The competition between the various factions can lead to an inefficient tapping of natural resources and an unsound use of revenues. The spirit of enterprise, talent and energy in both business and political life are used to acquire a share of this income rather than to foster productive activity in both the public and private sector. For an individual company or a group, this activity may seem rational - a 10 per cent chance to win the jackpot could be better than investing in a business that yields an ordinary return. This may have damaging consequences for a country. A sociological explanation is that easily acquired wealth weakens the incentive for innovation and work. We feel that we have become rich and want to live the good life. A possible economic explanation is that a large and broad sector that is exposed to international competition fosters learning and development. Without such a sector, the competitive intensity in the economy may decline and the ability and willingness to be innovative may be impaired. We must be cautious about drawing final conclusions based on historical comparisons. We would prefer to assume that we are managing our wealth better. However, it may be of particular relevance to highlight three critical pre-conditions for succeeding in this. First: Decision-making forms and processes in the political and economic arena must provide effective protection against the acquisition by interest groups of the right to use large shares of the petroleum wealth.
Also in most ten-year periods, investing in US equities has been profitable, with the exception of the depression in the 1930s and the last half of the 1970s. Equity returns have been negative after ten years only in the years between 1928 and 1938, in other words on equity investments made the year before the 1929 stock market crash. It may also be worth noting that equities purchased during recessions - such as in the mid-1930s and mid-1970s - brought solid returns ten years later. The picture is the same for most other countries. Since short-term fluctuations in equity prices are difficult to predict, it may be a sound strategy to keep the share of equities constant over time. This means buying a relatively large volume of equities when prices are low, and buying a smaller volume - or selling - when prices are high. This is the strategy applied by the Petroleum Fund. Let us now revert to the Norwegian economy and Norwegian economic policy. The revision of economic policy in March 2001 can to some extent be said to be a consequence of our oil economy. The new guidelines have also changed the interaction between the different components of economic policy. Fiscal policy will now have an expansionary effect. In order to prevent pressure from becoming too strong, monetary policy has to be tighter than would otherwise have been the case. Monetary policy has therefore been given a clearer role in stabilising economic developments.