Honey, I shrunk the economy!

Screenshot Tonari no Kashiwagi-san 2.5

Life isn’t so bad after all! Just ask the Japanese, they aren’t dead yet after two decades of economic stagnation. They haven’t even stopped making manga and anime.

For several generations now, economic growth has been seen as not only desirable but the natural state of things. The occasional wild-eyed hippie, radical environmentalist or other fringe voice from far outside the halls of economics will sometimes fantasize out loud about the zero-growth society, but it is not really taken seriously. Well, perhaps it is time to redefine growth: In an age where so many things are growing smaller, why not the economy?

There is a kind of “speed blindness” after all these decades of economic growth. When we learned that Japan had zero growth for over a decade, we imagined people wearing ten year old clothes and driving ten year old shoes, because they had not had any economic growth in that long. But what it really means is that they can’t buy more expensive clothes or more expensive cars than they could ten years ago. That is not a leading cause of death exactly, not in the rich world at least.

It’s been over 2 decades now in Japan, and Europe is approaching its first. Europe is a bit different because it is not really a country, there are some countries in which poverty really is spreading and biting ever deeper, notably in Greece, but also Spain is struggling with half of young would-be workers falling outside the official economy. (Some of them are working in the underground or black economy, which is traditionally large in southern Europe. Still, there is definitely a problem.) In northern Europe, growth has resumed, just not very fast.

The USA is a special case again: The nation as a whole has economic growth, but pretty much all the new money flows to those who are already rich. Depending on how you look at it, ordinary workers have either no growth or they are earning a little less over time. While household income is holding up compared to 40 years ago, there are now more household members working outside the home, so that the individual income is somewhat lower than in the previous generation. (This may explain some of the behavior of those who were young 40 years ago.)


So, 40 years ago, could you buy a tablet that you could bring with you anywhere and
-read a million books for free, anywhere, at your whim, instantly
-buy a million other books (many at a discount), anywhere, at your whim, and read them instantly without increasing your luggage weight or your shelf space at home
-listen to a million songs and melodies, anywhere, at your whim, for free or nearly so
-watch thousands of movies for around $10 a month (or free if your conscience failed you)
-let you talk to people around the country or around the world, for free
-let you read or watch news from anywhere, anytime, at your whim
-let you keep up to date with what your old friends and acquaintances were doing
-let you play games varying from chess to complex role playing games
-and more?

I think not. Even in the late 1990es, which was a pretty cool time all things considered, Supergirl and I had to traipse to the local video store and pick out a movie that happened to not be rented out at the moment, pay a modest rental fee, lug it back home and play it on the VHS machine. Later we had to trudge back to the store and give them the box back.

Today, I can watch a Japanese animation at the same time it airs in Tokyo, but with English subtitles. With American movies there is a substantially longer delay, because Americans think with their flagpoles, evidently. But it still beats having to wait until the local video shop guy decides to update his inventory. And there is no need to struggle up and down the steep hill between home and the shop on an icy road in the middle of winter only to find that they don’t have the movie we wanted to see so we have to make do with another.

So how do economists measure the value of this radically improved convenience? How do they measure the improvement of the saved time and money? They don’t. On the contrary, this is called economic “contraction” or “negative growth”. The basic idea in economics is that the more money people spend, the better. (But at least they adjust for inflation, or things would go horribly wrong very fast.) There is no way in classic economics to adjust for the fact that people spend less money because they need less. This idea is not only hard to measure, it is also utterly alien to the profession and the human mind in general. After all, normally, when we meet our needs easily, we promote a want to become the next need, and a wish to become the next want. The human mind is a highly efficient factory of desires, cravings, wants and wishes. So after a few days of saving money, you don’t really feel richer anymore. But you are. If some circumstance was to disable the new technology, and you tried to revert to the old, you would suddenly need more time and money to fulfill the same needs. That  you would definitely notice.


This is not the only way in which the new reality collides head-on with economics and the old common sense. For instance, if you buy a paper book, you don’t only pay for the content. You pay for people to cut down trees, other people to drive the wood to the paper mill, factory workers to change the wood into paper (and by the way you also pay people to make chemicals used in the bleaching process), drivers to drive the paper to the printing press, workers at the printing press (and workers making ink), drivers to drive the printed books to the warehouse and possibly to your local bookstore. Oh, and people who make the trucks used to drive all this stuff for hundreds of miles, and the refinery workers and oil drill workers, and the people making machinery for the factories and so on.

