Who your parents are matters more and more, even in the social democracy of Norway
The differences in wealth between Norwegians is now far greater than in several other European countries.
Differences in income are still not that great – but when it comes to wealth, Norway is on par with countries like Britain and France, as sciencenorway.no recently wrote.
And wealth is becoming more and more important in terms of the amount of money Norwegians have to spend.
Sociologists Marianne Nordli Hansen and Maren Toft try to explain how this has come to be in their article Wealth accumulation and opportunity hoarding: class-origin wealth gaps over a quarter of a century in a Scandinavian country, which was recently published in the journal American Sociological Review.
One of their main findings is this: Who your parents are, matters more and more.
“Recent decades have fostered new instruments for opportunity hoarding that are most successfully used by the sons and daughters of the economic upper class,” they state in the article.
“What we’re seeing is that financial differences follow generations in ways that fall into a classic pattern of class differences,” Toft says.
“And that the importance of class background has increased considerably in Norway from the beginning of the 1990s and until today,” she says.
No inheritance tax
Inheritance plays an important part.
“Placing wealth in stocks, property and cabins is a way these upper classes pass on their privileges to their children,” Nordli Hansen says to sciencenorway.no.
Transferring money between generations is very easy in Norway today. More and more money is being transferred – without the person receiving the inheritance having to pay any taxes whatsoever. This is unique for Norway and Sweden in Europe, according to the webpage taxfoundation.org.
While stocks are an important part of the wealth of the very richest, placing your money in your property is the dominating way of doing things for the population in general. And wealth in property is becoming an increasingly important factor in terms of differences between people, according to Nordli Hansen.
You have to know how to make money
A system of free education, extending to higher education with generous student loans, has most likely contributed to evening out differences between people in Norway.
But traditional education is not so important when trying to explain the connection between social class and wealth, the researchers find.
“The ability to create a fortune demands a different kind of knowledge and competencies than what you get through a regular education,” Nordli Hansen explains.
And this sort of knowledge and competencies is very unevenly distributed in the population.
In order to create a fortune, you have to have knowledge of investment opportunities. You need to know how to do certain things. You also need to know certain people, have access to certain connections.
Your parents will often be the gateway to all of this, the sociologists claim.
In sociology, it’s common practice to look at different types of upper classes – there is the financial elite, and then there’s the cultural elite. Some have a lot of financial capital, others have cultural capital. Some have a lot of both, some have neither.
“What we see is that the fortunes of those who have grown up on the financial elite is greater than the fortunes of those who have grown up in others types of privileged homes, such as those with parents who are doctors, lawyers, academics or have other important cultural positions,” Toft says.
Deregulation and privatization
Toft and Nordli Hansen find it interesting that Norway and Sweden are still viewed as classic social democracies. Two countries where a lot has been done in order to even out changes between people, and where upward social mobility has been relatively easy to achieve.
But Norway is today one of the countries in the world with the most billionaires per capita in the world.
The great age of social democracy is usually seen as the years between 1950-1980.
Since then, market economy has played an increasingly larger part in Norwegian administration and economy. According to Toft and Nordli Hansen, this explains a lot of the development we are now seeing.
Changes such as deregulating the property market, the credit market and other markets, as well as partly or entirely privatizing previously public companies, has given those with large fortunes as lot of advantages. The wealthy have been given ample opportunities to increase their fortunes.
In fact, the richest people in Norway have been able to secure the same share of the total fortunes in the country as the richest people in the United States.
Rolf Aaberge from Statistics Norway has done a lot of research on economic inequality in Norway. He confirms that if we look at wealth and not income, then we can no longer claim that Norway is a very equal society. On the contrary, we would have to say that the economic inequality in Norway is in fact very big.
Marianne Nordli Hansen and Maren Toft, Wealth accumulation and opportunity hoarding: class-origin wealth gaps over a quarter of a century in a Scandinavian country, American Sociological Review.
Translated by Ida Irene Bergstrøm