Editorial | Finland is slowly falling more and more behind Sweden’s pace

Editorial|Editorial

To the elections in Finland, which is preparing, parties and voters compose the future in the long term, but look at the past myopicly. One of the most important themes of this spring’s parliamentary elections is how to strengthen the public finances. The project is recognized as spanning several election periods. It is also worth noting that Finland has slipped into its predicament for a long time and steadily.

When economists present the development of the Finnish economy in recent decades, the curves show that something started to go wrong around 2008–2010. That’s when Finland’s competitiveness in relation to the other Nordic countries began to weaken, the public economy softened, the growth of labor input declined, investment in research and product development shrank, productivity slipped and even the birth rate curve turned downward.

One of the reasons is that in those days the mobile phone manufacturer Nokia was floundering. Nokia had changed the basic structure of the Finnish economy, invested huge sums in research, generated tax revenue and increased productivity. The old forest land turned into an electronic land.

However, Nokia’s roof does not explain everything. You can even think that Nokia’s rise covered Finland’s chronic weaknesses. They weren’t repaired because Nokia didn’t have to.

Even the financial crisis does not explain the problems. Sweden and Germany experienced the blow in completely different ways. However, they rose to the surface like a cork as soon as the worst time passed. The most important comparison countries grew and developed their economy even in the years when Finland was just trying to survive. Finland lagged behind. The only attempt to develop the economic impact in those years was the competitiveness agreement.

Finland falls further and further back. The employment rate is reasonable, but lower than Sweden’s. In Sweden, the age structure is better than in Finland. In Sweden, the number of people aged 15–74 is increasing, in Finland it is decreasing. In Finland, the birth rate falls more sharply than in other Nordic countries. Productivity in Finland is weaker than in Sweden.

Sweden is responding to its cries: its economy is able to cover the costs of social security and aging now and in the future. In Finland, parties everywhere promise to protect the welfare state, but the performance of the economy is nowhere near enough to fulfill the promise.

If Finnish politicians want to create a constructive and positive vision of Finland alongside the debt debate, they must focus on productivity and employment. Productivity is created in companies. Politics can help by investing in education and research. Companies can be given incentives that improve productivity, for example in taxation. Increasing work-based immigration is not a quick-acting panacea, but it is a medicine nonetheless. The years after the financial crisis showed that the Finnish labor market system and agreements must be flexible. Social security and work must be coordinated so that the transition from benefits to work is always profitable.

These drugs are not new or revolutionary. In Finland, they are not prescribed an effective dose just because of their bad taste. It says that chronic political incompetence is also behind the economic plight. The weakening trend of the Finnish economy should have been corrected immediately after the financial crisis. Jyrki Katainen’s (kok) government was not able to do that because it tried to serve too many political interests. The current government has reinforced the picture of the problems of overly broad governments.

High performance building the economy requires a high-performance, work- and productivity-focused, pain-tolerant government. The better the project that increases the efficiency of the economy succeeds, the more moderate savings are needed.

The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the journal principle line.