How to beat the resource curse in Norway (Summer School)

Let’s call it the luxury of restraint. This is what enabled Norway to avoid the fate of so many other countries when they discovered oil and it changed the mix of their economy overnight. Norway! It’s expensive, wealthy, and abundant in resources. We’re going to compare two of them in particular today: deep reservoirs of oil and icy waters full of salmon. While one resource was heavily in demand, the country had an oversupply of the other. In this episode, we learn how Norway built its wealth by carefully avoiding the pitfalls of discovering oil that have plagued countries in the past and how it creatively created demand for its raw fish abroad. How do you dodge the dreaded resource curse? What clever ways can you benefit from oversupply? And lastly, how do you get rich and stay that way? Featured Episodes: Norway Has Advice For Libya (2011) https://www.npr.org/sections/money/2011/08/26/139972557/the-friday-podcast-norways-got-advice-for-libyaThe Salmon Taboo (2015) https://www.npr.org/sections/money/2015/09/16/440951873/episode-651-the-salmon-taboo Featured Terms: Resource curse / Dutch disease / paradox of plentyCoordination problemFree-rider problem Support: NPR+ https://n.pr/3HlREPz Read: Our book: Planet Money: A Guide to the Economic Forces That Shape Your Life https://lnk.to/i3AukBdD (Audiobook here https://open.spotify.com/show/509P7k1QPcwgzOSCqVCDCZ) Our weekly longform Planet Money newsletter https://n.pr/3zrFvUBOur weekly Indicator link round-up newsletter https://www.npr.org/newsletter/indicator Follow: Instagram https://n.pr/3FqLuwsTikTok https://n.pr/3sGZdrqYouTube https://lnk.to/iCVDaW3CFacebook https://n.pr/3h92GwSThis episode of Planet Money Summer School is hosted by Robert Smith. It was produced by Sophia Paliza-Carre and edited by Planet Money Executive Producer Alex Goldmark. It was fact-checked by Sierra Juarez and engineered by Cena Loffredo with help from Annlie Huang and Robert Rodriguez. See pcm.adswizz.com https://pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. NPR Privacy Policy https://www.npr.org/about-npr/179878450/privacy-policy

• 0:00Speaker 00

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• 0:15Speaker 01

  This is Planet Money from NPR.

• 0:29Speaker 02

  Welcome back, everybody, to Planet Money Summer School World Tour, the only international economics degree you can get while driving on the wrong side of the road. Or is it the right side? I'm Robert Smith. Every Wednesday until Labor Day, we are living out of a suitcase and jutting to the seven continents of this earth. In each country, we'll hear stories of how other people have tackled some of the same economic problems we face here at home, and we'll collect solutions that we might not have considered. It's like a cheap souvenir that can improve everyone's life instead of just gathering dust on your bookshelf. Today, we visit Europe and tour one of the countries that is actually richer per person than the United States of America.

• 1:17Speaker 02

  Norway has won the economic lottery, and it's managed those riches better than just about any country on earth. Every class on summer school has a local expert to guide us around. And today in Norway, we have Hilda Bjornlund, a professor of economics at the Norwegian Business School. Hey, Professor.

• 1:35Speaker 03

  Hi, Robert. You can call me Hilda.

• 1:37Speaker 02

  OK, Hilda. Norway, and really all of Scandinavia, when you think about it, are often held up as this model of how a wealthy society can create this wonderful quality of life. I know it looks idyllic from the outside, but there must be some challenges in your economy that we don't normally talk about.

• 1:59Speaker 03

  There's a lot for us to learn from other countries. So one thing is that there's a lot to strive for in terms of-- if I should be a little bit more critical in the sense of entrepreneurship, productivity, and these days, technology and AI, we are not the leaders there. So in that sense, we are safe and sound with a lot of richness and social welfare, but maybe we are not the leaders in inventing things at the moment.

• 2:28Speaker 02

  Well, it is notable that Norway is only one of a handful of countries in the entire world that has a wealth tax. Most countries tax income, but Norway actually taxes your investments and your houses and your assets that you own every single year. Does this maybe slow down the competitive spirit to start an internet or an AI company?

• 2:50Speaker 03

  I think it's part of the problem. And I think for sure, most economies in Norway think it is preventing the kind of investment we would like to have. So it has been suggested to reduce it, and it's being discussed at the moment. But for now, it's clearly not working in the favor of new investment.

• 3:09Speaker 02

  Well, I could tell you, as a country that has both new investment and a brand-new trillionaire, there is more discussion here about perhaps having a wealth tax.

• 3:19Speaker 03

  Yeah. So but there's other taxes you can also impose, like inheritance tax and house tax separately. And you can also do higher income tax. But we have had most of them. So that makes for a less incentive, it said.

