Norway must prepare for the time when oil revenue no longer fuels the economy

Norwegian economist Karen Helene Ulltveit-Moe got where she is by speaking out. Now that she’s joined the board of the country’s central bank, she’ll have to learn to zip her lip in public.
She quit a committee charged with making industrial-policy recommendations in 2005 to protest how it was reaching its conclusions. Her research challenging a tax break for the shipping industry landed her in front of a parliamentary group to explain her findings. She’s been among the strongest voices saying Norway must prepare for the time when oil revenue no longer fuels the economy.
Ulltveit-Moe, 46, is at one of Norway’s most consensual institutions. She was named to the bank board in December and participated in the decision to keep the key interest rate unchanged at 1.5 percent, announced today. Her career also includes being the first female professor in the University of Oslo economics department and serving on a dozen corporate management and advisory boards.
As a Norges Bank executive-board member, Ulltveit-Moe will have to get used to raising what she calls her “independent voice” only within its walls. Minutes of meetings on monetary policy andinterest rates aren’t made public for 12 years because the body makes decisions by consensus. It also oversees Norway’s $850-billion sovereign oil fund, the world’s largest, and thus will grapple with solutions to declining oil revenue

Questioning Forecasts

“She is certainly a person who speaks her mind, even if that means being very critical about what other people are saying,” said Karolina Ekholm, a deputy governor at Sweden’s central bank. Ulltveit-Moe “needs to be able to question economic forecasts and policy proposals, even if everyone else agrees with them.” The two women have collaborated on research on trade, multinational companies and foreign direct investment.
Ulltveit-Moe says she doesn’t regret stepping out of the public arena. Being on the board “really gives you a more direct influence than just promoting your views through the press,” she said in her 10th-floor office with a view of the Oslo Fjord. “It’s very important for the bank to have a coherent voice and not to confuse the markets.”

Corporate Boards

Just before she joined the Oslo faculty, she withdrew from a government-appointed commission charged with making recommendations on how policymakers should support industries. The expected conclusions, she said, “were absolutely not based on sound economic principles.”
She has served on the boards and corporate assemblies of 12 Norwegian companies, includingStorebrand ASA (STB), the nations’ second-largest insurer, and aluminum producer Norsk Hydro ASA. (NHY)
While on the board of state-controlled Gassnova SF, which advises on carbon-capture projects, Ulltveit-Moe in 2011 objected to continuing with a full-scale plant along the lines proposed byStatoil ASA. (STL) The project, dubbed Norway’s “moon landing” by then-Prime Minister Jens Stoltenberg, was scrapped last year after cost overruns and delays. Ulltveit-Moe wasn’t re-elected to the board.
She took “a principled view” on how money should be spent “relative to the task that was on hand,” said Johan Nic Vold, managing director of nonprofit Oslo Energy Forum and chairman of Gassnova at the time.
“She is very good at translating her theory of economics into practical views about how society should function,” Vold said of Ulltveit-Moe’s engagement in public debate.

Oil Diversification

Ulltveit-Moe argues that the oil fund, holder of 1.3 percent of global stocks, will fail to benefit future generations unless other sources of income are found. Offshore crude, discovered in 1969, has made Norway the second-richest nation in Europe per capita after Luxembourg. The country will hit a wall in 2035 when oil runs out, she said in a September opinion piece in business daily Dagens Naeringsliv.
“I look at how much the oil has meant to the economy and how different Norway is today from what it was when I grew up,” she said in the interview. “We’re very spoiled compared to what we were a couple of decades ago. It’s going to be hard to keep that up.”
She isn’t alone in arguing for a more effective use of oil funds. Hilde Bjoernland, professor at Norwegian Business School in Oslo, has led research on wage growth in the industry and says it’s putting more and more pressure on pay in non-petroleum sectors.