NORWAY ON THE MED?:

Gaddafi 'to hand out oil money' (BBC, 8/30/08)

Libyan leader Muammar Gaddafi has said oil profits should be given directly to citizens, as part of sweeping economic and political reforms.

Speaking during celebrations to mark 39 years in power in Libya's second city, Benghazi, Col Gaddafi extolled the virtues of privatisation.

The Libyan leader said society would "reformulate itself in a new, free, and democratic way".

The changes will take place in the next four months, he said.

"The money that we put in the education budget, I say let the Libyans take it," Col Gaddafi said in a 100-minute televised speech to the General People's Congress, Libya's equivalent of a parliament.

"Put it in your pockets and teach your kids as you wish, you take responsibility."

"As long as money is administered by a government body, there would be theft and corruption". [...]

The BBC's Rana Jawad in the capital, Tripoli, says a leader who once favoured socialism seems to be fully embracing capitalism.

It would actually be better for him to follow a more socialist example here, but getting his country out from under the curse of oil would make him as significant a figure as he's always longed to be, Avoiding the Oil Curse: What Norway can teach Iraq. (Daniel Gross, Oct. 29, 2004, Slate)

Political scientists like to talk about the " 'curse' of oil." Over the past several decades, we've seen the sorry economic state of affairs that ensues when tribal kingdoms, authoritarian regimes, kleptocracies, and left-wing dictatorships get their hands on national oil revenues. Easy oil cash entrenches corrupt establishments, discourages sound long-term economic planning, and is almost never channeled in ways that promote development.

Iraq is on the verge of finding out whether it will succumb to the curse or defeat it. Norway offers an interesting model for the Iraqis to consider. Assuming things ever calm down, Iraq will decide how to use the nation's oil wealth to benefit its putative owners—the long-suffering Iraqi people. More than a year ago, Steven Clemons of the New America Foundation suggested that Iraq duplicate the Alaska Permanent Fund. Established in the 1970s, the fund guarantees that at least a quarter of all oil revenues received by the state be invested on behalf of the state's hardy residents. It has grown into a huge, highly diversified mutual fund. According to its September 2004 report, the APF has about $28 billion in assets. Each year, it pays out dividends to qualified residents—$919.84 per person. And in many ways, it's a classically American approach—built on a concept of individual ownership and intended to spur demand and consumption. Last year, the fund injected about $581 million into the state's economy.

Norway has pursued a classically Scandinavian solution. It has viewed oil revenues as a temporary, collectively owned windfall that, instead of spurring consumption today, can be used to insulate the country from the storms of the global economy and provide a thick, goose-down cushion for the distant day when the oil wells run dry.

Less than 20 years after they started producing oil, the Norwegians realized their geological good luck would only be temporary. In 1990, the nation's parliament set up the Petroleum Fund of Norway to function as a fiscal shock absorber. Run under the auspices of the country's central bank, the fund, like the Alaska Fund, converts petrodollars into stocks and bonds. But instead of paying dividends, it uses revenues and appreciation to ensure the equitable distribution of wealth across generations.

Here's how it works. Cash flow from the government's petroleum activities—the state owns 81 percent of the aptly named Statoil—is funneled into the fund. Last year, the total came to 91.9 billion kroner (about $14 billion). The fund then hires external managers to invest, generally using low-cost indexing strategies. It's conservatively managed—more bonds than stocks, and investments divided equally between Europe and the rest of the world.

Of course, the fund's history reveals some of the pitfalls of having socialists manage oodles of cash. The fund didn't start to invest in stocks until 1998, thus missing out on a big chunk of the boom. In 2001, it started a sub-fund to make eco-friendly investments—good social policy, dubious asset-management strategy.

But the huge balances mean Norway can happily continue to be heavily socialist without confronting the problems that its Euro-neighbors to the south face—unemployment, high inflation, and huge national debts. Yes, fiscal budget expenditures were a whopping 38.3 percent of gross domestic product in Norway last year. But the country still runs a budget surplus. Last year, per-capita GDP was a healthy $51,755, and both unemployment and inflation are low.

MORE:
Kadhafi: Conflict with the US is over (Al Bawaba, 01-09-2008)

Libyan leader Moamer Kadhafi said his regime's long estrangement from the United States was finally over as he marked the 39th anniversary on Monday of his overthrow of the Western-backed monarchy. "The whole business of the conflict between Libya and the United States has been closed once and for all," Kadhafi said in an anniversary speech to the General People's Congress.

"There will be no more wars, raids or acts of terrorism," said Kadhafi, according to AFP.

Posted by Orrin Judd at September 1, 2008 1:13 PM