• 3:32Speaker 02

  There is also, as we will see today in one of our case studies, the subject of the oil. Norway is one of the top oil producers in the world, the biggest in Europe. And that's led to these riches that I mentioned at the beginning of the show. So the money has been amazing for Norway. But is it possible to be too rich, to have too much money?

• 3:54Speaker 03

  I'm not sure whether we have too much. But if you have a lot, the politician might not necessarily prioritize the right thing. There will be a lot of pressure on them to spend it on a lot of things. You build roads to small islands without thinking on that you have to maintain all those roads in the future, which might not necessarily make the Norwegian economy more productive and more sustainable in the future.

• 4:22Speaker 02

  So how does a country stay productive and sustainable after the discovery of oil and massive riches that pour into the economy? We will tackle that question with Hilda and tell you a parable about the economic value of restraint. When it comes to governments, or frankly, their own lives, the key to long-term wealth is to resist the short-term urges. After the break.

• 4:54Speaker 04

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• 5:21Speaker 00

  This episode's sponsor is HubSpot, which offers the following message. What if, instead of updating your CRM, your CRM updated you? No catching up on manual edits, no more guesswork. HubSpot's self-updating CRM keeps your customer context current and helps you understand what to do next. So marketing builds more demand, sales wins more deals, and customers keep coming back. Learn more at hubspot.com. This message comes from NPR sponsor Charles Schwab. Financial decisions can be tricky. Your biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Download the latest episode and subscribe at schwab.com/financialdecoder.

• 6:05Speaker 02

  Welcome back, class. Eyes up, pencils ready. Because our first case study is a classic one in international economics with a new twist. When a country discovers a valuable resource, like oil, they pop the champagne bottles, they buy new Cadillacs, and then they watch in horror as their economy gets worse. The oil corrupts officials, distorts the real economic activity, like manufacturing and agriculture. It's called the resource curse, and we've covered it before on Planet Money. But Norway found a secret talisman to break the back of the resource curse. Professor Hilda, remind us of the definition.

• 6:44Speaker 03

  OK, so a resource curse is a strange fact that a country who finds, say, oil or gas or any natural resource, it ends up being poorer after it has extracted the resource than it was before. So it's a curse, actually, to find the resource rather than a blessing.

• 7:04Speaker 02

  It's amazing. It's like winning the lottery can make you poorer.

• 7:07Speaker 03

  Yes, exactly. It's like a paradox of plenty, we call it.

• 7:11Speaker 02

  The paradox of plenty. Oh, I love it. So how did Norway succeed in becoming a rich and successful oil-producing country where so many others have failed? Our first case study is from 2011. It was hosted by the great David Kestenbaum and Alex Blumberg.

• 7:28Speaker 05

  The story of how Norway avoided the oil curse is a fascinating tale focused on one guy, one unusual man, who was instrumental in helping Norway get it right, where so many countries get it wrong.

• 7:40Speaker 06

  My name is Farouk Alkassim.

• 7:42Speaker 05

  Farouk Alkassim is Iraqi. And for over a decade, he worked in Iraq for an oil company. He was trained as a geologist. Farouk's wife was Norwegian. And in the 1960s, they decided to move to Norway. Their son had cerebral palsy and needed medical care. Job-wise, Norway seemed at the time like the worst place in the world for an oil guy.

• 8:02Speaker 06

  You see, the Norwegian Geological Survey had already said that there is no hope in heaven of ever finding oil or gas.

• 8:12Speaker 05

  So Farouk figured if he was going to get an oil job, it would come with a very long commute.

• 8:17Speaker 06

  If I am lucky, I could get a job in Europe somewhere or even in North Africa or the Middle East. And then I could commute to Norway. If the worst comes to the worst, I may be able to drive a taxi in Norway. That's what I was thinking.

• 8:36Speaker 05

  So Farouk flew to Norway. He had to catch a train, but he had six hours to kill before the train left. And those six hours turned out to be very fateful for Farouk and for Norway. Instead of waiting around in the train station, Farouk decided, I'll spend my time productively.

• 8:51Speaker 06

  I looked into the telephone directory and decided that the Ministry of Industry is the ministry to deal with oil, if there is, if there were oil at all in the country. So I went there and--

• 9:04Speaker 05

  So you just took a cab from--

• 9:05Speaker 06

  Not even a cab. I walked. Oslo is not all that big.

• 9:10Speaker 05

  Farouk knew that there were some companies looking for oil in Norway, despite what the Norwegian Geological Service had said. And he was hoping to get a list from the Ministry of these companies. He assumed they'd just write some names down on a piece of paper and send them back to the train station. But instead, they sit him down, and they start asking him all these questions.

• 9:28Speaker 06

  I thought it was just social curiosity.