All of this hectic activity from mining and drilling and lumbering to manning the cash register in the bookshop, all of this is economic activity and makes the world a better place according to economics. Well, isn’t that true? Aren’t we doing something wrong when we are putting all these nice people out of work?

No, not really, because all this work (some of which destroys pristine nature, extracts resources that can not be put back, poisons the air and changes the climate) is now unnecessary. If we truly believe that it is virtuous to pay people to perform unnecessary work, then we can hire the laid-off workers and divide them into two teams: One that digs holes at some convenient location, and one that fills the holes. It is just as useful, safer, and has minimal impact on nature.

Now you can say that there are reasons to have paper books, and I won’t stop you. Perhaps you regularly spend a lot of time away from electricity, or screens give you a headache, or books just smell good. Nothing wrong with that: We still have vinyl records, even though they were replaced by CDs and the CDs by lossless electronic music formats. And despite way too many cars, riding still remains popular, because, horses! Most people who have a dog does not need it for hunting or herding, and most cats are not there for keeping the rodents down, not anymore. So there will likely be paper books around for quite some while, although some genres are likely to bow out.

But there is a rapid rise in affordable books which do not require lumberjacks, and this is measured by economists as an economic contraction, a downturn, even deflation since the prices go down. Deflation in particular is a terrifying concept that we should worry about and flail and wail, a problem that politicians should spend our money to counteract somehow, even if they don’t understand what it is.

This was just one single example, and you can expect to see much more of it in the future. For instance, solar panels are doubling in number every two years, and the price is dropping by 22% over the same time, on average. Back of the envelope calculation says that roughly in the time frame 2020 – 2025, the exponential growth of solar will sweep fossil fuels out of the tropical, subtropical and temperate zones. Oil, gas and coal will simply not be able to compete: Even with the cost of batteries to keep the power overnight, we will make electricity so cheap that only the rich will burn coal. Gas-powered cars will go the way of the vinyl records, although obviously it will take a decade or two for them to fade away.

Receiving clean power from the sky at a fraction of the cost instead of ripping off the topsoil, fracturing the land, polluting the groundwater and belching smoke into the air … do you know what economists will call this? You should know by now: Economic contraction, downturn, deflation. Somebody do something!

You think this is bad, wait until the food synthesizers appear (my target time is around 2040, but it could easily be a decade earlier). With the planet overflowing with cheap electricity and a little more progress in nanotechnology, the food synthesizer will break down simple organic material like grass or leaves and rearrange the peptids and lipids on a molecular level to produce whatever food we have programmed it to, somewhat like a 3D printer but with organic molecules and far higher complexity. There is nothing wrong with cows, but it will be cheaper and simpler to just put the hay in your food synthesizer the night before and get meat and milk when you need it. (Not that you actually need meat, but a lot of people like it.) The end of 10 000 years of agriculture as we know it. Cows reduced to pets. (Goats are better pets, by the way, they are awesome. Ask me about goats any day.)

Now this may sound like science fiction, and currently it is. Then again, the 3D printer was science fiction ten years ago. But what if it really happened? What if you could make dinner from the leaves you raked yesterday? Economists would describe a Great Depression the like of which has not been seen since the dawn of time. Let us face it, if we all became immortal, the economists would worry about the undertakers. It is called The Dismal Science for a reason.


In conclusion, traditional economics (and the politics that depend on them) are out of date. Certainly we could wish for ever more economic growth, and for the poor among us it certainly would not hurt. But for most of us, what we should really hope for is more of the “shrinkage” in which ever more expensive goods and services disappear in favor of simple or outright invisible solutions, where the things we need just are there when we want them. I for one welcome our new electronic underlings.

Help! I’m being monetized!

Screenshot anime Yuyushiki - touch screen!

Just a hunch, but I think a certain older software company has a hard time adjusting to a new generation of customers. Just saying.

Microsoft is running a smear campaign against Google, accusing them of providing free services just to earn money from spying on you, basically. Which is not too far off, but they go too far when they imply that you pay for this. In one sequence, they use the verb “monetize” correctly, but illustrate it with money flying out of your pocket. This is a way of thinking that should have died during the Bronze Age. I will show you why. Follow me to ancient Mesopotamia, where humankind discovered Trade.

Local barter with people you knew has existed since before the dawn of history. Young Neanderthal males brought with them extra stone axes when they left home looking for a wife. But almost 6000 years ago, someone discovered that you could smelt copper and tin together and get bronze, which was much easier to make into weapons and tools than stone, hard enough to do the same work, and could be recycled over and over. There was just one problem: Tin and copper were only rarely found together. Usually there was stormy seas, high mountains or dreadful deserts between them. What to do?

