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I have been reading a lot on the rentier state literature and have noticed that papers published in the last two decades focus on the typical rentier cases such as Saudi Arabia or Venezuela. However, older literature used to mention Norway as an example, which was confusing to me because I always thought of rentier states as non-democratic countries that are resource-dependent, so I decided to research basic statistics about Norway that are often used to assess whether a country is a rentier state or not, and I was surprised by the descriptive characteristics of Norway.

First, one-third of citizens remain employed by the Gov't, oil currently represents 64% of total exports, 49% of total government revenues, 33% of its GDP, and the oil sector employs around 19% of residents in the country. If we apply the technical definition in the rentier literature, any country that relies on a natural resource for 40% or more of its government revenues is likely a rentier country.

Perhaps there is no rentier mentality amongst citizens in the same magnitude as Venezuela but surprised to learn that the country is still heavily-resource dependent.

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    Alaska is likely a better State that models this. Texas has some diversity to it's economy.
    – hszmv
    Apr 20, 2023 at 14:45
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    There's also not a universally agreed method to define these notions academic.oup.com/wbro/article/36/2/164/5813434 In terms of oil resources (reserves) per capita Norway has way less that the Saudis. Apr 20, 2023 at 15:33
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    Because you're talking about "mentality"? Apr 20, 2023 at 15:43
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    Rentier mentality in the literature refers to the expectations that the government provides you with a cushy public sector job, it has nothing to do with oil resources per capita. See this decent paper: eprints.lse.ac.uk/103042/1/… Apr 20, 2023 at 15:47
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    "oil currently represents . . . 49% of total oil revenues" Did you mean government revenues?
    – ohwilleke
    Apr 20, 2023 at 16:46

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In my estimate, Norway is currently a rentier state (extracting signigicant revenue from the sale of natural resources) but not a resource-dependent country.

  • Oil wealth and the sovereign savings fund it created boosts the standard of living. If you look at GDP per capita, Norway does better than Denmark, Sweden, or Finland.
  • Norway has a sufficiently diverse economy, and a sufficiently stable democracy, that it probably could earn a similar per capita GDP to other nordic nations if oil was to disappear.
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    Norway gets 4.3% of its GDP from oil v. 32.2% Iraq, 31.9% D.R. of Congo, 24.0% for Angola, 19.4% for Oman, 17.7% for Saudi Arabia, 17.2% Iran, 11.7% for Qatar, 11.4% for Venezuela, 10.2% for Algeria, 1.1% for Canada. data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS So, it is less rent dependent than many petro-states, but at the high end of the developed world.
    – ohwilleke
    Apr 20, 2023 at 15:23
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    @ohwilleke Not sure how oil rents are calculated in the WB data, but according to the Norway oil producing firm, the industry represents 33% of the country's GDP: norskpetroleum.no/en/economy/governments-revenues Apr 20, 2023 at 15:32
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    Good question, around 27.4% as of Q4, 2022. stats.gov.sa/sites/default/files/GDP%20Q042022E_1.pdf Apr 20, 2023 at 15:44
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    More precisely, according to the latter, in SA: "The petroleum sector accounts for roughly 87% of budget revenues, 42% of GDP, and 90% of export earnings." For Norway: "12% of GDP, 13% of the state’s revenue, and 37% of exports, according to official national estimates". I suspect however there is a lot of variation from year-to-year, particularly in recent times. Apr 20, 2023 at 16:59
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    @Fizz The data in both sources you provide is outdated. Not sure if you are aware, but Saudi Arabia has went through a drastic economic transformation in the past few years with some notable success, read the article below: arabnews.com/node/2083841/business-economy Apr 20, 2023 at 19:58
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If we rely on the technical definition, than reliance on natural resources does not mean that the state should be non-democratic. One could perhaps argue that a non-democratic regime would have easier time staying in power, if it has an "easy" source of income, to calm the dissent among citizens by granting generous benefits. However, the same reasoning also explains the generous social policies and high level of government employment in Norway - the state spends money in order to make its citizens happy (though in a more accountable manner.)

Another thing to keep in mind is that comparing percentages is misleading when comparing countries of different size. Norway might have the same level of scientific and technological development as the US, and similar density of industry, while producing less oil than a single US state... and yet, the proportion would be very different. What could be a harsh verdict for a country with hundreds millions of people, is not so much of a problem in a country with population of 5 million.

Then, again, comparing to a place like Israel would draw a different picture again.

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Norway is clearly democratic, so linking it to a "rentier model" that postulates bad governance due to resource reliance seems somewhat of a stretch.

However, the Dutch Disease economic model that talks about over-reliance on resources and the effect on the wider economy seems a match. This model, concerned about economics rather than governance, applies just fine to highly democratic countries, which need to mind its effects on their economies.

In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agriculture).