• 9:31Speaker 05

  But what Farouk didn't know at the time, Norway isn't just an overly friendly society. It turns out that group of people in that office had been waiting for a guy like him to walk in the door for a while. See, even though Norway's geologists had said there wasn't oil, there were still oil companies exploring. And these oil companies were sending the results of their exploration to the government. Now Norway's a small country, and there aren't a lot of people who can make sense of that data the oil companies were sending. And so then, this Iraqi guy walks in and says, I'm here. Is anyone still looking for oil? So what do they do? They hired him. And his first job, first job they gave him, was they asked him to look over the geological results from the oil companies that had been doing test drillings. The terrain in Norway could not be more different, right? Farouk has gone from the deserts of Iraq to almost the Arctic Circle.

• 10:15Speaker 05

  The oceans are violent and freezing cold. But you know, geology is geology. And to him, looking at the drilling reports, they look surprisingly promising. The oil companies had found oil. Not a lot, but there was definitely something there under the ocean floor.

• 10:30Speaker 06

  Remember, the country was saying, there's no way there's oil out there. And here I am, looking at data that says, my god, they have already founded Fort Anjova, admittedly in not yet commercial size. And by the way, you know, most oil companies, they, when they go to a new area, they are not really interested in what I call the, the foxes and the rabbits and the mice. They are interested in elephants.

• 11:00Speaker 05

  Right. So they had a couple of foxes and mice that was in the data, but, but they were, but it wasn't clear there was an elephant there.

• 11:09Speaker 06

  They were looking for elephants. But if you are a good geologist, you should appreciate very quickly that it's too early. The elephants will be there. It's just a question of giving them a little bit of time to learn how to find elephants. And they will be shooting not only one, but maybe 20 elephants.

• 11:30Speaker 05

  So Faruk's job is to take all this data and write a report. And what he says in this report is two things, basically. One, I know your official geological survey said there's no oil. Turns out that's not true. And two, in fact, there's probably a lot. And you, Norway, have to get ready so you don't suffer from the oil curse.

• 11:49Speaker 06

  Norway has no time to waste preparing themselves for the oil era. And of course, you know, they looked at the report and they said, oh, do you really say that? Oh, my god. We'll just have to wait and see. All the warnings. I was a little bit desperate in trying to find, well, how do I, how do I go about persuading them that they really must start preparing themselves?

• 12:17Speaker 07

  Faruk's job of persuading them got a lot easier pretty quickly because shortly after he wrote that report, in 1969, people discovered the elephant, the Ekofisk oil field, a massive reservoir, which even today, just this one field produces almost 300,000 barrels of oil a day.

• 12:34Speaker 05

  So clearly Norway had a situation. They had a lot of oil, and they had this guy from Iraq saying, you have to be very, very careful how you handle it.

• 12:42Speaker 07

  So let's just pause here and lay out why finding what is essentially a pot of gold is considered by economists to be a curse. The first reason is just that it corrupts. It's human nature. When something very valuable is discovered, fights tend to break out over it. A lot of times you get dictators who keep all the money for themselves and use it to keep themselves in power.

• 13:01Speaker 05

  But there is a second problem with discovering massive amounts of oil. And it's less human nature, more mathematics. It's sometimes called Dutch disease, after what happened in the Netherlands when they found a bunch of natural gas. And it goes like this. All of a sudden, you have this commodity which the whole world wants to buy from you. Money floods into your economy, which makes your currency more valuable. After all, if someone wants to buy oil from Norway, they have to pay for it in the Norwegian currency, the krona. Before Ekofisk, not much of the world cared about having a lot of Norwegian krona. But now, everyone wants it.

• 13:33Speaker 07

  And as we've talked about before on this podcast, when your currency gets more valuable, that's actually a tough thing for a lot of local industries. I mean, take, for example, the Norwegian fishing industry, right? All of a sudden, now Norway's cod is going to be way more expensive than cod from other countries that haven't discovered oil. And so when you discover oil, what can happen is that other sectors of your economy shrink or even die.

• 13:55Speaker 05

  And that was the fate that awaited Norway. Corruption, collapsing industries, a possible descent into tyranny. So they asked Faruk, what do you think we should do? And he and a colleague sat down to write their recommendations, recommendations for how Norway should deal with its extremely dangerous newfound wealth.

• 14:12Speaker 07

  They had one week to do it. Faruk and his colleague needed a quiet place to think, so they set up for a cabin in the woods that his colleague had.

• 14:19Speaker 06

  We have food, we have beds, we have everything, fishing rods. You know, we could, we could work as hard as we like. And then when we are tired, we could relax. And actually, we, instead of using the whole week, we did it in four and a half days.

• 14:35Speaker 07

  It was a first draft of a white paper, a white paper that got passed up to various officials in the Norwegian government, reviewed, and eventually incorporated into a finance ministry plan that ended up saving Norway from the resource curse.

• 14:48Speaker 05

  Now, Faruk wants to make it clear, he was one of many people that contributed to this plan. But what emerged was pretty great. The plan set up a powerful, independent regulator that made sure all the companies in Norway played by the same rules, that there weren't any sweetheart deals, that they paid their fair share in taxes to the Norwegian government.