Someone came up with a genius plan: They brought copper with them from a place where it was plentiful and therefore cheap, and bartered it against tin in a place where tin was common but copper was rare. This way they left every time with more than they started with, and this practice caused them to get rich without actually digging in the mines. I am sure there were envious people at the time reacting much like Microsoft does today: These guys get rich from other people’s work! It just ain’t fair! But the practice continued, because people on both ends of the trade caravan ended up with more bronze than they could have had alone. Everyone was better off.

The caravans did not come and steal your stone axes. If you wanted to make stone axes like your ancestors had done for a hundred thousand years, you were welcome to it. And in the same way today, if you want non-targeted advertising, you are welcome to it. But I would like to point out that since non-targeted advertising is more expensive (you have to reach several times as many people to make the same sales) the extra cost is added to the product. So if Microsoft succeeds in smearing Google out of existence (good luck with that), you will help pay for it. Money will float out of your pockets, so to speak.

Going ass first into the future has always come at a cost. But at least this time nobody will hit you on the head with a bronze ax. So we live in good times. And Google is making them even better, by monetizing us all.

(Another matter is whether their targeting actually works, but that is a story for another day.)


Limits of redistribution

Screenshot anime GJ-bu

Redistribution of cake may seem like a good idea, but how will you redistribute the fat?

In “honor” of the international holy day of Socialism, I will write briefly again about why I am thoroughly anti-socialism.

Basically, socialism is a movement in which it is assumed that people should not need to take responsibility for their choices. But you can only do this up to a point. Even if we imagine that a society could exist where people will work just as eagerly for the common good as for their own – although no such society has ever existed – we would still only have come a short way. You can redistribute money, but you cannot for instance redistribute health, knowledge, happiness, meaning.

You can certainly redistribute health care. Those who are healthy can work and pay taxes which are then spent for medication, hospital stay, tests, surgery and so on for the sick. Indeed, if the government did not arrange for this, we ought to do it on our own accord. But this can only fix what is broken. We cannot transfer health itself. Health is something more than being repaired every time we break down. Living a healthy life is much more than that. To compare it to something else, even if you are not freezing to death, you are not necessarily warm. In the same way, even if you are not dying, you are not necessarily healthy.

If every person who had functioning legs decided to walk half an hour a day, we would not only save billions in preventable lifestyle diseases. People would also feel more energetic, their mood would improve, they would think more clearly, they would look more pleasing to the eye, and they would sleep better at night. This is not some revelation just I have had, this is solid scientific fact and ought to be in school textbooks if it isn’t there already. As you can understand, only a small part of the benefits can be transferred by taxing those who walk and using that money to patch up those who just sit there.

It is like this all around. If you don’t read good books, no amount of taxing me can give you the knowledge and insight and pleasure that I derive from reading. If you don’t meditate, no amount of taxing me can give you the peace and wisdom that should have been your birthright as a human. If you envy others, your frustration will never stop gnawing inside you. These things cannot be transferred by the state, or by any other human institution.

Redistribution is sometimes necessary, and we should have done so voluntarily. When we as a society did not, we were punished with socialism. But for the most part, redistribution is not possible. Most of life we must take responsibility for anyway, or suffer the consequences to some degree.

Are we rich enough?

Screenshot Sims 2 Apartment Life

In the last years of the Long Boom, when economists said recession was a thing of the past, I wrote the “Micropolis saga” about a near future where jobs were scarce and education expensive, and where it was natural to grow your own vegetables to save on the food budget. I tried to show that it was possible to find happiness in such times, and I still believe this.

Well, I probably am rich enough. I have food, clothes, a rented apartment, and a small gaggle of Android devices. What more can a man want in this world? It is nice to get a little more salary now and then, but it would have been nicer if the rest of the Norwegian workforce did not get twice that much increase. The relentless inflow of money squeezes housing prices, which again squeezes rent, which I pay. So if it were up to me, we would have wage- and salary-freeze for the next few years.

That would be nice for other reasons as well: Norwegian incomes are on average about 60% above EU average, and 25% above neighboring Nordic countries. I think we could safely take a breather now. We are awesome, but not THAT more awesome than our blood-brethren.

In America, where I have a bunch of online friends, people are gradually getting used to the new times where they will not automatically earn more money for each passing year. If they are lucky, they will keep their job, and maybe even work no more than last year for the same pay. The economy is picking up, so they say, although this is still largely for borrowed money. Now and then unemployment goes down a little, but there are still many who used to be employed but are now sliding helplessly into poverty. In a society where people pride themselves on being “self-made”, there are not a lot of handholds to stop that slide.

