Finland: a remote and cold country's success story.

Author:Andersson, Jan Otto
Position::Company overview
 
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"It is a lottery prize to be born in Finland." Coined in the 1970s, this saying gained currency during the 1980s when Finland experienced stable economic growth in a world troubled elsewhere by inflation, unemployment, exchange-rate volatility and chronic public deficits. After the revaluation of the markka in 1989, statistics showed that in terms Of GDP per capita (uncorrected for differences in domestic price levels), Finland was among the leading countries in the world. A feeling of euphoria enveloped the business pages of our newspapers and journals. Finland had become the "Japan of the North."

Then befell the suuri lama--the "great depression" of the early 1990s. Finland became the first OECD country to experience such a dramatic economic crash since the end of World War II. Euphoria turned into an almost tangible sense of crisis. Not until the glorious victory over Sweden in the 1995 world hockey championships did times become more cheerful. Also very encouraging was the remarkable success of Nokia. A few years earlier, this iconic national conglomerate had been on the brink of bankruptcy, but now it was a world leader in a rapidly expanding niche. By the late 1990s Finland had again become a success story.

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The ongoing world financial crisis will change this rosy picture. The Finnish banks seem to have avoided the worst mistakes this time, but Finland is even more dependent on exports now than in the early 1990s, and as foreign demand dwindles, shutdowns and layoffs--especially in the paper industry--are daily news. And now that Finland belongs to the euro area, its ailing exports cannot be corrected by letting the currency depreciate. Domestic demand is, however, expected to increase as a result of rising real wages, tax cuts and accelerated public investment. All told, the economy is in better shape in Finland than in most European countries.

In this article I offer my take on the Finnish success story. The problem is to avoid bragging, since Finns are not supposed to brag. So 1 begin by citing some outsiders who in recent years have frequently cast Finland as a model for other countries.

In his 2005 book Finland, Cultural Lone Wolf, Richard Lewis asked why Finland is number one in global competitiveness and mobile phones, the least corrupt country in the world and the world leader in managing water resources, and why Finns are regarded as ideal peacekeepers. (1) The renowned Spanish sociologist Manuel Castells is another admirer. In their 2002 book The Information Society and the Welfare State: The Finnish Model, Castells and his Finnish co-author Pekka Himanen told the story of a country on the frontier of the information revolution that nevertheless managed to maintain an egalitarian welfare society. (2) Boris Kagarlitsky, director of the Institute of Globalization Studies in Moscow and a Marxist dissident in Soviet times, described Finland as "the northern exception" in his 2006 book The Revolt of the Middle Class. According to Kagarlitsky,

The "Californian model" builds the network as a gigantic supermarket, while the Finnish model builds it as a vast library. In the former case everything is about the purchase of goods; in the latter, about access to knowledge, information and socially necessary services. (3) There are fennophiles on the other side of the Atlantic as well. Canadians Neil Brooks and Thaddeus Hwong compared the high-tax Nordic and low-tax Anglo-American countries. They singled out the United States and "another country Canada might wish to emulate: Finland," and found:

This pattern, with the United States ranking about the lowest among industrialized countries and Finland near the top, is evident on most of the remaining social indicators we examine--relating to social goals such as personal security, community and social solidarity, self-realization, democratic rights, and environmental governance. (4) According to the study, Finland is a good example of the high-tax Nordic model. Fascination abroad with the Nordic, Scandinavian or Swedish model is, of course, not new; what is new is that Finland is now sometimes regarded as the most interesting Nordic case. (5)

Even the Swedes have lately paid attention to Finland. During Sweden's 2006 election campaign, the bourgeois parties--which won a historic Victory over the Social Democrats--consistently praised the Finnish way of handling things. Among the examples they used were Finland's educational system and its tax subsidy for hiring service workers. Some Swedish writers also cautiously referred to Finland's membership in the European Economic and Monetary Union and its courageous construction of a new nuclear plant. That even the Swedes admire the Finns for reasons unconnected to the sauna, sisu or Sibelius can be taken as the ultimate sign of national success, comparable to the monster group Lordi breaking the long spell of humiliation at the Eurovision Song Contest. Finland--twelve points, douze points!

Finland in global rankings

Several factors--the information revolution, the proliferation of international organizations and investors' need to monitor suitable locations for investment--have caused a boom in international ranking lists. Institutions such as the OECD, the World Bank, the United Nations Development Programme and the World Value Survey have specialized in creating new indicators for different purposes. According to the country statistics database NationMaster, Finland is number one on many of them: technological achievement, literacy, Summer Olympic medals, freedom in decision-making, growth competitiveness score and communication-technology patents (see table 1). (6)

Among OECD countries, the rankings show Finland as a mixed bag. It is a country with high educational levels (no. 2), but students report high noise and disorder levels in class (no. 2). Finns think that they are quite happy (no. 2), but the number of reported crimes per capita is high (no. 3). There are relatively many rape victims (no. 3, along with Sweden), but also many female parliamentarians (no. 3). Finns are heavy consumers of coffee (no. 2), spirits (no. 3) and energy (no. 3). Taxation is high (no. 3), but so is the will to fight for their country (no. 4). Finns trust others (no. 4) and they feel safe walking in the dark (no. 4). They tend to own their houses (no. 5), but relatively many of them see people of a different race (no. 2) or drug addicts (no. 3) as undesirable neighbours.

Among the bottom rankings we find that Finland has the smallest number of hours of instruction for pupils aged 9 to 12, that it has the smallest proportion of houses with more than five rooms, that Finns produce less waste per capita and that municipal waste-treatment expenditures per capita are the smallest. We also find that growth in health expenditures was the smallest and that the lowest proportion of people who have signed a political petition is found in Finland.

Other low rankings are "consultation with doctors" (second last), "discuss politics frequently" (second last), not thinking of political extremists as undesirable neigbours (second last). There are few property-crime victims (third last), few children living in poor families (third last) and few immigrants per capita (third last). Finns tend not to drink bottled water, soft drinks (fourth last) or wine (third last). There are few abortions and asylum seekers per capita. Life satisfaction inequality is low, and so are crime victims as a proportion of the population. The proportion of pupils disliking school is low, and so are church attendance, cannabis use, daily smoking, the proportion of taxes paid by the richest 30 per cent and the number of cars per inhabitant.

In a 2006 article, Juho Saari and Raija Sailas presented a more systematic review of the most important economic and social rankings. (7) Table 2 shows the different indicators and the rank given to Finland on each of them. In these rankings Finland is the only country with three first positions. It is also the only one that appears among the 15 best on all the rankings. (8)

Effort and performance

In their comparative study of high- and low-tax countries, Brooks and Hwong present an early-21st-century snapshot of 19 countries, arranged in four groups: the "social democratic" Nordic group (Denmark, Finland, Norway and Sweden); Anglo-American "liberal" welfare states (Australia, Britain, Canada, Ireland, New Zealand and the United States); "corporatist" continental European regimes (Austria...

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