What Happened to Finland? From a Welfare State to the Next Greece
From 1980 to 2008 Finland changed drastically. Domestic capital lost its preferential position as a prime source of investment. This happened because a deep recession hit Finland in the early 1990s. A severe recession combined with the propagandistic belief that globalization can “save” countries from economic crises served as fertile ground for changing Finland from a planned economy into a free market economy. Change started in the 1970s but it really gained pace after President Kekkonen resigned in 1981. Finland was a mixed economy where the government controlled everything from legislation, trade and foreign policy, however - it was not a totally closed system. Only the biggest industrial companies were owned by the state. A well working system was changed to an economy that became totally exposed to open markets. This was done in the name of liberalisation and free markets. This occurred slowly over the course of decades because the Finnish people were strongly opposed to such policies. Politicians had to be very careful and cunning not to impose changes too quickly.
Since the 1990s, the public sector has been under great pressure to privatize its services. This means that the public sector is being made available to private foreign investors who profit greatly off of the services that are vital for most people. Most of these services used to be publicly owned; for example: the social sector, health care, etc. However, this also includes private companies which own more and more functions that once belonged to the public sector, for example security companies doing tasks that used to belong to the police, etc.
In the 1990s recession, the high unemployment rate came as a shock and it stayed for good. The atmosphere in the work place got more tense and demanding. Human resources were stretched to the limit. Families were especially suffering from this new wave of doing things. This change went through every layer in society. This abandonment of the old, where regulation and planning was the best way of doing things for not only the nation but for the individual as well, was replaced by fierce competition where market values replaced the overall wellbeing of the people.
After the Second World War, Finland was paid reparations by the Soviet Union. This was the key component which enabled Finland to prosper after the war. Although reparations were a tough task to manage, it can be said that because of them Finland rose to a higher level of industrialization. In addition, rebuilding the country after the war had raised productivity, combined with the devaluation of currency, which made export levels boom. All these factors opened new windows of prosperity, not to mention a better quality of life and a way to develop into a welfare state. These factors yielded strong economic growth over a period of thirty years. Finland’s growth rate was approximately +5% over GDP during that time. This prosperous period occurred because Finland was under state guidance. The system was actually a mixture of a planned economy and free markets combined with wise monetary policy. Japan used similar policies to successfully recover from the Second World War.
In the early 1980s, Margaret Thatcher and Ronald Reagan believed that future economics would be built around the philosophy of monetarism. Monetarism is a school of thought that emphasizes the role of government in controlling the amount of money in circulation. Monetarists believe that variation in the money supply has major influences on national output in the short term and the price level over longer periods, and that objectives of monetary policy are best met by targeting the growth rate of the money supply. The philosophy of neoliberalism is often combined with Monetarism. When these two are put together their aim is to turn a nation-state into a market-state.
Whereas in the past the government allocated funds to a certain sector of society based on available resources, Monetarism changed the system so that these sectors had to fund themselves by collecting payments from the users of services or goods. The public sector also started to outsource services and some services were cut off because there were not enough market-based users to collect enough funds to justify their place in the system. So, the government role started to fade and it was replaced by the will of investors combined with a market value.
For example, day care used to be run by a municipal structure. First some of those day care facilities changed to a public utility, then it changed to a public corporation and finally it was privatized and sold to an investor or highest bidder. After this, the government’s only role was to legislate and monitor lawfulness.
This development was possible because the elite took this task upon themselves. Neoliberalism managed to justify its necessity for a liberal, global economy. The elite, especially the business elite, incorporated this belief into their souls and minds as a new world order.
Nevertheless, the question must be asked: What was the pivotal reason why Finland changed its path from a welfare state to market liberalism? The big reason would be: there was a significant change in the role of domestic capital and its crucial role in the Finnish economy.
Before the 90s recession, foreign ownership was limited to a certain segment of all Finnish companies. That initial limitation started to grow fast as the recession got more severe. Finally, foreign ownership peaked in 2000 where it was 73 % of all companies. In the years since, foreign ownership has been slowly declined to a level of 50 %.
