Sharing for prosperity

Thank you for the very warm welcome and kind introduction.

It is always exciting to be here in New York – a city so closely connected to the rest of the world, not only through its financial institutions and the United Nations, but also through its residents and its students.

Seeing all of you here today fills me with hope because we really need fresh research and new ideas in the fight against poverty.

And I imagine that being a student in New York means being poor, at least some of the time, so I am sure you are all in favour of fairer distribution of money.

To today’s text:

While the distribution of wealth between countries is becoming more even, the global trend is of increasing income disparities within countries, especially developing countries. The latter is the topic of my speech today.

We have enough assets on this planet. We just need to share them more fairly.

In 1975, extreme poverty worldwide could have been eradicated through an additional 5 % tax on our income. Today the price tag is less than 2 %. So is economic growth in emerging markets gradually eliminating poverty?

Think again.

This year’s United Nations Human Development Report contains both good and bad news.

The good news is that 40 developing countries are seeing faster economic growth than expected. This is impressive.

The bad news is that the gap between rich and poor people within countries is widening. Not a little, but a lot.

This accelerating inequality is undermining growth in the longer term.

We risk losing the fight against poverty, the United Nations warns.

In fact, today the vast majority of the world’s poor live in middle-income countries. Over 70 % live in five countries: China, India, Nigeria, Pakistan and Indonesia.

The “trickle down” theory from the 1960s, which maintained that when significant investments are made in one part of society, the benefits would automatically spread to the entire population, is “complete nonsense”, according to Joseph Stiglitz.

He is right, even though some of you may think that he belongs to the wrong University: Columbia!

Poverty is not eliminated by economic growth as long as poor people are excluded from that growth.

So poverty will not go away by itself. We need to act.

Uneven distribution of wealth is not only bad for the poor. It is also bad for the rich. Poverty slows down the rest of the economy. It is simply unprofitable. Fairer distribution is better for everyone.

This is why fair distribution of national resources must be included in the new development targets that will replace the UN Millennium Development Goals after 2015.

But fair distribution is not only important for developing countries, but also for developed nations.

The American dream is dying in the US, but it is still alive and kicking in Norway.

Stieglitz’s book The price of inequality provides some astounding facts.

For example, there has been no real increase in wages for the average American since the seventies.

Societies with a smaller gap between rich and poor are better societies.

Fair distribution of resources in the Nordic countries – Norway, Sweden, Denmark, Finland and Iceland – is one of the reasons why we find ourselves at the top of the UN Human Development Index.

The Nordic model combines a business-friendly economy with fair distribution, the right to welfare, cooperation between trade unions and employers’ associations in sharing productivity growth, and, not least, high female participation in the labour force, which is currently over 80 %.

This model was in place in Norway long before we discovered oil in the 1970s. It helped us prevent serious shocks to our manufacturing sector and exchange rate as a result of the additional revenue from petroleum exports, the so-called Dutch disease.

Call it the “Nordic dream”: the freedom to succeed in business and keep a substantial part of your earnings, while the rest is distributed fairly among the population as a whole.

So let’s talk about tax, and what it can do for development and for democracy.

I fully agree with “no taxation without representation”. But the opposite is also true: “no representation without taxation” – and no development.

Fair distribution of wealth and power is what we are aiming at.

This is why Norway is shifting its development cooperation towards countries that strive to increase their own tax base, provide services, redistribute resources, respect human rights and strengthen democracy. Countries with leaders who are taking action to reduce poverty.

In Brazil, former President Lula Da Silva introduced cash hand-outs to poor mothers, on the strict condition that they go to ante- and post-natal check-ups, and that their children are vaccinated and go to school. The Bolsa Familia programme, as it is called, now reaches out to 25 % of the population, and costs the Government only 0.5 % of GDP.

You cannot argue with the results: extreme poverty in Brazil has dropped by 40 %. And this has not been paid for by us, but by Brazil’s tax payers.

Norway will support the establishment of direct cash transfer and social security schemes in developing countries. But more importantly, we are assisting governments in increasing their tax base and export revenues to pay for their own development. And we are helping them become more attractive for domestic and foreign investment.

Through the Norwegian Tax for Development programme, Norway is helping to build the institutions necessary to distribute resources and services fairly.

Significant reduction in poverty cannot be achieved without an increase in energy supplies. About 1.3 billion people do not have access to electricity today. At the same time, the reality of climate change means that this increase in energy production should be in the form of renewable energy.

Donor funding alone cannot cover the costs, but we can help governments in developing countries to manage their resources responsibly, and team up with private investors to get those hydro-, wind-, solar- and thermal power stations built.

Seven of the ten fastest growing economies are in Africa. But they could have grown even faster, and reduced poverty more successfully, with better distribution of resources.

I firmly believe that we can, and must, talk about decent wages too. A precondition is a good dialogue between employers and unions, and adequate national legislation. The International Labour Organization (ILO) has developed training programmes to help developing countries achieve this, and we provide support for participation in these programmes.

Five brief examples of other things that we do:

• Through our Oil for Development programme, Norway supports governments that want to manage their mineral resources responsibly and to distribute revenue fairly. We also support the establishment of an international, independent group of experts to assist developing countries in renegotiating unfair mining contracts to maximise their national income.
• We are working to gain support for a 0.005 % global levy on currency transactions. Raising USD 40 billion per year, this levy would be used to address problems that cannot be attributed to specific countries, such as infectious diseases and transboundary environmental problems.
• Norway is interested in developing an international transparency convention for tax havens, where most of the 1000 billions of dollars gained from tax evasion, crime and corruption are hidden away.
• We are seeking to establish a partnership with developing countries to develop a transparency guarantee. This guarantee would be used by the authorities in the countries concerned to extract more information from multinational companies engaged there. Today there is usually no further tax disclosure after a company’s revenue has left the country.
•   And Norway is cooperating with the US authorities on the development of a FATCA (Foreign Account Tax Compliance Act) Agreement between our countries. This would require US and Norwegian financial institutions to report financial information about individuals and companies that are taxable in the two countries directly to the tax authorities.

To sum up:

When visitors come to Norway, I ask them: Do you know what I think is the most wonderful thing about Norway? Not the majestic fjords, not the snow-clad mountains, not the midnight sun, not even the world heritage site Bryggen – the medieval wharf in my beautiful hometown Bergen.

The most wonderful think about Norway is its high level of equality. We go to the same schools; we are treated in the same hospitals; we are all in the same boat, supporting each other through taxation and in other ways. 

That is why I will be so bold to suggest that if you want for a development model that gives shared prosperity to all who are working hard for a better future, you could take note of Franklin D. Roosevelt’s words: “Look to Norway.”