• 15:03Speaker 07

  But that still left the Dutch disease problem. Selling all that oil would flood the country with money and drive up the value of the currency. So the solution? Let's not make so much money. Let's not drill everything at once.

• 15:14Speaker 06

  So what they advocated, that we should be very restrictive in how many licensed blocks we allocate per year. And as a result of that, throughout the 70s, no more than three, four blocks were allocated every year.

• 15:30Speaker 07

  That shows amazing self-restraint. We're only, we have all this oil in the ground, but we're only going to tap a bit every year.

• 15:35Speaker 06

  It is a fantastic self-restraint. The whole nation didn't even question this. Now, when, when this white paper of 1974 came out, it was received with skepticism by the industry, who wanted Norway to go full speed ahead. But at the end of the day, when the debate settled, the opinion of the politicians was very clear. We should go slowly.

• 16:05Speaker 05

  So Dave, let's just pause here to marvel at what the Norwegians did here. They essentially had this gigantic pile of money buried beneath the ground. And they said, you know what? We're not going to dig it all up at once. In fact, we're going to dig it up really, really slowly, just a little bit a year for decades. They reinvested almost all the money back into developing the oil industry, into drilling new wells, doing new explorations, developing new technologies. Remember, Norway's oil was really hard to get. It was far beneath the ocean floor, in cold, stormy seas with these crazy cross currents. The technology to get it out of the ground barely existed at the time the discovery was made. So there was a lot of R and D to invest in to actually get it.

• 16:44Speaker 07

  And even later, in the 1990s, when a lot of those problems had been solved, the government still did not spend the money it got from oil, instead, put it into a fund.

• 16:54Speaker 05

  We learned of this story from an article Martin Sandvåg wrote. He's an editorial writer at the Financial Times. He's from Norway.

• 17:00Speaker 06

  It's been saved in, in an oil fund, a savings fund. And the government only gets the interest on the financial wealth that's in that fund.

• 17:08Speaker 05

  Your country basically has a huge trust fund, a huge endowment.

• 17:11Speaker 06

  A huge trust fund. The trust fund is, I haven't checked the latest numbers, but it's on the order of $500 billion now, which amounts to $100,000 per Norwegian citizen.

• 17:20Speaker 05

  That's pretty nice.

• 17:22Speaker 06

  It's quite nice.

• 17:23Speaker 02

  Our case study on the oil curse first aired in 2011. A lot of oil has flowed from the North Sea since then. Professor Hilda Bjornlund, let's update the numbers in that story. There is more money in the oil fund now, I would imagine?

• 17:39Speaker 03

  Oh, yes. Yes, for sure.

• 17:40Speaker 02

  How much money does Norway have?

• 17:43Speaker 03

  Okay, so I actually had to check the numbers. And these days, the fund now is $2.3 trillion.

• 17:54Speaker 02

  2.3 trillion?

• 17:57Speaker 03

  Trillion. So there's a lot of zeros after the 2 point there. And if you take those $2.3 trillion and divide it by 5.5 million Norwegians, you get $400,000 for every Norwegian.

• 18:15Speaker 02

  Why go to work today, Hilda? Why should anyone do anything in Norway except spend that money?

• 18:21Speaker 03

  That, that's a good point. But the reason being that we can't spend it all now, because we are saving for the future. We are still saving for the future, but we are spending a big chunk of that every year still.

• 18:36Speaker 02

  Well, the case study was all about the money. But there is something else that Norway got out of this whole process. And that is expertise. There are now Norwegian drilling engineers, Norwegian drilling companies, Norwegian subsea robots, a whole Norwegian high-tech petroleum industry that you didn't have before.

• 18:55Speaker 03

  So this is super important. And that's often something which isn't part of the story. If you think of a typically oil-producing countries, think of a small, open economy with no knowledge, like we had in the 70s. And US comes in with these big companies, they drill, and they have all the expertise, and the proceeds go to the government, who spends it wildly. Then you're, you're bound to get some resource curse. But what we did was that we taxed these oil companies. We decided to tax them a lot, 78% for drilling in our, in the North Sea. And that, together with the know-how and the spillovers and the engineers and the technical competence, made us not just producers, but it made us

• 19:40Speaker 03

  capable of having industries which then again could go and export and to drill and to extract and invent in other countries.

• 19:49Speaker 02

  So this all seems like a good pitch to do things Norway-style, or I guess we should say Faruk-style. But I do wonder if listening to this case study would actually help a country if they discovered oil? It seems like you have to have a lot of political and economic things in place before the oil starts pumping. So Norway was already a democracy when it discovered oil, which was also true of Canada and the US, who avoided the curse. You have to have a good financial tax system in place. And economists talk about the high level of social trust in places like Norway. What, what does that look like in the country?

