The current undermining of the Welfare State

A society that promotes the winners and their interests at the expense of the weakest does not deserve the designation "civilised". The new poverty is being ignored, accepted or covered up by vulgar and seductive speeches about solidarity and fair distribution. The fact is that the large middle class has pulled a curtain over Norwegian reality. Ivar Brevik
Asbjørn Wahl; Gunhild Ørstavik
For the Welfare State; The Norwegian Forum for Environment and Development

A society that promotes the winners and their interests at the expense of the weakest does not deserve the designation "civilised". The new poverty is being ignored, accepted or covered up by vulgar and seductive speeches about solidarity and fair distribution. The fact is that the large middle class has pulled a curtain over Norwegian reality. Ivar Brevik

The Scandinavian welfare society model isbuilt on the principles of poverty eradication and social inclusion. Untilrecently poverty has not been part of the political agenda in Norway. Mostpeople have taken the benefits of an advanced social-democratic welfare statefor granted and expect its continuing progress.

Togetherwith the other Scandinavian countries, Norway has been regarded as a societythat has minimised poverty. This has been explained by policies promoting highemployment rates and egalitarian wage structures, the strong position of thetrade unions, generous, universal social benefits and accessible and affordablebasic public services. The state has played a key role in promoting fairdistribution and redistribution, in which institutionalised universal welfarebenefits (as opposed to targeted minimum support, based on needs assessments)and progressive, generic taxation have been the pillars. The system is oriented towards individual rights and the family plays aminor role in provision of financial support.Comparative research shows that the universal model has been moreeffective in combating social inequality and poverty than liberal social systemswith specially targeted policies based on needs assessments.

AlthoughNorway is fortunate enough to have an unemployment rate lower than that of mostcountries, social and economic inequalities are increasing. While averagewages increased by 15% from 1995 to 1998, official figures show that thecorporate fat cats increased their income by 35%. From1993 to 1999 public consumption increased by 2% per year while privateconsumption increased 3.6%. The share of government spending was reducedfrom 52% to 43% of GDP between 1992 and 1999.

Inthe same period a number of expensive reforms in health and education obligingthe local governments to increase their service provision have been introduced.This has created a situation where municipalities with small revenues arepractically bankrupt and not able to meet their obligations towards theirinhabitants. While a decentralised taxation and government system has createdlarge differences in service provision among communities on the local level, theNorwegian state is wealthier than ever due to its petroleum resources.

WhenNorway explored large oil resources on its part of the seabed in the 1970s, thePetroleum Fund was established as a pension fund under the full control of thegovernment. The purpose was to secure the future welfare of the Norwegianpeople. Since then the revenues have by far exceeded any expectations at thetime. By the end of 2002 the size of the Fund is expected to pass USD 105billion. As oil prices areextremely sensitive to international political conditions, the current threat ofa war against Iraq increases the Norwegian petroleum revenues by USD 13.5million per day (according to information from the government).

Thusthe “black fortune” increases and decreases according to the whims of theinternational market. Nationally the political debate focuses on whetherto save these revenues for the future or spend more now to improve the publicsector. The Parliament hasagreed that spending from the Fund is not to exceed 4% of its revenues.

Oneman’s meat is another man’s poison

ThePetroleum Fund has been invested in several trans-national corporations and mostof these investments have increased the value of the Fund. This is the priorityfor the Norwegian Parliament, which several times has turned down proposals tointroduce ethical guidelines on investments. “Triple bottom line” guidelineswould incorporate social, economic and environmental standards, as well as humanrights, in investment decisions. Respecting international labour rights such asthe rights to organise and negotiate, and the prohibition of child and forcedlabour would be self-evident in such a framework.

ThePetroleum Fund’s annual report for 2000 shows that 20% of investments havebeen in companies that the Global Unions have banned because of theirrelationship to the military dictatorship in Myanmar/Burma. While theInternational Labour Organisation (ILO) promotes boycott of the regime known forslave-like working conditions and oppression, the government of Norway choosesto invest there to secure future welfare at home. In a meeting with NorwegianNGOs at the Finance for Development meeting in Monterrey, Mexico, in March 2002,Prime Minister Kjell Magne Bondevik stated that the driving force behindinvesting the Petroleum Fund is to maximise profit in solidarity with futuregenerations; he avoided the question about international solidarity withtoday’s world inhabitants.

Inthe spring of 2002 increasing political pressure forced the Parliament toreverse its policy and acknowledge the inadequacy of the Fund’s limitedregulation on investments. In theory it has been possible to withdraw frombusinesses whose activities are in conflict with Norwegian International Lawobligations or constitute a violation of basic human rights. Hard evidencebrought to the public by the national newspaper Dagbladet, however,showed that Petroleum Fund investments had gone to companies producinglandmines, violating the International Treaty Norway has signed. This forced thegovernment to appoint an expert group with the mandate of developing a frameworkfor ethical guidelines by 2004. Although civil society groups had been doing theresearch and advocating for years to put this issue on the agenda, none of theirmembers were included when the expert group was appointed. The group of tenconsists of people from business, administration and political backgrounds; manyare economists and lawyers (some of whom, in former positions, have arguedstrongly against the introduction of such guidelines).

