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Monday, June 24, 2024

Growth demands ‘political brutality’

It’s time to change the way public sector investments from roads to schools are chosen and managed in Norway, Finance Minister Siv Jensen was told on Tuesday. An expert group led by a professor from Trondheim dashed politics that favour development in outlying areas over cities,  and said the government will need to exert some “political brutality” in order to boost productivity and maintain economic growth.

Finance Minister Siv Jensen receives a lot of reports, but the latest aimed at boosting public sector efficiency and national productivity is likely to get a lot attention. PHOTO: Finansdepartementet
Finance Minister Siv Jensen receives a lot of reports, but the latest aimed at boosting public sector efficiency and national productivity is likely to get a lot attention. PHOTO: Finansdepartementet

The 10-member group led by Jørn Rattsø, a professor of economics at The Norwegian University of Science & Technology (NTNU), handed over its first report to the government after being commissioned by Jensen last year to find ways of reversing a sharp decline in productivity in recent years. The report is sure to spark protests from, for example, the Center Party and others who advocate major public sector investments far from population centers.

The group has documented how Norwegian politicians all too often have approved major investment projects that benefit far too few people, are poorly managed and plagued by huge budget overruns. Costs in general are way out of line in Norway, according to the group, while schools are mediocre, university students take too much time to earn degrees and mainland businesses outside the oil sector lack enough prestige to help Norway diversify its oil-based economy. The group mostly blamed the decline in productivity, though, on systemic inefficiencies and too much emphasis on local interests at the expense of the nation.

“A lot of special interest groups will fight against many of the measures we propose (to counter the inefficiency),” Rattsø told newspaper Aftenposten. “So a lot of this will demand an appropriate dose of political brutality. The gain will be a more efficient economy in the future.”

Huge challenge that must be tackled
Rattsø realizes that it will be demanding to change political processes in Norway, to establish new rules for more efficiently carrying out projects and to meet the dire need to improve public sector management and accountability. Roads in Norway shouldn’t cost 60 percent more to build than they do in Sweden, for example, even after costs are adjusted for Norway’s higher wage levels. The education system, for example, can’t be improved in just a few years either, Rattsø noted, but added “that just shows how important it is to get started.”

Members of group he leads represent various sectors of the Norwegian economy, including the head of the student loan financing agency Lånekassen, the head of the state competition authority, a bank director, the head of a large local hospital, other professors and a special adviser to the finance ministry. “We’re trying to diagnose the Norwegian economy,” Rattsø said. “A lot is good, but there are great possibilities for improvement.”

His group flatly states that cities are “more productive” and offer the best return on investment. More investments, especially in transportation, need to be made in urban areas than in outlying areas. The group recommends far more investment in regional cities, though, to avoid centralization in the Oslo area. “Strong regional cities are the best means for spreading development and ensuring growth in productivity,” Rattsø said.

He praised the current government’s efforts to promote and even force mergers of local governments around Norway, as a means of streamlining transportation projects, regional development and improving schools, which are administered and funded at the local level in Norway.

Long list of proposals
The group’s list of proposed measures to boost productivity is long, with the group’s first report amounting to 555 pages. Among them: Tougher demands on teachers and students alike, with more emphasis also on vocational programs to lower the drop-out rate from high schools; more emphasis on science and less on economics in the schools; clearer goals for transport plans and clear lines of responsibility on specific projects; and better ties between education, research and business.

A need for far more accountability runs through all the proposals. Profitability and the overall purpose of a new highway, for example, “must come before local interests and groups,” the group wrote.

The report seems to support and even justify the government’s own calls for improvements in productivity and public sector investment. Prime Minister Erna Solberg recently spoke of the need to invest in areas where people actually live and where infrastructure improvements are critical. Finance Minister Jensen will now take the report under advisement, and newspaper Dagens Næringsliv (DN) reported she intends to use it as a basis for next state budget for 2016. Berglund



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