In southern Europe, official unemployment is extremely high in many countries. In all fairness it must be said that these nations have a large black economy, and even during the boom years many were officially unemployed, although they strangely seemed to always have money. Now that actual unemployment has skyrocketed, they may have second thought about not having paid taxes and earned pension rights and higher unemployment benefits. There is no doubt that things are pretty bad in such countries as Spain, Portugal and particularly Greece. But more than in the US, it is a shared misery. When school kids have to search garbage bins for food, as occasionally happens in Greece, you know things are pretty bad. If people had seen this coming, they would have made other decisions: Found a smaller place to live, perhaps, saved more and borrowed less. But every arrow was pointing upward for so long, people took it for granted.

This was the common theme of the rich world for so long, it became second nature. The sun rises in the east and sets in the west, and each year we earn a little more. Laws of nature. And then the sun turned.

If you can’t afford food or prescription medication, then I’d say no, you aren’t rich enough. (Somewhat depending on whether the reason is that you’ve borrowed a fortune to buy a palace, but I mean after you have tried to balance your economy.)

There are still a lot of us though who don’t face anything like poverty. I mean, basically the entire middle class and most of the working class in the first and second world are better off than my parents were when I was a child. They worked long hours and had little money. We had food and clothes, but the clothes we used at home were patched and darned and (for us kids) handed down, often more than once. Expensive luxuries like oranges were for special occasions, and chocolate and soda were known mainly from visitors – we did not buy those even for Christmas and New Years, if memory serves. On the other hand we managed to subscribe to a couple newspapers and my dad usually got me a book for Christmas or birthday or both each year, as well as some other books for himself and the rest of the family.

I don’t wish myself back to those days, but we survived. We were used to it – in fact, my parents were used to worse, so they felt pretty good about it. No invading armies since the 40es, for instance, and no rationing. Times were good.

I don’t wish myself back to those “good old days” – I rather enjoy the current affluence. But I think looking back a few decades can help us overcome the false despair induced by not getting richer and richer anymore.


Regression, not recession

Screenshot anime Hyouka

“The world is going to hell pretty quick…” says this Japanese animation. Economists used to talk about Japan’s lost decade, but now it is around two decades and the economy is still stagnant. Yet now the Japanese have grown used to it, and several other rich nations seem to have started their own lost decade or two.

As I’ve mentioned, for the last few years my friends in Europe and America have experienced something very like a recession. Unemployment stays high, wages stay low, some savings have been wiped out, there is uncertainty and a feeling that the middle class is slipping and slowly sinking toward poverty. People worry what the future will bring as the economy stagnates or shrinks. Even when the economy is growing a bit, as it is in the USA, it is powered by a large and rapidly growing government debt. How long can it last before this too fails and a new Great Depression sweeps the nation?

But if we look at the developing world, the picture is quite different. As a whole, the developing world is growing by 5% a year. Not as much as the first years of the century, but a respectable pace. And the “as a whole” includes a few countries that are still in the grip of war, civil war or dictatorship, and are not doing well at all. But most are doing well, quite well, although from a rather dismal starting point.

There has been a tendency in this direction for a while now. Many people are locked in the picture from the 1950es when a few rich countries stood out while most of the world was mired in abject poverty. People still say without thinking that 20% of the people have 80% of the wealth while 80% have 20%. But obviously this cannot continue to be just as true as it was, if the developing world is growing at a brisk clip while much of the rich world is stagnating at best.

One name for this process is “regression to the mean” (where mean is read as something similar to average, not “nasty”). It is globalization in practice. Perhaps we were just looking for cheap workers to do the things we felt too important to do anymore, but things tend to take on a life of their own. The poor never promised to stay poor, we just felt secure that they would, them being inferior to us and all. We were born to rule, we were created in God’s image and then we evolved. We had no competitors, but we gracefully allowed these strangely colored people in faraway places to serve us, as is good and proper. Well, things seem to have gotten a bit out of hand.

The poor, once they are no longer starving, have started looking ahead and improving their own lot. Their kids have gone to school and learned to read and write, and before we knew it they began to become technicians and engineers. Instead of taking just the jobs we did not want, they are now just as qualified as we and still doing the job much cheaper. So more and more work is done in developing countries, even work that we would not mind keeping here in the north-western world.

