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September 07, 2005

Farmann focus: Norway number one?



Norway ranked as world’s #1 country by UN.

The United Nations Development Programme – UNDP – is releasing today the Human Development Report – HDR – for the year 2005 . In it the Human Development Index – HDI – ranks the world’s countries. The Human Development Index ranks countries by three variables, GDP per capita, knowledge level (school enrolment and adult literacy) and life expectancy. In the HDI for 2005 the country of Norway is ranked as the #1 country, making this year Norway’s fifth consecutive year on the top. Read on...

Business magazine Farmann criticizes the report: ”While we appreciate that Norway has been named the #1 nation according to this index, we want to arrest anyone thereby inferring that Norway is the best country in the world in which to live, something we find dubious. What this report says is that Norway according to these three variables ranks as #1 in the world. But how relevant are these variables?

The UNDP measures through its HDI three basic aspects of human development. Norway is a small homogeneous population that currently is experiencing enormous wealth due to oil production and historically high oil prices. This wealth can hardly be attributed to the hard work of Norwegians, but must rather be viewed as an enormous windfall gain.


Due to the oil production per capita income is nominally very high. Also, one needs to remember that this is not money that benefits the pockets of Norwegians. Rather this money is put into the state budget and into the swelling Norwegian petroleum fund, making the state rich – as if it were not powerful enough without that wealth. Norway has a small population of 4.6 million people on which to divide the oil income. Naturally this means more money per capita than for example the UK which needs to divide her part of the North Sea oil on her 60 million people. The Norwegian welfare state sees to it that the very young and the elderly are taken care of in institutions. Hence, taking care of the young and the elderly is part of the GDP. We need to ask ourselves if the transfer of these responsibilities to institutions represents a step towards a higher level of development. Moreover, given the “best place to live” interpretation, it is even more important to ask ourselves if this transfer has made Norway a better place to live. One of the things the Norwegian government does with the oil revenue is to provide an extensive free education system. Free education naturally encourages people to study more and stay in school longer – more and longer than what might be strictly necessary for the education they are pursuing. This is a large part of the reason why Norway has such a high rate of people enrolling in schools. Note also that measuring the combined gross enrolment ratio for primary, secondary, and tertiary schools says nothing about the quality of the education. And the quality of education is vital to the basic aspect of human development of knowledge. With few real budgetary restrictions the Norwegian government is also employing a huge number of new graduates making an artificially large market for people with higher education in fields like sociology, dance, cultural sciences, political science, minority studies, and other professions that might reasonably be expected to have had a harder time finding employment in a more competitive market economy. The high average life expectancy is mostly due to the homogeneous population with few minorities dragging the average up or down.

We would also have liked to see economic freedom as an aspect of the index. We do concede that economic freedom is not so relevant for human development as for whether a place is a good place to live. However, it is relevant. Moreover, we realize that economic freedom is partly measured indirectly through the standard of living – or GDP per capita. However, when a country is soaked in wealth from natural resources, it needs less economic freedom to get a high GDP ranking.

We have yet to see any quote by any representative of the UNDP, or the UN as such, stating that Norway is the best country in the world in which to live. The UNDP is measuring human development, and as the UNDP itself says in its FAQ: “Is the HDI enough to measure a country’s level of development? – Not at all. The concept of human development is much broader than what can be captured in the HDI, or any other of the composite indices in this Report.”

Norway has a general election coming up on September 12. This expect that this report will be used extensively by the current government to tell voters that Norway is the best place in the world to live. It is important that this statement does not go uncontested.

The “Norway is the best place in world in which to live” misconception is generally due to media disconnecting their critical role in order make headlines. Politicians are no better, using this “interpretation” as documentation of “good policies.” We do, however, concede that a high ranking on the HDI contributes to making a country a good place to live, but the top ranking is by no means any documentation that this country is THE best place to live.

Link to UNDP

Contact: Farmann editor Hans Jorgen Lysglimt - Phone: 00 47 92 41 05 10 - Email: info@farmann.no

Farmann is an independent Norwegian business magazine.

Posted by Farmann at September 7, 2005 08:40 FM


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