will be more teachers in primary school; and care for the elderly will be better. This will lead to large expenses for the state. The public poverty we have to reckon with in the years ahead, given that the promise of the EEA agreement and / or the promise of the tax level is maintained, will make it impossible for the government to fulfill all this.

However, a reservation is required. Under the economic system that forms the framework for that economy in Norway, development is determined, among other things, by what happens in international markets over which the Norwegian government has no control. Suppose that the international economy remains very good throughout this parliamentary term. This will lead to the state's and municipalities' finances becoming so much better that a number of welfare schemes can be improved. In that case, the government may in 2009 claim that the promises in the Soria Moria Declaration have been fulfilled. But that does not mean that the government can rightly claim that it has ensured that they were met. It would be more accurate to say that it shares the credit for the improvements with the good economic conditions.

Significantly lower unemployment?

One of the chapters in the Soria Moria Declaration is entitled "A working life with room for all". It states that "The fight against unemployment and for an inclusive working life is a key goal in our policy". What is called one main goal is in fact two goals. One is to reduce overall unemployment in Norway, the other to make working life inclusive. Although I am in favor of an inclusive working life, I will concentrate here on the possibilities for reducing overall unemployment.

In the statement from Soria Moria, the Labor Party, the Socialist People's Party and the Socialist People's Party do not quantify how much they can manage to reduce unemployment. But I assume that "the fight against unemployment" is a major goal of our policy "means the following: The new government believes that it can affect the extent of unemployment, and it promises to use this opportunity to influence that unemployment will be significantly lower.

The Soria Moria Declaration mentions a wide range of instruments to be used in the fight against unemployment. This is done in the chapters on working life, economic policy, business policy and the chapter on children, education and research. I will divide the instruments into five groups.

The first contains suggestions for making studies or doing other things that can at best give useful results in the long run.

The second contains measures that will have an impact on the extent of unemployment in the next few years, but which are formulated in such a way that it is impossible to know what they entail. Here is an example: It is said that in monetary policy, both inflation, the krone exchange rate and employment should be given weight.

The third group includes financial support for private companies, including start-up capital and investments. Both public poverty and the restrictions on Norway's freedom of action that follow from the EEA agreement mean that the effects of measures in this group will be small.

In the fourth group, I place the measures referred to in this statement in the declaration: "Public ownership of important companies shall be secured, and the ownership shall be used, among other things, to achieve political goals." Companies such as Statoil and Norsk Hydro are probably being considered, and low unemployment is probably one of the political goals. But far from everyone in need of new jobs will be able to find them in Statoil, Norsk Hydro or other companies owned by the public sector. Otherwise, public ownership will probably primarily be used to defend existing jobs, not to create new jobs.

The fifth group consists of measures to make working life inclusive, and to reduce unemployment among young people, the long-term unemployed, the disabled and immigrants. Here is an example: A measure guarantee must be established for the long-term unemployed who have been unemployed for two years, so that all of them receive work, education or labor market measures. Public poverty will limit the use of the measures in this group. But in order to point out certain important conditions, I must nevertheless assume that they will be used to a considerable extent. The measures in this group will undoubtedly reduce unemployment in the groups the measures are aimed at. However, the effect on overall unemployment is uncertain. One possibility is that the measures do not contribute to changing the number of jobs, and therefore do not reduce unemployment, but that those measures are aimed at advancing in the queue of jobseekers, and that many of them get jobs they otherwise would not have gotten. At the same time, many others will not get the jobs they would have gotten if the measures had not been used.

Theory needed.

The effect of measures used to reduce unemployment depends on the cause (s) of unemployment. The parties behind the Soria Moria Declaration should therefore have started the discussions on unemployment by explaining their perception of what the cause (s) are. Put another way: they should have first explained the theory they want to build on. Then they should have explained the measures they want to use. Finally, they should have argued that these measures would lead to significantly lower unemployment if the theory they use provides an accurate description of reality.

Since the Soria Moria statement says little about what the theory behind the measures in the fifth group is, I will try to find it myself. As far as I can judge, it must consist of two parts. Firstly, that it is "conditions related to those who want work" that is the cause (s) of the current unemployment in Norway. Therefore, employment policy measures should be directed at them, and not, for example, at what the owners of private companies are concerned about. Secondly, employment policy measures do not need to be aimed at "ordinary" jobseekers. There is no need for them to have increased opportunities to find work. Instead, employment policy measures should be targeted only at groups of jobseekers who have difficulty finding work. The theory is that if the authorities are able to ensure that these jobseekers find it as easy in the labor market as "ordinary" jobseekers, total unemployment will come down to an acceptable level.

From the beginning of the 1950s until the beginning of the 1970s, unemployment was one to two percent. In recent years, it has been around four percent. What is the reason for the increase?

An important part of the answer is that the production technique has changed so often, and the adjustments that these changes require have taken so long, that before you have finished the adjustment one change requires, there have been other changes that also require adjustments. . Therefore, there have always been half-completed reorganizations, ie reorganisations that have already led to job losses, but where new jobs have not yet been created that can replace those that have been lost.

We can call this type of unemployment adjustment leave. It has increased because it has to a greater extent than before become the one who is to perform one

specific type of work, must have qualifications that most people do not have.

A large part of today's unemployment is adjustment unemployment, therefore we must include the adjustment unemployment in a theory that can be a good basis for finding instruments that over the next four years can lead to significantly lower unemployment. But it is not done on Soria Moria.

As mentioned, the Soria Moria Declaration promises a comprehensive development of the welfare state. The measures mentioned in this connection are not aimed at reducing unemployment. But if the promise is to be realized, new jobs must be created in the state and municipalities. A "side effect" of these new jobs will be that they contribute to lower unemployment.

How strong this side effect will be depends on how strong public poverty will limit the development of the welfare state.


Based on what has been pointed out above, it follows: Suppose that the government in the fight against unemployment only uses measures mentioned in the Soria Moria Declaration. In that case, the promise in this declaration of significantly lower unemployment in 2009 will not be fulfilled.

The Government is facing this choice: It can fulfill the promise of the EEA Agreement and / or the promise of the tax level. If it does, it will not be able to fulfill its promise of significantly lower unemployment. Or it can break both promises about the EEA agreement and the promise about the tax level. In that case, it can fulfill the promise of significantly lower unemployment.

Another reservation is required. Assume that the international economy will be very good throughout this parliamentary term. In that case, it will lead to lower unemployment in Norway even if the promises about the EEA agreement and the tax level are fulfilled. Perhaps unemployment will be reduced so much that in 2009 the government can claim that the unemployment promise in the Soria Moria Declaration has been fulfilled. Again, it would be the good economic conditions, and not the government alone that was responsible for the changes. In that case, it would be neatest for the government to share the credit with the good economic conditions.

Chronicle by Fritz C. Holte, Professor of Social Economics,

Due to the complexity of what has been said in this post, not all the allegations are substantiated. For additional reasons, see Fritz Holte's book Ways out of International Market Liberalism. It is posted on the internet:

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