But this is not a process that goes on forever. China, for instance, used to be a low-cost country, but that is no longer the case. Well, there is still a reserve of rural poor, but it is no longer enough to supply all the cheap labor China needs. So China has outsourced cheap jobs to other, less prosperous, developing countries. Those of us who have lived a while remember when Japan caught up to our labor costs, and later Korea.

I used the expression “regression to the mean”, as in the rich nations becoming poorer and the poor nations becoming richer. But at the same time, the whole global economy is still growing. Even though some countries face shrinking incomes, others are standing still (which is not really a bad deal – zero economic growth does not mean zero money, it means no more money than last year.) And the mean, the middle, is still steadily rising. That is to say that even if we should eventually end up with the same income for workers in America and Namibia, that income will probably be closer to that of America than of Namibia, compared with before this process started.

Things could still go horribly wrong, of course. There are at least two big black swans. The one is a new major war. The Middle East could explode anytime, with Israel being wiped off the map and most Arab capitals reduced to glow-in-the-dark glass and radioactive rubble. China is likely – almost certain – to try to invade Taiwan (which most mainland Chinese does not think of as a different country but a small rebellious province). If they ever trust America to have a sane leader who is not willing to wipe out everything bigger than cockroaches rather than let a tiny island reunite with its parent country, that is. Right now, there is no such guarantee. So they bide their time. After all, for each year, China grows stronger compared to the rest of the world.

The other black swan, beyond war, is natural disaster. Global climate change is a glacially slow process – literally, because the world’s great glaciers play a key role in regulating the climate. So it will still be many years before the sea starts to flood the streets of London and New York every high tide. But other things could go horribly wrong. The supervolcano below Yellowstone could explode, as such hotspots do every few hundred thousand years. An earlier supervolcano eruption in south-east Asia almost put an end to Homo Sapiens – we were down to a few thousand at most. When Yellowstone goes off – and it is overdue – it will kill most humans in the USA in a matter of days at most and plunge the world into a temporary deep freeze. That is bound to depress the global economy for a while (and probably end the current civilization). But it could also be a thousand years from now – it has waited this long, after all.

Just as we cannot really know when the black swans will land, there are also “white swans”. We might discover safe fusion, finally (it has been 20 years in the future since I was a child). This would make energy trivially cheap for thousands of years at the very least. We could put an end to aging, possibly (although unlikely). That would certainly have some interesting effects, although we would still be mortal. We could develop technology to settle under the sea and colonize the three quarters of Earth’s surface that are covered by salt water.

So we don’t really know the future. We can only make guesses, and not very far ahead. But the current trend is one of convergence: One world, no longer first world or second world or third world. And I for one welcome our new global citizens.

Food is too cheap now

Screenshot anime GJ-bu

What is the proper way to eat hamburger and fries? No more than once a day. ^_^ Food has become so cheap that there are now more obese humans than starving ones.

Back to our world, which has its own troubles. But most of these troubles are not natural or technological or even economic, but moral: Greed, anger and ignorance. Today, let us look at the Quora question “What would be a good plan to produce enough food for everyone on the planet?

Ryan Carlyle pretty much nails it in his answer, and I am happy to say that this is the most upvoted answer at the time of writing. We already produce 2700 calories a day for each human on Earth, enough for everyone to get a little chubby. But some of the food spoils, some is wasted, and much of it is eaten by those who already are a little chubby (and then some). The real problem however is bad government, says Carlyle.

I tend to think that for the most case, bad government stems from bad culture, specifically a culture of war and strife. The most terrible places to live on earth are those where people have a tradition for war, civil wars or tribal feuds. It is impossible to have a good government in such places. Bloodthirsty people will follow bloodthirsty leaders. Those who do not feel bad about people being shot will not feel bad about people going hungry either.

If it is not obvious to you that the problem of starvation is human rather than natural, just read his explanation again until you get it. It is pretty straightforward. If there is more than enough food for all, then the problem is not in the soil but somewhere between the farm and the mouth, at least I hope we can agree on this.


What I want to bring up is related to that, but not quite the same. What would happen if all the wars ended, the dictators set their peoples free, and the ruined roads and warehouses were repaired? What would happen if hungry could finally eat their fill? The price of food would go up.

Today, because a billion people don’t get to eat their fill, there is that much more for the rest, and this presses the prices down. You may not think food is cheap, but in that case you are probably thinking of the wrong food. (Or you are reading this in the future, when various things have happened that I may or may not have predicted.) The price of food to farmers is so low that a great deal of arable land lies unused – the people who might have farmed it prefer to do things that are better paid, and buy their food in the supermarket. In the rich world, almost the only land being farmed is that which is suited for full-mechanized farming, where the work is done with large diesel-powered tractors and other farm machines. This is because if it required more manual labor, the hourly wage would simply not be worth the trouble.