Before this, however, there was an avalanche of foreign investment and ownership; there was a 20 % limit for foreign ownership in Finnish companies. The government wanted to raise it to a maximum level of 40 %. However, the negotiations for Finland becoming a full member of the European Union would not allow such restrictions. In 1993 Finland removed all restrictions concerning foreign ownership.
This suited especially the American investors. They saw the business sector in Finland as a tempting investment opportunity because the recession had crashed the market value of Finnish companies. One example of this was Nokia. In 1992 the Nokia market value was smaller than its daily cash balance.
Finnish companies became part of a foreign investors’ portfolio. This was first greeted as a positive development since the banking sector and, therefore, domestic capital had taken a huge hit during the recession. Nobody wanted to talk about the possible downsides and what that could mean for Finnish companies in the long term.
In many ways, Finland is a land of “one truth at a time.” If you have something that contradicts a prevailing paradigm, you will get marginalized, ostracized and your career options will become limited. This is a typical feature of Finnish society because there are very few individuals at the top of the food chain, and those who actually are at the top have made a pact that they alone shall rule Finland. If you try to swim against the proverbial current you will be destroyed professionally. Big business, the media, academia, political parties, etc. – all fields have been infected with this kind of mentality.
Of course, this could change if common people would know the truth as it relates to history and the future things that are planned for Finland and its citizens.
The economy of Finland was gathering pace after a terrible recession. No let us see how this was possible after a deep recession, which changed Finland for good.
Jaakko Kiander, the former research manager of the Government Institute for Economic Research, wrote in 2001 that there were three main reasons why Finland recovered quickly from the recession in the early 90s.
First: the devaluation of the Finnish mark. Finland had a fixed exchange rate. The value for currency was set too high and it became impossible to defend against market speculation. Finally on Nov. 14, 1991, Finland devaluated its currency by 14 % because the Bank of Finland had exhausted all its currency reserves. This made foreign trade almost impossible because foreign trade requires foreign exchange reserves which will back its liabilities.
Secondly: the fixed exchange currency was changed to floating currency. The devaluation in 1991 was not enough. Capital was leaking out of Finland because the exchange value was still set too high. To avoid another rock bottom, Finland was forced to proceed into the floating currency system on Sep. 7, 1992.
Third: the enormous success of Nokia which created over ten thousand jobs in Finland alone, making the Nokia market in the year 2000 worth over 210 billion US dollars – which today equals the worth of Royal Dutch Shell or the pharmaceutical giant Pfizer. Nokia built enormous success in less than a decade. Now 15 years after its peak, Nokia’s market capitalization is 24 billion, almost ten times smaller.
The recession was not taken seriously enough until it stopped all foreign trade. Now Finland is a member of the Eurozone and there is no such demand concerning exchange reserves. The political elite in Finland is ready and willing to destroy its economy, and there is no such power to resist. To bring true change to Finland there needs to be a political will. And for that to happen there has to be some sort of a crisis.
If we look at the PIIGS countries (Portugal, Ireland, Italy, Greece, Spain) the destruction of the economy can go very far before there is any sort of political crisis which can put enough forces in motion to initiate further change.
In Finland this means that as long as the eight parliament parties get enough votes to maintain their position, there is neither a political desire nor a need for change. In other words, there is no true opposition in parliament. Therefore, change will only come from outside the established box where the eight parliament parties can wheel and deal as they like and keep their position secured.
After gaining independence from Russia in 1919, Finland was a nation with three strong institutional pillars. The first pillar was a strong President. The second pillar was the government, which focused on economic and social policies. The third pillar consisted of the labor unions. While the president had a firm grip on foreign policy, the government’s responsibility was to develop the economy and enhance the social well-being of the people, which led eventually to the welfare state.
After the Second World War, President J.K. Paasikivi and (especially) President Urho Kekkonen expanded their power beyond their mandate. Kekkonen was famous for his tactics of directing how the various Finnish governments were formed, who got nominated as a minister, etc. Kekkonen monitored the press and even solved disputes within political parties. The people accepted this. They wanted a single, strong leader who was a symbol of the state – a symbol of the highest authority, a father of the nation.
