Neoliberalism : Finland : egalitarian & competitive


Richard Moore

    Today, this small Nordic nation boasts a thriving hi-tech
    economy ranked the most competitive in the world, the best
    educated citizenry of all the industrialized countries,
    and a welfare state that has created one of the globe's
    most egalitarian societies.

This article explores the reasons for Finland's success,
and leaves out discussion of the elephant in the kitchen:
the role, or lack of it, of neoliberalism in Finland. For
example, "How much foreign investment and how many foreign
corporations operate in Finland?" That is to say, "To what
extent is Finland's success due to resisting the
neoliberal project?"

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Egalitarian Finland most competitive, too

By Peter Ford, Staff writer of The Christian Science
Monitor Wed Oct 26, 4:00 AM ET

Fifty years ago, Finland was known for little more than
the wood pulp from its endless forests. A poverty-stricken
land of poorly educated loggers and farmers on the edge of
the Arctic Circle, few paid it any attention.

Today, this small Nordic nation boasts a thriving hi-tech
economy ranked the most competitive in the world, the best
educated citizenry of all the industrialized countries,
and a welfare state that has created one of the globe's
most egalitarian societies.

Envious policymakers from far and wide are beating a path
to Helsinki to learn the secrets of Finland's success.

"We have a saying here," chuckles Stefan Nygard, a
university lecturer, as he swings his baby daughter
gently, soothing her to sleep. "If you are Finnish, you've
won the lottery."

But as the leaders of other European countries desperately
seek ways to preserve their expensive systems of social
protection in a competitive globalized world, Finland's
circumstances and mind-set aren't easily copied. "Finland
is an exceptional case Europe," cautions Riisto Erasaari,
professor of social policy at Helsinki University. "We are
a small homogenous country, heavily state-based, and our
social model as a whole is so typically Finnish that it
won't travel. But parts of it," - such as the
government-funded focus on innovation and education, "are

Mr. Nygard and his partner, Minna Sirelius, have certainly
enjoyed the fruits of Finland's exceptionalism.

Neither of them paid a cent for their university
education, though they took seven years to complete their
respective degrees in history and psychology. Ms. Sirelius
enjoyed free healthcare throughout her pregnancy and the
birth of their daughter, Emilia, and she plans to stay on
leave from her job in IBM's human resources department for
11 months.

She can afford to: The government is paying her 60 percent
of her salary to look after her baby. Next year Nygard and
Sirelius will choose among the Finnish-, Swedish-,
English-, or Spanish-language day-care centers in their
neighborhood, and the state will pick up four-fifths of
the cost.

If either of them loses their job, they will be able to
count on unemployment benefits that range up to 70 percent
of their salaries for 18 months. And when they retire they
can look forward to generous pensions that amount, for the
average Finn, to 60 percent of their last salary.

These benefits come at a cost, of course: Finland levies
some of the highest taxes in the world, and if Ms.
Sirelius does well in her career, she will pay more than
45 percent of her personal income toward taxes. But she
does not object. "I feel that is what keeps our society
and country running," she explains. "We can't keep the
welfare state running unless everyone pitches in and helps
with the costs."

In that she is like most of her fellow Finns, says Petri
Rouvinen, research director for ETLA, a business-linked
economic think tank. "The Finnish mindset is collectivist,
with a very strong sense of fairness," he says. "It's that
kind of mindset that makes it possible to have this sort
of system."

But what Mikko Kautto, a researcher at the government's
Welfare Research Center, calls "universalist thinking,"
goes further. Finns do not regard social spending as a
drag on economic growth and job creation, he says, but as
a positive force.

"The merit of thinking socially," he argues, "is that
having everybody involved, with all our human capital
working for the benefit of society, is part of the reason
for our [economic] competitiveness." The World Economic
Forum, which runs annual business summits in Davos,
Switzerland, has ranked Finland the most competitive
economy in the world, ahead of the United States, for four
of the past five years.

Nowhere is this approach clearer than in Finland's
schools, which at the end of World War II turned out some
of the worst educated young people in the industrialized
world, and now graduate the best, according to comparative
studies by the Organization for Economic Cooperation and
Development (OECD).

Making sure that every Finnish child, wherever he lived
and whatever his background, could get a decent education
had a very deliberate goal, says Riita Lampola, head of
international relations for the Finnish Board of
Education, which oversees schooling.

"As a poor country with a small population, if we wanted
to be a modern society and to develop our country, we
needed everybody here," she says. "That meant everybody
had to be educated."

High level education is the key to what Pekka Himanen, a
brilliant young philosopher who advises the Finnish
government, calls his country's "virtuous circle."

"When people can fulfill their potential they become
innovators," Dr. Himanen argues. "The innovative economy
is competitive and makes it possible to finance the
welfare state, which is not just a cost, but a sustainable
basis for the economy, producing new innovators with
social protection."

Other European countries could copy Finland's efforts to
improve its education system, Himanen insists, just as
they could emulate Finland's heavy investment in research
and development (R&D) - currently standing at 3.6 percent
of GDP, the highest level in Europe after Sweden.

It is this approach that has fostered firms such as Nokia,
the largest cellphone producer in the world whose
spectacular growth has boosted the Finnish economy and
carried many high-tech subcontractors on its coattails.
The telecommunications superstar singlehandedly accounts
for one-quarter of Finland's exports, 4 percent of its
GDP, and 35 percent of business sector R&D.