Norwayhas traditionally been one of the most generous providers of OfficialDevelopment Assistance. In 2002 Norway spent 0.92% of GNP and has agreed toreach 1% by 2005. Over the last ten years Norwegians have earned aninternational reputation as peace negotiators in a number of armed conflictsaround the world, including Sri Lanka, Colombia, Central America and the MiddleEast.

Butnow Norway is actively giving military support to the USA-led war, the so-calledOperation Enduring Freedom, in Afghanistan. Despite appeals from the UNSecretary General Kofi Annan and the Afghan government for increasedpeacekeeping forces, the Norwegian government supports American unilateralwarfare. The host country of the Nobel Peace Prize is expected to spend morethan double the amount on military operations in a war that is beingincreasingly questioned by the public, than it will spend on humanitarian aid tothe war’s victims in the same period.

Theprivatisation crusade

Accordingto a recent survey a majority of voters prefer good public services to taxreductions. Yet we are witnessing a global crusade led by multinationalcorporations and international financial institutions promoting privatisation.Norway’s debate on privatisation of public services has created a deep dividein the Social Democratic movement: those who regard themselves as modern,without any fundamental objections to privatisation, confront those who opposederegulation and the unlimited power of the market forces. There are numerousexamples of outsourcing of profitable public undertakings and services at alllevels and in many sectors. Even the cinemas in Oslo, which have been publiclyand profitably run, are now going to be partly privatised.

Cleaningof public buildings, sanitation, transportation and nursing homes areamong other areas formerly run by local governments that have been opened tocompetitive bidding over the last decade. Yet the rate of privatisationand outsourcing of local public services has been low in most sectors comparedto that of other Scandinavian countries, due largely to strong opposition fromthe trade union movement.

Homesweet home

Housingis the area where Norway has gone much further in a neo-liberal direction thanits neighbouring countries. Up to 1983 there were a considerable number ofcommunal flats in Norway, distributed by the local authorities according tocriteria such as seniority rights and need. The conservative government inpower, however, strongly promoting private ownership of homes, removed communalregulations and established a system of taxation that favoured home ownershipover renting. This deregulation made former rental houses subject toprivatisation, but the system put large financial risk on the owners as netcapital and mortgages were required. Currently approximately 75% of thepopulation own the flats and houses they live in.

With the removal of public subsidies, rentsincreased by an average of 35-40% for the country as a whole between 1995 and2001. In Oslo, rents doubled in the same period. From 1958 and 1999 the share ofhousehold budgets spent on housing increased from 13.6% to 24.8% (excludingmortgage instalments).

Currentcharacteristics of poverty

In Norway, people’s basic needs for survival are met, but the poor lackresources to sustain a living standard and a level of social participation thatis regarded as normal in society. Social exclusion is not equivalent to, but isoften a result of, relative poverty. (The poverty line is defined as less than 50%of the median income.)

Notwithstanding its impressive wealth, Norway has growing inequality. OECD Economics Department WorkingPaper No. 189showed that compared with twelve other OECD countries only Italy had a greaterincrease in disparity of income distribution from the mid-1980s to themid-1990s. Other recent research shows that:

·       17% ofNorwegians report that they have problems making ends meet.

·       While 3% of ethnically Norwegian children live below the poverty line,the equivalent figure among children from ethnicminorities is 14%. 4% of Norwegian children and 23% of children from ethnicminorities live in families that have received social support sometime in thecourse of the past year.

·       36% of the unemployed in Oslo are of ethnic minority backgrounds,although minorities constitute only 9% of the city’s population.

·       Even thoughNorway is one of the world’s best performers regarding gender equality, menare still better paid than women. The average wage for women employed fulltimeis 86% of the male equivalent, and the difference has not been alteredsignificantly during the last decade.

·       14% of singleparents, of whom the large majority are women, live below the poverty line. Thisfigure is two and a half times higher than in Denmark.

·       Life expectancyis 12 years longer in the wealthier areas of Oslo than in the poorestneighbourhoods.


Popularresponse to the undermining of the Welfare State

Underthe pressure of the current globalising economy, with trans-nationalcorporations and the international financial institutions as the most prominentpromoters of deregulation, the State’s role in providing for its citizens isunder attack. The considerable redistribution from public to private productionand consumption and the ever-shrinking public share of GDP is causing severefiscal problems. Neo-liberals blame the problems on the public sectoritself, citing its lack of productivity and efficiency. Instead of reinvestingin state capacity, competitive bidding and privatisation are the only solutionsthey consider. The inadequacies of an impoverished public sector createdissatisfaction. Those who can afford to gradually turn to private services.This undermines the basis for maintaining public services, and threatens thelegitimacy and existence of the universal welfare state.


ToneFløtten, Espen Dahl, Arne Grønningsæter, Dennorske fattigdommen: Hvordan arter den seg, hvor lenge varer den og hva kan vigjøre med den? Fafo-notat 2001:16 66 s.

Dagsavisen,23 September 2002.



NOU 2002:2.

Liv Tørres, Jatakk, begge deler, ForUMbulletin 1/2002.

Forthe Welfare Stateis a national alliance of major trade unions, municipalities and grassrootsorganisations. It is established to build a broad popular alliance to improvethe quantity as well as quality of public services, to confront the adverseeffects of the current offensive of market forces, and fight privatisation,competitive tendering and neo-liberal policies. The perspective isinternationalist, but the main task of Norwegian unions and activists is toorganise the struggle at the national level.