Norway’s prosperity paradox: rich wages, timid capital

The North Sea has made Norway one of the world’s richest nations. Average household disposable income stands at roughly USD 39,000 a head, far above the OECD mean.oecdbetterlifeindex.org  Oil revenues feed a sovereign-wealth fund worth more than twice the country’s GDP. Yet growth is sputtering, private investment is anemic and voters keep asking the state to step in. The malaise lies not in public finances—which are in rude health—but in the behaviour of the private economy.

Fat pay packets, skinny balance-sheets

On paper Norwegians look asset-poor. Median household net wealth is USD 268,000, lower than the OECD average despite the lofty incomes.oecdbetterlifeindex.org  The explanation is leverage. Property dominates personal portfolios and homes are bought with large mortgages. Household debt is more than 210 % of disposable income, one of the highest ratios in the rich world.tradingeconomics.com  A recent loosening of the loan-to-value cap from 85 % to 90 % will push the pendulum further toward debt-fuelled housing.reuters.com

Saving without investing

Norwegians do put money aside: the household saving rate hovered around 7–8 % in late 2024.tradingeconomics.com  But those krona seldom power domestic enterprise. Mortgage repayments absorb a chunk; the rest is channelled automatically into pension plans or the Government Pension Fund Global, which invests almost entirely abroad. In an open economy S = I is an accountant’s identity, not a local reality: savings fly overseas, investment stays grounded.

An economy propped up by the state

Government still tries to fill the gap. Public investment accounts for roughly one-fifth of all fixed capital spending, among the highest shares in the OECD.regjeringen.no  Yet Mainland GDP in 2024 crept ahead by just 0.6 %, while business investment outside oil and gas barely budged.ssb.no  The problem is not a shortage of cash but a shortage of risk appetite. A generous welfare state mutes the pain of inaction; tight regulations and a wealth tax that bites harder on financial assets than on property nudge capital into bricks rather than business.

What would stir animal spirits?

1. Level the tax code
   Cut the wealth-tax surcharge on shares and unlisted firms. Today entrepreneurs pay more to own a factory than a flat, so unsurprisingly they buy flats.
2. Deepen capital markets
   Broaden the pool of domestic equity finance. Norway’s stock market is energy-heavy; tech start-ups still hunt abroad for late-stage capital.
3. Tackle housing bias
   Phase in tighter mortgage deductibility and restore the 85 % loan-to-value ceiling. That would cool house prices and redirect savings.
4. Loosen product-market rules
   Simpler licensing and zoning would lower entry barriers, enticing firms to scale rather than sit on cash.

None of these steps demands extra public money—just political nerve.

High income, low energy

Norway’s oil endowment secures high salaries and enviable public services. But prosperity built on wages and mortgages is brittle. Unless private capital finds the courage to invest at home, the sovereign fund will keep booming abroad while mainland growth idles. The state has already done “more”; it is time for households and firms to do the same. Without that shift, Norway will remain a land of rich pay slips and poor dynamism—a prosperity paradox in plain sight.