During these years, Authority and the President’s will highlighted the political scene. This was reflected in the Finnish parties themselves, where each chairman was the undeniable leader of his party. This was a time when everyday policies were dictated by governmental institutions and were very technocratic. Naturally then, the party leaders soon became alienated from the people. This development went into “turbo boost” in the late 1960s when parliamentary parties were given party subsidies by the state. Such an action ensured automatic funding and a new independence from popular supporters no matter what the leaders did.
Today the law governs party subsidies. Every parliamentary party receives the annual sum of 170,000 euros per one representative.
Paasikivi and especially Kekkonen created national unity by collaborating with Social Democrats and communists. However, the Finnish people had deep wounds resulting from the 1918 civil war fought between “reds” (led by the social democratic party) and the “whites” (led by the non-socialist conservative-led senate). The civil war was a total catastrophe for Finland. Around 36,000 people – or 1.2 percent of the nation’s total population – perished. Even today, almost one hundred years later, there is a deep grudge between “red” and “white” families in certain parts of Finland.
Kekkonen, who was seventeen at the time of the civil war, took part in battles on the “white” side and gained a reputation as a worthy soldier. After the civil war he was ordered to command an execution squad and this affected him deeply. Later on, when he was president, this particular period of his life helped him see the future perils waiting to strike Finland if this deep grudge and outright hatred could not be contained. He understood that Finland needed something which would unite the people around common objectives.
The first step was to get Social Democratic support for Kekkonen’s foreign policies and to accept him as the nation’s president. After winning the 1956 presidential campaign against Social Democrat candidate K.A. Fagerholm (151–149 in the Electoral College vote), Kekkonen realised that getting Social Democrats to accept him as Finland’s President was essential for the country.
Secondly, he adjusted the revolutionary intentions of the communists to fit national interests. Because of his relatively good relations with left wing parties he could successfully accomplish this via consensus policies (for which he was famous). Kekkonen’s dogged policy of consensus was probably his greatest achievement in the domestic arena. After his removal from office due to illness in 1981, small winds of change started to blow but it took a while before structural changes really began.
Each year, in the many international comparisons that are made by various NGOs and world organizations, Finland scores high (near the top of the list) in areas such as schooling, social progress, economic competitiveness, etc. In many ways the foundation for this success lies in the national consensus policy, which Kekkonen first initiated, between president, political parties and labor unions. Over the decades these sectors refined their cooperation to a level in which they had enough power to smooth away all the “bumps and wrinkles” that came along in recent history. The greatest achievement of consensus policy was how Finland got back on its feet after the 90s recession. During that time, Finland suffered the worst recession in its independent history, as two major banking establishments went bankrupt causing a great deal of turbulence and financial damage, not only for individual citizens but also for the domestic economy.
At the same period of time, Finland also joined the EU and later the Eurozone. It should be known, there are strong hints that when Finland joined the Eurozone there were violations of its constitution, which, naturally then, may be labeled as high treason. The former minister of development cooperation Toimi Kankaanniemi, who was in talks concerning EMU (Economic and Monetary Union) reservations, indirectly conceded this in 2012. Also the role of a number of former presidents and the current one should be examined in the international court. Indeed, deception and diversion goes all the way to the highest levels of the political elite. Morally this is unforgivable, as so many people have suffered greatly – and some have even paid the ultimate price!
Yes, Finland stared deep into the abyss. Her people were agitated because of the high unemployment rate, and the economy of the country was spiraling downwards. The Bank of Finland had lost literally all its currency reserves defending FIM (Finland Markka).
One particular reason enabled a quick recovery to happen in a very short period of time: economic growth. Without it Finland would have slipped over the edge into destruction, into the abyss without a return ticket.
From the early 1980s Finland had exposed its markets to global competition. The liberalisation of the financial institutions started in the early 80s. First there were some very small steps taken but banks felt their time had come since the strong President Kekkonen had resigned due to illness. These small steps, which were never discussed nor voted on, continued to be taken and gradually they formed a strong package leading all the way to the total liberation of the finance markets.