If a billion more people came to bid for the same food, the price would necessarily rise. The supermarket may not look like an auction, but the food that ends up there has often passed through an auction earlier. Grain, potatoes, even cattle are auctioned. Unless you are getting your food from the local farmers’ market, chances are it has been auctioned. And even the local vegetable farmer will keep an eye on the Net to check what the current prices are.

So if all goes well, if we manage to end the wars and not start new ones (a big, big if) then food prices will go up. But this is not a bad thing. It is a good thing. First, it is a good thing because it is a sign that more people are getting food. But it is also a good thing because it means farmers will reopen their fallow fields, and small farms that would have been closed down will get new owners and continue to operate. With higher food prices, it will be worth the time to farm in terrain that is not quite as perfect for large machines. The production of food will expand until the price stabilizes, and it will likely do so on a level that is still very comfortable for us in the rich world. Even a ten percent increase in the hourly wages of the farmer would bring a lot of land back into production.

Over the last couple decades, the number of Chinese who have gone from poverty to middle class is large than the population of the USA. This means their eating habits have changed. No longer eating rice for all meals unless it is a public festival (in which case the family eats a chicken), people now eat pork and beef. It takes about ten pounds of corn to make one pound of beef (somewhat less for pork and poultry) so a lot of grain has gone into this process. But the world has not really noticed. The prices of food vary somewhat, but other factors have much larger effect. (Here in Norway, for instance, groceries have been consolidated into a few chains so the competition is less fierce. The chains have a lot of profit now, which they would not have had if we bothered to enforce competition. But food is too cheap for us to bother. Your state may vary.)

The population is expected to peak around 9.5 billion at the middle of the century, barring some unimaginable disaster (which will likely happen, but it is not clear whether this will make the number lower or higher). We can feed them all with a moderate increase in food prices. Of course, this is not a big deal in northern Europe or America. But there are other parts of the world where food is a big part of the budget. The solution to this is to let these people earn more. And this is currently happening.

While my friends in Europe and America feel like they are trapped in an endless recession, the developing world is growing at about 5% a year. That is from a low level, of course, but as Albert Einstein said, “compound interest is the most powerful force in the universe”. The next time it grow by 5%, it is 5% of a higher number. And as an old friend of mine would say: “$10 is a lot of money when you don’t have it.” For the poor, 5% more money makes a big difference. It allows them to improve their lot even more. With a bike, they may be able to commute to a better paid job in the town. With that better paid job, they may be able to afford an Android tablet. With that tablet, their kids may improve their school skills and get a better job than their parents ever could. Poverty is a deep valley, but the higher you climb, the higher you can climb. By 2050, it may not be the same parts of the world that are struggling. It may be those who are fat and lazy today.

We do not need cheaper food – we need less poverty. And we know the way to that. As the Buddha said, we need to remove the 3 poisons of the mind: Greed, anger and ignorance. The world is not Heaven, but we could make it a lot closer just by this.

Norway and Sweden

Norwegian spring - circa 2005

If not for the telltale Norwegian flag, this picture from a half forgotten spring day could just as easily have been from neighboring Sweden.

The “brother kingdoms” of Norway and Sweden should be of interest to all of the world, for the way they illustrate what really matters in a highly developed country.

The two nations share the Scandinavian peninsula, my native Norway to the west and Sweden to the east. Most Norwegians are genetically indistinguishable from Swedes (and Danes), the culture is very similar, and even the languages are mutually comprehensible. Well, older Swedes may have a hard time understanding Norwegian unless they are paid for it, but the reason for this is psychological. For centuries, Sweden was the big brother, not just in population but in prosperity and culture as well. From 1814 to 1905 Norway was basically as Swedish province, but gained independence peacefully after a dramatic cultural revival in the latter half of the 19th century, led by world-famous names such as Ibsen (playwright), Grieg (composer), Munch (painter) and Vigeland (sculptor). This golden age turned out to be temporary, and Sweden remained the leader of the Nordic countries.

Then in the 1960es, Norway won the nature lottery: Under the North Sea lay enormous reserves of oil and gas. Over the next decades, great wealth started flowing into the country: Mostly directly to the state through oil taxes and ownership, but the high-tech oil supply industry also earned large amounts of money. By now, a Norwegian worker is likely to earn substantially more than his or her Swedish counterpart, and pay less tax. For some years now, the UN has declared Norway the world’s best country in which to live. Some envy from the Swedish side cannot be avoided, but there is actually less reason for it than one might think.