The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959.[

Another way to look at this is also compare to the Tax-to-GDP ratio in Norway to other economies. Compared to other OECD countries, Norway's is not especially low. However, it is quite a bit lower than the ratios of its Scandinavian peers which run similar social policies.

Note that, when discussing Norway's economy it is sometimes claimed that Norway was "poor until gas was discovered", which lends credence to Norway being a one trick pony. However, that claim is questionable.

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  • Thanks for the thorough response. I agree that it's an advanced and stable democracy, however, some macro indicators suggest that it might be relying too much on one source for revenues. After all, if oil represents 65% of a country's exports, I would argue that it's a reflection of some bad governance. norskpetroleum.no/en/economy/governments-revenues Apr 24, 2023 at 13:16
  • @nesta1992: Why should a government want to hurt their exports just to lower an fairly arbitrary percentage? This answer points to a more fundamental reason, that looks beyond a single number.
    – MSalters
    Apr 26, 2023 at 12:24
  • @MSalters because we know from other historical examples like Netherlands and Venezuela, that relying on one source for gov't revenues and/or exports negatively changes the behavior of other producers/sectors in the private sector throughout time. I recommend familiarizing yourself with the writings of Steffen Hertog, Michael Ross, and Luciani on the Dutch disease across different political contexts. Therefore, as a gov't, you should have an incentive to reduce (not hurt) your oil exports to avoid the disastrous consequences of the Dutch disease and a rentier mentality. Apr 26, 2023 at 13:05
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Venezuela, Saudi Arabia, and Norway can all be called "rentier states", but the circumstances differ.

Venezuela came into its oil riches fairly early, in the 1910s and 1920s. Even before that, Venezuela was not a stable state, with the country alternating between left wing and right wing autocracies, occasional interspersed with democratically led governments. Instead of inspiring democracy, the country's oil wealth inspired those with aspirations of autocratic rule to take the reins.

Saudi Arabia came into its oil riches in the 1940s and 1950s. This was after the Saud family had already conquered almost all of the country and cemented their absolute monarchical rule. The discovery of massive oil deposits helped cement that rule even further. While there have been assassinations and rivalries, those have been intrafamily. The Saud family has partially ruled for over a century, and has ruled completely for over 50 years.

Norway came into its oil riches rather late, in the 1970s. By that time, Norway had already settled into being a fully democratic state with significant freedoms for the press and for individuals, and rights for those accused of crimes. All that the oil riches did was to make life easier for Norwegians. The killings, tortures, and inhumane treatments attributed to Venezuela and Saudi Arabia would be highly reported in Norway and not be tolerated there.

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  • Thanks for the thorough and clear explanation. Is it fair to say that Norway and Indonesia are the only cases that are rentier and still able to retain democratic values despite their oil wealth? Apr 24, 2023 at 13:23
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No. Norway is not a rentier state and being a democracy or not has nothing to do with it. In a rentier state a part of the population is employed in the exploitation on the commodity the state lives on and they are the only productive sector of the state. The rest of the population live off those revenues.

In Norway the small population can only create a small alternative economy, the size of the oil revenues overshadows the rest. But that does not mean that the smaller component is not vital. Quite the opposite. The previous link shows that almost half of the exports are not related to oil. The overall economy comprises a developed financial sector, hydroelectric, telecom and ICT, tourism and other sectors.

Your misunderstanding may stem from the fact that lack of democracy also involves corruption. Corruption often creates an elite that does not produce anything, they just live off the resources produced by others. The size of that elite is determined by two opposing factors, the bigger it is the more stable their power is, but the higher is the damage on the country revenues. So a corrupt country can maintain a big elite only if they have very valuable resources, therefore only states that fit the definition of rentier states may fall in this group. But it is not necessary.

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    Thanks. The data source you provided on exports are outdated. The current 2023 figures show that 65% of exports come from oil, which represent 33% of the country's GDP. The oil revenues from 2022 were approximately 48% of the government budget. As mentioned in the post, if we rely on the technical definition from the literature, any country that relies on one resource for 40% or more of its revenues is a rentier state even it's democratic. norskpetroleum.no/en/economy/governments-revenues Apr 24, 2023 at 13:19
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    @nesta1992 The figure of 65% was due to the spike in oil prices triggered by the war in Ukraine. This is something driven by the whole world economy and again it shows how a small country can see its real economy eclipsed by it. But on the other hand I think you misunderstand the definition of rentier country. Using a simple figure as a threshold to make the classification is a blunt oversimplification. In a rentier country the rest of the economy has no vitality, subpar productivity.
    – FluidCode
    Apr 25, 2023 at 10:39
  • I am not the one using using a single figure to determine whether it's rentier or not, most prominent scholars on rentier states do, however. I suggest familiarizing yourself with the writings of Hertog, Michael Ross, Beblawi ,and Luciani. Apr 25, 2023 at 12:40

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