Notably, there are similarities with the European Union’s own federal development. The EU also progressed with tiny little steps, aiming to cross the line, where it would not be possible for its individual members to return to their former status as nation states. These plans were laid down right after World War II. Publicly the European Union was a project of peace in Europe, to ensure that war would never happen again in Europe. At least this was the selling pitch that was fed to the common people. Under this veil, however, there were much more sinister aims.
The European Union has always been a project of the United States; the USA’s front or “cover” is Germany, which executes the orders of its transatlantic master. There have been numerous statements from former journalists, army and intelligent personnel who back this view. Simply put, Germany is still occupied by the United States.
After World War II Finland was in the “armpit” of the Soviet Union. People did not like it but it was reality. Paasikivi, and later Kekkonen, understood the position Finland was in. Finland had a 1,340 km borderline with the Soviet Union. Securing this North-West borderline would give the Soviet Union time and resources to focus on the more important things. Finland and its political elite realised that being pragmatic with the Soviet Union could present an opportunity for Finland to take advantage of its technological expertise. Commerce was a prime example of this.
Finland and the Soviet Union did trade on a bilateral basis. Finland would refine different metal components, clothes and other consumer products and trade them for raw materials, especially oil. Russian oil was refined and exported to the West. Finland received oil for a reasonable price and the Soviet Union acquired access to Western petrol markets via Finland. This was a “win-win” situation for both countries.
Meanwhile, the United States was monitoring Finland with great interest. They did not want Finland to get along too well with the Soviets. Their goal was to get information as well as make valuable allies who would be useful later on. The ultimate goal was to lure Finland permanently into the Western camp. This meant close relations with NATO.
Because Finland was, back then, much more important for the Soviet Union than it is now for the Russian Federation, the Soviet Union did not let Finland drift too far away, into the arms of the United States.
This status quo began to weaken when President Kekkonen resigned from office and later died. Finland drifted further away from Moscow with its membership in EFTA (European Free Trade Association). Finland was an associate member of EFTA from 1961, but in 1986 Finland joined fully. Association membership did not only lead to full membership but it also paved the way for Finland to apply for full membership in the EEC (European Economic Community) in 1973, where the same pattern happened again. Finland signed the EEC free trade agreement in 1974. The free trade agreement fully came into effect in 1985. In 1989 Finland started its convergence with the EC (European Community). The EC would later become the EU (European union), which Finland joined as a full member in 1995.
And so, the free market “religion” replaced Finland’s former planned economy. This was an open invitation for the United States to lure Finland as one of its “close friends” – in other words, as a satellite state.
Culturally Finland has been saturated with American culture. Films, TV-series, clothes, language, values have all been flooding Finland since the end of the Second World War. This has caused a deep wound for Finland. Not only in the fundaments of a country and its core values, but also in the minds of the people. This delicate way of brainwashing has been done carefully with one objective only: that the people of Finland should accept everything the United States does or produces without any questions.
When you talk to the common people of Finland, you get the impression that they are resigned. There is true despair among the lower ranks of society. The elderly and sick feel they are forgotten. Families with children feel the government intrudes in everyday life. There are thousands of children who get their only meal in school. The taxation rate is going up. The total tax ratio might reach 50 % in the near future. VAT (Value Added Tax) is 24 %; food is 14%; and medicine 10%. Finland has progressed from being a country with a slight difference in the gap between rich and poor, to a country with a considerable gap between the two, and it is rising at that! The reason for this was a big tax reform done in 1993 by the government of Esko Aho (Center party). The most damaging decision was separate investment income from income taxation. Later this led to straight tax evasion since senior executives and business owners started to get their salaries in stocks or options rather than salaries because of the favorable tax rate in an investment tax ratio. This might have never happened if there would have been a strong president or a real opposition party which would have opposed such bad decisions.
Now 20 years into EU membership, Finland is facing the greatest crisis after the Second World War. There used to be a consensus policy, which made sure that recovery happened quickly after crisis. Finland also had its own currency and central bank. Neither currency nor central bank may ensure welfare but they are tools, which can be used to achieve those objectives. Without such tools it is almost impossible. Finland needs a political movement outside established political parties. There is a need to rebuild and unite the fragmented country. Unrest is growing but it is not strong enough yet. The situation will change drastically by the next elections in 2017.