How Norway became the most AGI-proof government
AGI economy series - Nr. 8
In 1969, three thousand meters beneath the tumultuous waves of the North Sea and hundreds of kilometers from the nearest shore, the Norwegian company Phillips Petroleum made a monumental discovery: the Ekofisk field, one of the largest oil reservoirs in Europe. The offshore field is located within the Exclusive Economic Zone of Norway but borders that of the United Kingdom. This discovery set off a flurry of other nearby discoveries and by the early 1970s, the large-scale exploitation of oil and gas in the North Sea was underway.
This geological bounty, shared between Norway and the United Kingdom, set up the conditions for a trillion dollar experiment in natural resource governance. The two countries took very different approaches to governing their windfall. The approach chosen by Norway is what makes it the most ‘AGI-proof’ government in the world today — meaning Norway has sustainably reduced the dependency of public finances on the labor income of its population and could handle the economic shock of an AGI-scenario in which the labor share of income falls significantly.
1. The trillion dollar experiment: resource governance in the North Sea
While Norway has larger oil and gas reserves than the UK, the two countries have extracted roughly the same absolute amounts over the past five decades. The UK produced ~30 billion barrels of oil equivalent (boe) of oil and ~15 boe of gas. In the same time period, Norway produced ~30 billion boe of oil and ~20 billion boe of gas. However, the countries managed the extraction of these natural resources quite differently.
Private vs. mixed approach: The UK government has had no direct equity participation in the North Sea since 1986 and has fully privatised the sector.1 In contrast, in Norway over 50 percent of oil production is operated by the company Equinor, which is owned 67% by the Norwegian government. And while the rest of Norway’s oil fields are operated by international oil companies, they are co-owned by the Norwegian government. Specifically, the day-to-day operations are led by international companies, but the fields are joint ventures with revenues and costs split according to ownership share between the international companies operating the fields and the 100% state-owned Petoro. Overall, Norway’s absolute public revenue has been more than double that of the UK for nearly the same resource, within the same time period.
Planning horizon: The British government chose to leverage its newfound wealth to finance tax reductions. This stimulated (short-term) economic growth by increasing consumer spending and investment. Unfortunately, as the UK’s reserves have dwindled, the country’s oil and gas boom is already over.
In contrast, Norway adopted a strategy that even goes beyond that of Alaska in its long term focus. Whereas Alaska invests about 12% of its oil revenues, the Government Pension Fund Act stipulates that Norway invests 100% of net government oil revenues into its sovereign wealth fund, formally known as the Government Pension Fund Global, informally the “oil fund”. With about 1.75 trillion USD in total assets under management as of September 2024, it is the world's largest single sovereign wealth fund.
Instead of spending those resources today, Norway is saving the majority of its funds for the future. Payouts from the fund to the government are only possible with authorization by the Norwegian parliament (“Storting”). In 2001, Norway also adopted a Hartwickian fiscal rule that states that government withdrawals cannot exceed the expected real rate of return of the Government Pension Fund Global. Originally, this was set at 4%, in 2017 the estimate was reduced to 3%. Between 1998 and 2024 the fund has generated a nominal return of 6.3% and a real return of 4%.
2. Norway on FIRE
The concept of Financial Independence, Retire Early (FIRE) originated in personal finance circles, where individuals seek to save and invest aggressively in order to live off their investment returns and achieve financial independence. By building a large enough asset base, FIRE proponents aim to cover all living expenses with investment returns alone, freeing themselves from the need to work.
In Norway’s case, the government is applying this same principle on a national scale, using its sovereign wealth fund to secure long-term financial stability. There are two ways in which we could think about government FIRE.
The first is the idea that a government has reached FIRE if it does not rely on tax revenues for current levels of government spending. This is essentially the Norwegian government saving for its own retirement. If we assume a safe withdrawal rate of 4%, the Norwegian government can sustainably expect about 1.75 trillion USD * 4%, resulting in 70 billion USD annual investment return. This would cover between 30 and 40% of ca. 180 billion USD in annual government expenses.
The second, more maximalist idea, could be that an entire country can reach FIRE, if it can finance the income of its population and government based on the investment returns of private and public assets. The public assets of the Government Pension Fund Global correspond to about 300’000 USD per Norwegian citizen. With a withdrawal rate of 4%, Norway could safely pay every citizen a dividend of about 12’000 USD per year or 1'000 USD per month. That would correspond to the generosity of Andrew Yang’s Freedom Dividend, but it would not be sufficient for a more generous “post-work” basic income.
In short, Norway hasn’t reached government or country-wide FIRE yet. Still, Norway is working towards a future where it could largely sustain its government on investment return alone. This makes it a unique case study of an ‘AGI-proof’ government, one that decouples public finance from traditional labor and tax-based models. Indeed, the traditional FIRE model probably understates Norway’s preparedness for full automation, as we might expect 5-10x higher economic growth and higher returns on investment in such a scenario.
Is government FIRE possible without oil wealth?
Norway is a rich country with oil wealth. Do governments without oil wealth also have a shot at FIRE? Yes!
Investment capital can come from any government revenue. While oil gave Norway a significant head start, the principle behind its success is applicable anywhere. Any consistent revenue stream, whether from taxes, public enterprises, or other assets, can be reinvested into a sovereign wealth fund. The key is a long-term commitment to saving and investing wisely.
Investment capital could even come from central banks. This route to sovereign wealth is more unconventional but it is also worth considering. For example, Switzerland accidentally printed a de facto sovereign wealth fund through excess foreign currency reserves held by the central bank.
At the same time, Norway has already invested for 30 years to work towards this “government pension”. Attaining government FIRE is a long-term project and the best time to start was always yesterday. Realistically, not every country will have the means and the discipline to emulate the Norwegian model. Furthermore, sovereign wealth funds come with their own governance challenges, like mismanagement or political influence in the economy.
Still, Norway provides an interesting blueprint for an ‘AGI-proof’ government that can serve as an inspiration to other governments.
Thanks to
, , , , and other Roots of Progress blog-building fellows for valuable feedback on a draft of this essay. All opinions and mistakes are mine.State-owned companies still make up a significant minority of British oil & gas production. However, they are not owned by the UK government but by the Chinese government (CNOOC, Sinopec), the Norwegian government (Equinor), and the UAE government (Taqa).