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Finland

A remote and cold country’s success story

by Jan Otto Andersson

“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.

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 I 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,

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About the Author

Jan Otto Andersson
Jan Otto Andersson is Docent in International Economics at the Institute for Statistics and Economic Research at Åbo Akademi University in Turku, Finland.




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