• 20:30Speaker 03

  So first of all, I think most Norwegian trust the government, the parliament, the lawyers, the high court.

• 20:38Speaker 02

  Let me write that down. You trust the lawyers. This is a new concept for me.

• 20:43Speaker 03

  Well, let me say, I trust the high court. And in a sense, I'm not, I don't trust all the lawyers.

• 20:48Speaker 02

  Okay.

• 20:49Speaker 03

  So like, at the time, I think people trusted the government for making the best decision for the Norwegian economy. That doesn't mean that you have to agree on all decisions which are made. There's a lively debate in Norway these days about spending too much public money relative to using the money on, say, reducing taxes. It's a political decision. Should we reduce taxes and then maybe spend less on the social welfare system? That's a debate.

• 21:19Speaker 02

  You know, I've always wanted to ask a Norwegian this. Your riches come from oil, but most of the cars sold in your country are electric cars. I read something like that 96%, could this be true? 96% of new car registrations are electric cars?

• 21:35Speaker 03

  Absolutely true.

• 21:37Speaker 02

  From an oil superpower? Do you have an electric car?

• 21:40Speaker 03

  Yes, I do now. And I love it. So it's fantastic. But the thing is, here they gave a huge tax incentive. So this is maybe a tax incentive which worked in the beginning. But then the price of electric car went down. So then it become quite an excessive subsidies towards electrical cars.

• 22:02Speaker 02

  I love it. Electric car subsidies that come from oil. That is definitely one way to do it. We will return with the professor after the break and another clever Norwegian lesson. How to turn something you're about to throw away into profit. All it takes is a cartoon Viking, a boatload of salmon sushi, and the willingness to break a cultural taboo after the break.

• 22:33Speaker 04

  Stay tuned for the following announcements and messages from our sponsors. This message comes from Insperity. Because how you HR matters. From payroll and benefits to HR compliance and talent development, helping your business move forward with confidence. Learn more at insperity.com/HRmatters.

• 22:53Speaker 00

  This episode's sponsor is HubSpot, which offers the following message. What if instead of updating your CRM, your CRM updated you? No catching up on manual edits, no more guesswork. HubSpot's self-updating CRM keeps your customer context current and helps you understand what to do next. So, marketing builds more demand, sales wins more deals, and customers keep coming back. Learn more at hubspot.com. This message comes from NPR sponsor Charles Schwab. Financial decisions can be tricky. Your biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Download the latest episode and subscribe at schwab.com/financialdecoder.

• 23:36Speaker 02

  We are back enjoying the bounties of Norway. Sweet, sweet crude oil and now delicious salmon. Both are Norwegian, both abundant. But there was too much demand for the oil, as we saw in the last story, and not enough demand for the salmon, which is the topic of our next case study. Kind of a sushi curse, if you will. Professor Hilde Bjornland, I take it everyone eats salmon in Norway?

• 24:00Speaker 03

  Oh, yes, all the time. Brought and cooked and fried and barbecued.

• 24:06Speaker 02

  And anything else you could think of? Okay, before we hear this case study about salmon, what should the students keep in mind as they listen to it?

• 24:15Speaker 03

  So, the students should think about what are the barriers to trade? What could prevent industries for entering into trade with another country? And I think also they should think about the market alone is not always enough.

• 24:30Speaker 02

  Interesting. People should pay attention to what the government does in this story and how it does what the market can't do. This case study came from 2015. Our hosts are Jess Jiang and Jacob Goldstein, and the story starts in Manhattan.

• 24:45Speaker 07

  I've been going to sushi bars since I was a little kid. But in all that time, I've never been on the other side of the sushi bar. I've never been back where the chef stands.

• 24:53Speaker 00

  Last week, we made it back there, thanks to chef Shimao Ishikawa at the sushi restaurant Jewel Bako in Manhattan.

• 25:01Speaker 07

  What's the most popular fish you sell? Popular fish? Yeah. Tuna is the popular, yeah.

• 25:08Speaker 00

  Tuna. They've got lots of tuna.

• 25:11Speaker 07

  And then the second most popular? Seikando is and now on the salmon. The salmon? Yeah. It's the second most popular. He's been a sushi chef for 40 years or so. And, you know, as you'd expect, he has served and eaten basically everything. Sea urchin, of course, he's eaten sea urchin.

• 25:27Speaker 00

  Poisonous blowfish?

• 25:28Speaker 07

  Sure, he's got a special license in Japan to prepare poisonous blowfish.

• 25:31Speaker 00

  But in all his years as a sushi chef, he's never, ever had a single bite of raw salmon.

• 25:38Speaker 07

  I'm not eat salmon, no.

• 25:42Speaker 00

  Wait, never?

• 25:43Speaker 07

  Yeah, I never eat the salmon, you know. So, never, you've never even taken one bite of raw salmon?