It is true that a Norwegian worker (or pensioner) has quite a bit more money left after tax. But it just so happens that most things are more expensive in Norway too. Food is so expensive that Norwegians who live near the border often drive to Sweden to buy their groceries for the week, and even on the south coast people take the ferry to Denmark – a rather long trip for something called a ferry – to buy meat and alcohol. Alcohol is expensive in both Norway and Sweden, but even more extreme in Norway. But it is not just food. Books are substantially more expensive in Norway, cars are a lot more pricey, and housing is disturbingly overpriced. (In Oslo prices are comparable to the world’s largest trade centers such as London, New York and Tokyo, with 10-20 times the population density.)

The surprising result is that the living standard in Norway in Norway is only marginally higher in Norway than in Sweden. Indeed, for a large family the costs of housing and food in Norway may make it harder to make ends meet than in Sweden. (That said, large families are rare in either country these days.)

It seems that while money has poured into the Norwegian economy, there has not been a corresponding increase in the things you can buy for money, and so the prices have risen to meet the newfound willingness to pay.

There are some exceptions to this. One is goods that are anyway directly imported from overseas, such as electronics and everyday clothing. Scandinavians also increasingly import music, video and English-language books from abroad, in which case the nominal wealth of Norwegians translate directly into purchasing power. And with both nations having legally enforced 5 weeks vacation, it is also customary to visit foreign countries each year, where the strong Norwegian currency makes the winter-pale Norwegians into princes and princesses.

But for most of the year, the difference in nominal income makes very little difference to the actual standard of living. There is a lesson to learn from this, I think. It is true that for a developing country, lack of money is a big problem. But for the world’s richest countries, GDP growth is no longer really important. Streamlining public services and reaching compromises on political issues contributes more to the wellbeing of the people. A number of countries should pay heed to this and perhaps take a long good look at Sweden now that their own economies are faltering. Perhaps they can get some hints there.

Norwegian economy: Secret inflation

Apartment buildings are cropping up in areas where there used to be single-family homes with apple gardens. But even these are not many enough or arriving fast enough.

For most Europeans, Norway must seem like a (slightly chilly) paradise these days. While “austerity” is the new trend elsewhere, Norway has returned to its continual boom after a short break during the financial crisis, a break mainly caused by European banks refusing to give credit to our trading partners. Norway today has almost no unemployment and in fact a chronic shortage of some types of workers. Guest workers from Europe have the option to immigrate, and many are taking it. Of course, we are a high-tech country and we don’t really need loafers. Our productivity is very high, and those who can’t keep up are not going to stay employed for long. Even public sector jobs are gradually becoming like that.

That said, wages and salaries are rising for almost everyone, although of course not equally. So it may seem like a paradise. Income is rising and there is almost no inflation! Well, about that…

What with all the people moving here, there simply aren’t enough houses for everyone to live the way they want. People who would prefer to live in a large house, live in a smaller house. People who would prefer to live in a small house, live in an apartment. People who would prefer to own, are renting. Now you may say: “This is how it always is. Desire always exceeds opportunity.” True! But the thing is, housing is getting expensive at a rapid pace. And since all need to live somewhere, it is actually inflation. It is just not evenly distributed. Those who already own a home, don’t notice it except in taxes, and only moderately even then. But the moment they want to upgrade to a larger home, they will find that these are rather more expensive than they used to be. So although they are theoretically growing richer at a rapid pace, they are actually not able to upgrade as they normally would. So: Inflation, but nobody must know it.

Of course, it gets pretty obvious for us who rent. Looking for other apartments without night parties upstairs, I can’t help but notice that the prices are rising steadily, by about 15% a year. Given how large a part rent is of monthly expenses, it is a pretty hefty inflation. If your taxes were rising like that, you’d vote for a different government next time. But due to the camouflage inherent in home ownership, people are actually happy with this inflation. They forget that they don’t really have the option, to sell their home and spend the money. Sure, they can borrow more money against it for each year, if they so desire. But borrowing has never, in itself, made anyone richer. If they invest that money wisely, perhaps. Do you know anyone who does that?

If this seems vaguely familiar, it may be because I warned Americans when they were making the same mistakes we are making now. Even though Norwegians have had the opportunity to point and laugh at the stupid foreigners (both American and European), nobody wants to believe that we have a problem here. It is different with us. “It is typically Norwegian to be good.” (Actual quote by a former Norwegian Prime Minister, although opinions are divided as to whether there was a hint of irony in it. It became a popular saying, anyway.)