Finland maintained high R&D spending even during the dark
days of an economic crisis in the early 1990s that saw GDP
fall 13 percent in three years and unemployment climb to
17.9 percent.

The legacy of that crisis disappoints many Finns: for the
past 10 years successive governments have grown stingier
than they used to be, and though social spending has held
steady, services have not improved in the way they used

The public health system in Helsinki, for example, is
overcrowded with older Finns. "You wait a long time to see
a doctor, and then you don't see him for very long,"
complains Sirelius.

Pensions have risen by only three percent in real terms
since 1993 - ten times more slowly than wages. Many jobs
lost in the crisis have not been replaced, and
unemployment stands at 8.6 percent.

"The cleavage between rich and poor is perhaps widening,"
says Jouko Kajanajo, the head of social research at the
Social Security headquarters. "At any rate, the increase
in equality has stopped."

"We are the poor little brothers" of neighboring, more
generous Scandinavian countries such as Sweden,
acknowledges Dr. Kautto. Indeed, Sweden's social spending,
which constitutes 28.9 percent of its GDP - compared to
Finland's 24.8 percent, enables it to provide more social
benefits. "Finland did not restore social protection to
pre-crisis levels... but we have not forgotten our Nordic
heritage in our social policy," says Kautto.

That policy enjoys enormous public and political support
across the spectrum, founded on the consensual style of
Finnish life where governments, employers, and unions are
used to making compromises with each other. It helps, of
course, that Finland's population of 5.3 million is
largely homogenous, with a 6 percent Swedish minority and
no significant immigration.

The result is that even the opposition Conservative party
supports the country's social model: Its most daring
attack on the status quo was a recent suggestion that
Finns should be made to pay a token fee for using the
public library system.

Indeed, says Mr. Rouvinen, the challenges of globalization
mean that "we specifically need our social model. As a
small country on the edge of the world we will have steep
ups and downs. We have to have mechanisms so that
individuals won't suffer from that."

But Finland will have to adapt its model, as it develops
what Dr. Himanen calls "the welfare state 2.0."

"It will have to become more innovative, more productive,
more customer driven," he argues. And that may mean giving
private companies a larger role in providing welfare state
services, and encouraging a more entrepreneurial approach.

"Until now we have been a textbook case of how a country
should advance," says Rouvinen. "Today we are at a
crossroads, because we have been a catch-up economy, and
now we are at the global frontier, which is a different
ballgame. We have to lead the way."

That, he suggests, demands the sort of businessman who can
"come up with radical new ideas and make billions, and the
Finnish mind-set does not support that."

He remains confident, though, that so long as Finland can
tell success stories like Nokia's in key global industries
such as telecommunications, and improve its efficiency in
delivering welfare services, it can go on offering
economic growth and a social safety net.

After running budget surpluses for a decade, adds Dr.
Kautto, "Finland is one of the countries best equipped to
meet the challenges of an aging population, globalization,
and so on. In economic terms we are doing extremely well."

In the end, says Jorma Sipila, the Chancellor of Tampere
University, Finland's inclusive social model is its best
guarantee for the future.

"The conditions for a flourishing economy are so demanding
that the state has to make social investments to raise
competent people and take care of dropouts so that they
carry their share of the burden," he argues. "Marrying
prosperity and social protection is the only sustainable

* Thursday: France looks at how to remodel its social

Finn factsLand of Nokia

The world's No. 1 cellphone maker is based in Finland. It
holds 32 percent of the global cellphone market.

Nokia started in 1865 as a forest industry company on the
banks of the Nokia River. Today, it employs more than
60,000 people (about 24,000 in Finland) with factories in
10 countries and research and development facilities in 15

Nokia's share of Finland's:

GDP 4% Business sector R&D 35% Exports 25% CEO Jorma
Ollila's yearly pay: $4.64 million

Upwardly mobile society

In 1998, when some Americans were still getting funny
looks for using cellphones, mobile subscribers in Finland
already outnumbered land-line subscribers. In fact, 20
percent of households relied solely on cellphone service.

No censorship here

Reporters Without Borders ranks Finland (and several other
countries) No. 1 for freedom of the press. The US ranks

It has its challenges, too

Finland has some of the highest suicide rates in the
developed world. For people aged 35-44, for example, the
suicide rate is 29.9 (people per 100,000) in Finland,
versus 14.4 in the US.

Speeding is expensive

A 27-year-old Finnish heir to a sausage business, Jussi
Salonoja, was famously fined 170,000 euros (about $217,000
at the time) for going 80 kilometers per hour in a 40 kph
zone. Speeding fines are based on the offender's income.
Mr. Salonoja's reported earnings for 2002 were 7 million

Linux is from where?

The open-source operating system was started in 1991 as a
hobby by Finnish university student Linus Torvalds. But he
wasn't the only entrepreneurial student: In 1992 (before
Netscape came along), IT students at the Helsinki
University of Technology developed the first graphic-based
Internet browser.

Where Santa's sleigh garages

The residents Mt. Korvatunturi - in the northern part of
Finland known as Lapland - claim this is the home of Santa
Claus. Some 600,000 letters a year are sent there in the
hope that it's true.

Sources: Yahoo; Harvard Business School; Morgan Stanley;; University of Lapland; BBC; World Health 

Copyright © 2005 The Christian Science Monitor 

Copyright © 2005 Yahoo! Inc. All rights reserved. 



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