International capital markets play an important role for Norway. We drew on borrowing opportunities abroad when the petroleum industry was under development. We did the same in order to expand welfare schemes and to finance the countercyclical policy of the mid-1970s and the early 1990s. In the past 15 years, international financial markets have enabled us to convert national oil and gas resources into foreign equities and bonds. See chart “Real return on the fund” at the end of the speech. Since its establishment in 1998, the fund’s average annual real return after costs has been 2.9 per cent, or somewhat lower than the expected long-term return. This figure is marked by the challenging character of the financial crisis. The fund lost NOK 633 billion 4 in 2008, but a market reversal in 2009 has resulted in a positive return of NOK 716 billion over the past five quarters. So far, the fund seems to have fared relatively well through the most severe financial crisis for many decades. We still consider a real return of 4 per cent as realistic over time. This is based on the assumption that investment in sound government securities in the market can provide a reliable real return of about 2½ per cent. At the same time, the fund can reap a return of 2 to 2½ per cent in the long term from the three-fifths equity portion, some gains on corporate bonds and returns from active management.
The concept Dutch disease stems from the negative effects on the Dutch economy of the spending of revenues from the substantial gas resources of the Groningen field. From the end of the 1960s, these revenues financed strong growth in public expenditure, which led to higher costs and a decline in manufacturing. The situation went too far, resulting in large balance of trade and government deficits which required tightening measures. This in turn led to a sharp rise in unemployment in the first half of the 1980s. But the Netherlands is not the first example of a nation that failed in this respect, and far from it 2. A very clear example is provided by Spain as early as in the 17th century when the colonisation of South and Central America provided the country with access to vast natural resources and gold. The historian David Landes describes the effects on Spanish society in his book “The Wealth and Poverty of Nations” where he cites a happy Spaniard who proclaimed the following in 1675: “Let London manufacture those fabrics of hers to her heart’s content; Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocades: Italy and Flanders their linen, so long as our capital can enjoy them. The only thing it proves is that all nations train journeymen for Madrid and that Madrid is the queen of Parliaments, for the world serves her and she serves nobody.”  1  See Report no.