Moving to Norway (if you can work smart enough to be the most productive in the world with a short workday and long vacation) is still a good option, but you should not have high expectations about home ownership for the first years unless you have a job title that ends in “Executive Officer”.

Jobs are obsolete

In the life simulation game The Sims 3, anyone can live off painting, sculpting or writing books, if they have the patience, although the talented will earn more. In real life, few would trust such a hobby to feed them. But what if they already had food and a roof over their head? Might they be tempted to try to add to their income through art then?

The age where paid work is the measure of a man, that age is coming to an end. What will we do to distribute money after jobs?

It has been going on for a while already. In most of the western world, unemployment is high and chronic. Here in Norway, unemployment is low, but disability pension is widespread. This may be a more realistic take on it, for the old jobs will never come back, barring a disaster of horrifying dimensions. I am not sure we would even physically survive such a disaster. So disability it is, in a matter of speaking. But many of these men and women are not in pain or bearing visible scars. In fact, a study a few years ago told us that the disabled rated their health on average as better than those who were still working!

Rather, it is generally assumed that if a person cannot be gainfully employed, they must have some kind of illness that prevents it. As pretty much all of us have some kind of illness or weakness, especially after years of constant stress, there is usually some hook to hang the coat on. But in many cases, people simply don’t have the intelligence and concentration needed to work in the Information Age.

We may need a stupidity pension, and we may need to make it almost universal. For every year and a half, computers double their processing power. Artificially intelligence remains out of reach, it seems, but we are still able to automate more and more tasks. And machines that we don’t think of as robots, still contain more and more computing technology. And don’t be sure you can always get a job as a taxi driver: Self-driving cars are now allowed to drive on roads in Nevada and California.

The office assistants who used to fetch documents in file cabinets and file them away after use are long gone. I started my adult working career as such an assistant (although I got into a different job at the same place a year later). Today, I would probably have needed to stay in school for another three or four year to get into what is the new entry-level job. Some years from now, today’s entry-level jobs will most likely not exist either. People may need to stay in school till they are 30, and only work at highly specialized jobs. On the other hand, the profit from those who work will be very high. We may discuss whether they ought to keep that money or whether the owners of the businesses should keep most of it (in so far as these are still different people). But what about those who are patently unable to study for 25 years? And what about those who educated themselves for jobs that disappear?

An unfair but practical solution is to give a small “living wage” to everyone, whether they work in the traditional sense or not. The idea is that a human life probably has a value even if you are not employed in the traditional sense. You probably have relatives and friends who appreciate your existence, for instance. We might take the conservative approach and tell those relatives and friends to keep you alive if they think you are worth it, but this will likely cause even more resentment than taxation does. Given that those who are employed will earn a lot of money even after tax, it may be easier to give a “living wage” to everyone, and leave it to their own inventiveness if they want to earn more money. Of course, some of that inventiveness may take the form of crime. But not having food and a place to sleep is no less likely to lead to crime. And if we are not going to let people starve on the streets anyway, we may as well give a modest amount to all instead of a larger amount to those who are good at imagining illness. (For instance, whiplash symptoms tend to fade within a few weeks after compensation is paid.)

There is a lot of economic activity already that does not take the form of jobs, exactly. People make various goods and sell them, or perform services against payment without a regular employment. I hope to see much more of this in the future. Many humans are quite creative.

So I expect jobs and freelance supplemental income to coexist for a long time, but the jobs becoming fewer and more specialized, while the informal economic activity grows. But I may be wrong. I may have to confer more with the voices in my head to know for sure. But for now, they are telling me to hang onto my job. ^_^


There is something called “first world problems”, but I think this one must be categorized as a “zeroth world problem”:  I have a straight salary, no variable parts, no overtime. (Travels, which I avoid when possible, are refunded separately.) Now today it was payday again, and for some reason I felt the urge to know how much I was receiving. But unfortunately the corporate website hosting my electronic pay stub was overloaded, so I could not find out until after closing hours.

I might want to interpret this as “I am not particularly interested in material goods”, but my new computer would like to argue the opposite. Perhaps it is more that I have lived for so many years, I can’t really go around remembering how much I earn for each year. It will surely change again if I live for another year. Probably upward, although I am not sure this is in my best interest. The more expensive we are compared to foreigners doing the same job, the greater the profit that may be had by outsourcing our job.

But for now, we here in Norway seem to think the trees will grow into the sky. Of course, that’s what I remember from my American friends some five years or so ago, too.