The new perspective report points out that several factors, such as state support for companies and cheap debt financing, may have kept unprofitable companies, so-called Zombie companies, artificially alive. This means that employees may have been locked into bad companies. The support to companies during the pandemic may have hampered the functioning of the economy, by locking up capital and labor to existing structures, the perspective report states. The Norwegian economy might have benefited from several companies going bankrupt, even before the pandemic, according to the report. – Bankruptcies are a completely normal and necessary part of the market, says BI professor Gisle Natvik. But the process whereby unprofitable companies go bankrupt and free up resources for better projects has been disrupted in recent years, he says further. Bankruptcies are a completely normal and necessary part of the market, says BI professor Gisle Natvik. Photo: BI NHO is too afraid of bankruptcies, says professor – It sounds like people think that bankruptcy in itself is a thing. And a great deal of the rhetoric, especially from NHO, is somewhat in that direction. It’s a bit funny, says BI professor Gisle Natvik. Natvik is supported by Ola Kvaløy, who is dean and professor of social economics at the University of Stavanger. In times of crisis, it is more important to protect the employee than the workplace, says dean and professor Ola Kvaløy. Photo: Heidi Gomnæs / news – Especially in Norway, where the costs of bankruptcies are low thanks to a good welfare state that means that the employees themselves are well insured, bankruptcies are healthy for the market. NHO, on the other hand, has moved in the opposite direction, and actively worked to prevent bankruptcies, Gisle Natvik believes. – To a small extent, they advocate the principles that should underlie business activities. It’s more like, how can we get the most possible state support for the companies at any given time? I found that a bit disappointing, says Natvik. During the pandemic, NHO and LO put great pressure on the politicians to give generous support packages to companies to prevent bankruptcies in the business world. This led to the number of bankruptcies during the pandemic being lower than in “normal” times. It gets expensive when these two are aligned. When LO and NHO play on the same team, politicians don’t stand a chance, says dean and professor Ola Kvaløy. (From right to left: Peggy Hessen Følsvik, leader of LO; Terje Aasland, energy minister for the Labor Party; and Ole Erik Almlid, general manager of NHO.) Photo: NTB – Overall, developments in recent years may have created an expectation that the state to a greater extent cover losses, for example in the event of a surprising loss of income or cost increases, the perspective report states. This may have hampered the market, it says. – When support for business has increased, it shakes the principles that capital owners who receive the gains for their investments must also bear the risk of any losses, and that income protection schemes are reserved for households. The message emphasizes that it must be easy for companies to establish themselves and grow, while other companies must be able to go bankrupt. NHO rejects that they have lost faith in the market Gisle Natvik points out that even in times of crisis such as the pandemic, which the business world and the companies themselves had nothing to do with, then market forces should be stronger. – If you work in the oil industry, it’s great if the oil price goes up, and stupid if the oil price goes down. But the state will not start insuring the companies against falling oil prices. That would have been completely silly, and I think everyone in the offshore industry understands that, says Natvik. He points out that the same principle should have applied during the pandemic. – The same applies if you run a hotel and there is a pandemic. It is not surprising that there can be pandemics. Then the hotel industry will be at a loss for a while. And then they will probably leave with extraordinarily large profits afterwards when the pandemic is over and everyone will be traveling again. NHO ensured that taxpayers splurged NOK 342 million on hotel billionaire Petter Stordalen during the pandemic. Photo: NTB NHO director Anniken Hauglie, on the other hand, believes that the crisis support during the pandemic was absolutely necessary. – You make decisions at a time when you don’t have the whole picture. And afterwards you could perhaps have had a different arrangement for this, says Hauglie. What NHO is most concerned with are the general framework conditions. So I think the vast majority will agree that the pandemic was in a special position that required extraordinary measures in a very extraordinary situation, says NHO director Anniken Hauglie. Photo: Hallvard Norum / Hallvard Norum – But at that time there was a complete lockdown all over the world. We saw that the value chains were about to collapse. And it was important for Norway that we made sure that we also had a viable business community at the other end when we came out of the pandemic. Gained approval for large support packages In the years after the pandemic, NHO has also made large demands for state support for business, and received approval for too much. For example, many companies that had not entered into fixed price agreements for electricity before the energy crisis, often because the spot price was more favorable when prices were low, received electricity support from taxpayers when prices skyrocketed after the Russian invasion of Ukraine. Companies that take risks, for example by becoming dependent on low spot prices for electricity, must be able to live with the consequences in times of recession, Natvik believes. – Do you think it is a good system that when companies do well, the owners should keep the profits, and when the companies do poorly, the costs should be shared with the community? It is, in principle, a problematic policy, says Natvik. NHO director Anniken Hauglie agrees that the companies themselves must take responsibility for their own gambling, but believes that the extraordinary situations Norway has faced speak for the generous support packages that NHO has worked out. – Basically, we completely agree that companies should be run at their own expense and risk. And then there have been some extraordinary events that have brought it all to a head, she says. Published 20.08.2024, at 19.26
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The government warns against “zombie companies” – news Norway – Overview of news from various parts of the country