• 25:52Speaker 07

  No.

• 25:54Speaker 00

  Can we get you to try it today?

• 25:58Speaker 07

  Tomorrow. Manana.

• 26:02Speaker 07

  Not that long ago, everybody in Japan was like Ishikawa. Nobody ate raw salmon. It was like eating raw pork or something. It just wasn't done. When we talk about international trade, you know, we often tend to talk about things like tariffs and quotas. And there's this idea that if you get rid of those things, get rid of those barriers, then new products just come rushing in across borders. But clearly, that is not always the case. I mean, sometimes you have to spend years and years and years working and begging and trying to convince an entire country that whatever thing you have a lot of, whatever thing you want to sell, is something they should want to buy. Like, take, for example, salmon in Norway. Hello?

• 26:48Speaker 00

  Hello, can you hear us? The other day, we were trying to connect to the studio in Tromsette, on this little island in northern Norway. And we overheard them talking about us in Norwegian.

• 27:03Speaker 06

  Money, money planet.

• 27:06Speaker 07

  Hello? Hello. Does Planet Money translate as money planet? Isn't that right? Yes, yes, yes. This is Bjorn Adic Olsen. And when we talked to him the other day, he told us that back around the time he graduated from college, this was a few decades ago, Norway had a problem. The government had been subsidizing the Norwegian fishing industry for decades. And basically, they'd been paying people to fish. And of course, when you subsidize something, you get more of it.

• 27:34Speaker 06

  It's not a very clever way of using money because the more you use, the worse the situation gets.

• 27:42Speaker 00

  The government says, okay, let's wind down these subsidies. But we're not going to screw over our fishing industry. Let's figure out a way to get the rest of the world to buy our fish.

• 27:54Speaker 07

  They look around the world and they see one country in particular that really loves fish and that needs to start importing more fish. Yes, Japan.

• 28:02Speaker 00

  At the time, salmon sushi is not a thing. Not in Japan, not in Norway. Sure, it's cured or smoked, but a hunk of raw salmon? No.

• 28:13Speaker 07

  And in fact, the idea of salmon sushi just began as this tiny, little, little thing at the Norwegian Embassy in Tokyo. They were just playing around with ways to serve Norwegian products in a Japanese style.

• 28:25Speaker 06

  They just tried, let's try to have a little bit salmon raw. Just in the embassy, try that. And the chef and the ambassador said, oh, this tastes quite, quite nice.

• 28:38Speaker 00

  Around this time, Bjorn gets hired by the Norwegian government to sell fish to the Japanese. He used to be a fisherman. He speaks Japanese. He's kind of the perfect guy for this mission.

• 28:48Speaker 07

  And he figures, yeah, sure, we could sell salmon cheap in Japan. People in Japan already eat salmon grilled. But when people buy fish to use for sushi, they're willing to pay a lot more for it. Sometimes people pay five times as much for the same kind of fish if it's going to be used for sushi. So, if he can get people in Japan to eat salmon sushi, it'll make all that Norwegian salmon much more valuable.

• 29:11Speaker 00

  So Bjorn goes to Tokyo and he gets a bunch of Japanese fish industry executives into a conference room. And he unveils the next big thing. Salmon sushi.

• 29:22Speaker 06

  And they say directly over the table, it's impossible. We Japanese do not eat salmon raw. And we say, well, yes, but it's good. It tastes good. No, they say, it doesn't taste good. They say the color is wrong also. It's too, it's too light red, it should be redder. And they say that it has a smell. And also, of course, they knew the shape of the salmon and they said that the head has the wrong shape and the gills look wrong. Everything is wrong. So, everything was wrong. Everything, the taste, the smell, the texture, the fat, the color, everything.

• 29:57Speaker 00

  Bjorn's big challenge was this. He was going to have to change the perception of an entire country of people. People who thought the color or the shape of the head of salmon was all wrong.

• 30:08Speaker 07

  And if you want to change perception, if you want to get people to buy something, what you do is not a mystery. You launch an ad campaign. And so Bjorn and his colleagues figured, all right, we'll start doing some TV commercials.

• 30:18Speaker 00

  Maybe have a cute cartoon character.

• 30:21Speaker 07

  Did you have a mascot, like a dancing salmon or something?

• 30:24Speaker 06

  We had, but it was, it was very silly. It was a Viking.

• 30:28Speaker 07

  A Viking?

• 30:29Speaker 06

  Yes, yes. It was a Viking with a helmet and it was like a funny drawing with a big head. And it said Norwegian seafood.

• 30:39Speaker 07

  He actually sent us a picture of the Viking, of the mascot. And I have to say, it's like, if you were to imagine what some outsider trying to pander to a Japanese audience would come up with, it's kind of that, right? Like, it's this super cute little boy Viking with this great big head and like big eyes.

