War, electricity crisis, inflation and interest rate increases dominate the news. Yes, there are bad times and a sour mood for both consumers and businesses, which are noticing lower purchasing power and earnings.
As if that wasn't enough, the government is really tightening the belt with tax increases and savings that cause a chill to run down the spines of business owners, high earners and other rich people who are flowing out of the country heading for Switzerland and destinations with lower tax burdens.
Yes, there is a long way between the good news these days, and in good Norwegian spirit, the debate here on the mountain is mostly about how much money we should throw at our problems.
The news picture is characterized by politicians and people with special interests who all compete in indignation and self-interest when you cry for your own sick mother. Electricity support for private individuals has been introduced as a measure and now companies are also demanding a similar scheme to prevent bankruptcies and subsequent high unemployment.
No, it is not easy to be a governing politician now, which is clearly shown in the opinion polls for the Center Party, where support is in free fall downwards in line with the upward climb of interest rate increases. Then it is good to be able to buy some forest in Meråker for a couple of billions.
That there are recessions is beyond any doubt and we all feel it.
Some of us will have it tougher than others and some businesses will go bankrupt. In all this misery it is easy to forget a few things; Firstly, such periods are inevitable and perhaps even necessary. This downturn comes in the wake of a very strong upturn in which companies have done very well and we consumers have had a very strong development in purchasing power. All this sponsored by corona crisis packages, record low interest rates and public spending.
There has been a party, and now comes the day after.
Secondly, those who scream the loudest for various measures should remember that it can be argued that companies and consumers should have set aside a little in good times to cover rising interest costs and unforeseen cost increases such as extreme electricity prices.
In principle, it is not the state's responsibility to provide a financial safety net for companies that are not profitable enough to withstand short-term cost shocks. Then we would have a situation where the upside of running your own business is privatized and the downside is the public's responsibility.
This situation is often called "moral hazard" and is a situation that encourages risky behavior because you yourself are not exposed to the downside of the behavior. In a market economy, companies must and should be allowed to go bankrupt. It is important because most of the decline in value that occurs when companies go bankrupt can be picked up by others or exploited by others.
Keeping companies artificially alive with subsidies is therefore a very bad idea. It is a little sweet to hear, for example, the grocery industry, which has created so much wealth for chain owners and merchants, demand electricity subsidies because they cannot pass on increased electricity costs to customers. This at the same time as food prices are exploding more than inflation in the food chain otherwise. Still, enough pressure from the business community and interest organizations will ensure that electricity support for the business community is put in place. Unfortunately, that's the political game. Nobody wants to be left with black pepper, so we buy ourselves some goodwill.
My third and final point is that there are some companies that are not as affected as established players by the downturn. As a group, start-up companies are challengers to the established and they have many characteristics that make them better suited to succeed when times deteriorate.
- They have newer and more cost-effective business models – a classic example is low-cost chains in flights or groceries.
- They are small and have low costs - entrepreneurs play the long game and are willing to sacrifice short-term gain for future success.
- They are good at turning around quickly and finding temporary solutions that get them over the edge.
The start-up companies and their understanding of the problem are therefore a likely solution to all the crises we experience today.
When we subsidize established businesses with electricity subsidies and other "crisis measures", many companies will manage in the short term anyway. The flip side of the coin, however, is that even if this support saves the company, it will often collapse at a later point in time.
Money has then been wasted and a necessary change in the business structure has been displaced.
It is a bit like an old forest where the big trees dominate. It is important that the forest owner manages the forest so that the forest does not grow too dense. Then no new forest will have the opportunity to grow and become large and strong, which can contribute to the rest of the forest doing better in the long term. Suddenly you're standing there with your beard in the mailbox and a forest that won't grow. One day the old trees will be there and rot away, and you run the risk of having to cut them all down. Then you stand there on "bare ground" and have to rebuild the forest.
And that will take time.