• 30:56Speaker 00

  And a huge giant fork.

• 30:58Speaker 07

  Yeah, like as tall as he is. And so the Viking surprise didn't work.

• 31:03Speaker 00

  People in Japan were used to eating this kind of salmon that tended to have parasites in it and would make you sick if you ate it raw. Bjorn says the salmon from Norway was totally different. Parasites just weren't a problem.

• 31:17Speaker 02

  But it's not like Bjorn could just run an ad in Japan that said, don't worry, our salmon is parasite free.

• 31:23Speaker 06

  We concentrated our information to the consumers about the cold, pure Norwegian seawater. And of course, putting the pictures of fjords, mountains, ice, then you gave the impression about something that is pure and fresh.

• 31:40Speaker 02

  Pure and fresh, not enough to get Japan to start eating raw salmon.

• 31:45Speaker 00

  And back in Norway, their Norwegian salmon industry was getting desperate. The glut was getting so bad that they start filling industrial sized freezers with tons and tons of salmon.

• 31:57Speaker 02

  So Bjorn is trying to find somebody in Japan to buy into his dream of Japanese people eating raw salmon. And there was this one company called Nishi Rei that he'd been building a relationship with for years. Everybody in Japan knows this company. They're like Kraft or Stouffer's or something in this country. They sell frozen food, you know, dumplings, chicken nuggets, squid.

• 32:18Speaker 00

  Bjorn told them, I will sell you 5,000 tons of that frozen salmon for really cheap. All you have to do is sell it in the grocery stores as sushi. Just try it.

• 32:30Speaker 02

  Nishi Rei said, yes, Bjorn had a deal.

• 32:33Speaker 06

  It was a day of happiness. I remember that. And it was like, I mean, being in the heaven, if you see what I mean, just the happiness, I mean, that we shared.

• 32:44Speaker 00

  Once Nishi Rei starts selling salmon for sushi, the idea of salmon sushi just seems more normal somehow.

• 32:51Speaker 02

  It would be like if, I don't know, if in this country, say, Danone started selling yogurt with raw pork at the bottom.

• 32:58Speaker 00

  Oh, God.

• 32:59Speaker 02

  I mean, you know, look, think about it this way. Like, I look at it and think, OK, definitely not something I would have come up with, but I've been eating Danone yogurt all my life. Never made me sick or anything. So, you know, whatever, maybe I'll just throw one pork at the bottom in, along with my strawberry banana, my shopping cart.

• 33:14Speaker 00

  Pretty soon, salmon sushi starts showing up everywhere in Japan, especially in those conveyor belt sushi restaurants, those kind of mid-tier apple peas of Japan.

• 33:25Speaker 02

  Almost everybody is trying raw salmon. Tadashi Ono is a sushi chef. He's 53 now. The first time he tasted salmon sushi, it was about 20 years ago, and it did not go well.

• 33:35Speaker 06

  I was scared. Yeah, so I couldn't really enjoy it. I wasn't really clear about how it tastes. I was more thinking about, oh, my God, am I going to get sick or what? But, you know, second time, maybe, third time, OK. So, you know, I started liking it. It's actually, you know, buttery, it's creamy, melt in your mouth.

• 33:59Speaker 02

  It's creamy and it melts in your mouth, is that?

• 34:01Speaker 06

  Yeah, it is, in a way.

• 34:07Speaker 02

  That story was from 2015, hosted by Jacob Goldstein and Jess Chang. A small update to the story. In a recent survey of Japanese consumers, 59% preferred to eat their salmon raw while dining out. That data is from the Norwegian Seafood Council. Keep on selling, my friends. After the break, our professor returns with advice for countries that don't necessarily have oil or oily fish. The real Norwegian lesson is how to solve a coordination problem and sell an image. Coming up.

• 34:45Speaker 00

  Stay tuned for the following announcements and messages from our sponsors.

• 34:49Speaker 04

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• 35:04Speaker 00

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• 35:30Speaker 02

  And we are back from the break and here with some final lessons from Norway and the salmon solution. Hilda Bjornland is our professor. Hey, professor.

• 35:39Speaker 03

  Hi, Robert. Thanks for having me here.

• 35:41Speaker 02

  What I found interesting with this story is that one company could not have done this alone. It required all the companies and the government together to market not just one company's salmon, but Norwegian salmon as a whole brand. So why was that important?

• 35:58Speaker 03

  I think it was important for two reasons. One reason was, of course, that together they were stronger and there was no incentives to free ride.

• 36:07Speaker 02

  Why don't you define free rider for us? That's a good economic term.

• 36:11Speaker 03

  OK, so free rider is, so let's say I'm a company and I do all the hard work and I sell for a lower price and I invest and I go there and I advertise and I use a lot of resource on this. Then eventually, I managed to convince Japanese people to eat raw salmon. Then all the other companies in Norway, salmon companies, who haven't been putting money and resources into this, suddenly have a free access to the same market because I have opened the door for them. So free riding would be that they would sail on my success in a way.

• 36:47Speaker 02

  This is a kind of coordination problem that requires a government to come in.

• 36:51Speaker 03

  Exactly, a coordination problem, exactly. And the government here opened the doors for them. We couldn't just advertise one company. We needed to advertise the Norwegian salmon as a brand. And for that, they needed to come together.

• 37:07Speaker 02

  Well, I would argue it was more than just Norwegian salmon. They were selling Norway. And we've seen this with countries around the world, right? This sort of soft power that people talk about. South Korea sells its entire culture as a sort of cutting edge, cool thing, and that benefits all their companies. France has sold their, their high gourmet standards. This was an opportunity for Norway to develop a brand, really, that you are pure nature quality. I don't know if that existed beforehand.

• 37:40Speaker 03

  You're absolutely right. We heard about the Viking, it's trying to brand it through the Viking, and we see the Viking today in the world champion, in the football. This is really the brand Norway we were selling. Maybe we will have more tourists coming to Norway from this.

• 37:54Speaker 02

  Maybe you could sell those plastic hats with the horns on them. I know they're very popular.

• 37:57Speaker 03

  Nobody wants that. Nobody wants those.

• 38:00Speaker 02

  They're probably made in China, anyway.

• 38:01Speaker 03

  They are made in China, for sure.

• 38:04Speaker 02

  Hilda, one thing we are asking of every professor this season from countries around the world is if there's one thing we could take, one lesson we could take from Norwegian economics to implement here in the United States, what should we do? And you cannot answer, get lucky and find more oil.

• 38:22Speaker 03

  It's not about the luck, but it's what you do with the luck. So we were lucky, of course, we found oil. But that's not the real reason we are lucky. We are lucky because we managed the wealth in a good way. I think the winners, the big winners in Norway from, from finding this oil is like the people, everybody. Because we have a society where the income distribution is compressed, we say. That is not a big difference between the people. And I think that's partly to do with the fact that we found this huge wealth and we have redistributed it. So we have, everybody are winners in a way. It can be improved on, but I think that's a lesson for the US, to think in those directions.

• 39:06Speaker 02

  We do have a lot of work to do. Hilda, before you leave, I wanted to remind students of two of the big concepts we covered in this class. There is an online test at the end of the summer. Everyone should prepare. And you don't want to flub the questions on the resource curse, also known as the oil curse or the Dutch disease.

• 39:26Speaker 03

  The resource curse is the fact when a country who is lucky and find oil or gas or any resource, it ends up poorer than before it found it. That's the resource curse.

• 39:43Speaker 02

  Of course, we went over ways to prepare for the resource curse. One big one is to develop social trust. I'll do the definition. It is the belief that other members of a society are basically honest, fair, and reliable. Yes, even the lawyers. Please don't write us. And Hilda, you mentioned the term free rider. I'm going to use it in a sentence. I am free riding on your brilliance in this interview.

• 40:09Speaker 03

  Well, I'm free riding on this discussion. I'm enjoying it.

• 40:13Speaker 02

  All right, free riders all around.

• 40:19Speaker 02

  Our professor today is Hilda Bjornland from the BI Norwegian Business School. Thank you so much for coming in.

• 40:26Speaker 03

  Thank you for having me, Robert.

• 40:28Speaker 02

  If you'd like to know more about clever ways to profit from an oversupply, the new Planet Money book has a great chapter on raisins, page 32. They're just worthless, dehydrated grapes. Hate to break the news to you. Until you figure out how to brand them. That's Planet Money, a guide to the economic forces that shape your life. We're starting to get your emails about clever economic tricks from around the world. How about this one? In Taiwan, every receipt for a commercial transaction is also a lottery ticket. Every couple of months, the government gives away money to people with lucky receipts. It keeps businesses from selling things under the table and avoiding sales tax. Very, very good. Send your ideas you've seen around the world to [email protected].

• 41:13Speaker 02

  Put summer school on the subject. We'll celebrate the best ones in our graduation episode at the end of the series. Summer School is produced by Sofia Palisa Carr and edited by Alex Goldmark. It is fact checked by Sierra Juarez. This show was engineered by Sina LaFredo with help from An Li Hua and Robert Rodriguez. I'm Robert Smith. When I'm not summer schooling, I am talking about business history on the new podcast, Business History, which is a show about the history of business. This is NPR. Thanks for listening.

• 41:47Speaker 01

  Ladies and gentlemen, a reminder, no running in the terminal. Don't worry, you'll have plenty of time to get to your Planet Money flight to the Caribbean. We'll be heading over there to ask a radical question. Does property have to be private? Take off as usual next Wednesday.

• 42:06Speaker 00

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• 42:10Speaker 04

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