Can Europe Make It?

Finland: welcome to the Ostrich Nation

The political, economic and social situation in Finland remains perplexing. Finns have been told for so long how good they have it, that they now refuse to believe anything to the contrary.

Gareth Rice
5 May 2015

Cafe in Oulu, Finland. Pixabay/tpsdave. Public domain.Once heralded for balancing a womb-to-tomb welfare state with a competitive economy, Finland hasn’t had it easy of late. The small Nordic country with a population of just over 5 million has struggled with four years of policy stagnation and a bickering coalition government, which has been mired in three years of economic recession. Multinational nails were hammered into the Finnish national confidence when, in 2013, Nokia’s mobile phone business was bought over by Microsoft Mobile, the new subsidiary of the software giant Microsoft. Today, Finland needs to make some far-reaching changes if it is to retain the best parts of its former economic glory. The 2015 national election results may exacerbate existing problems rather than provide solutions. 

Those who ignore sound solutions to the problems that are happening around them can be compared to the ostrich, a flightless bird of the genus Struthio, which is known to bury its head in the sand. An ‘ostrich nation’ is a place where a near majority of people and the politicians who they voted for behave like they are ignoring the reality with which they are faced. Invective populist rhetoric intoxicates cohorts of the voting public and acts as a barrier to alleviating economic ills. In this article I want to explain how Finland has come to uncomfortably fit the definition of an ‘ostrich nation’ and why some of its voters and politicians need to take their heads out of the sand to deal with what has been happening in their country over the last few years.  

It would be odd for any country in an economic recession to do well in the World Economic Forum’s 2014 Global Competitiveness Index, but somehow Finland managed to place 4th out of 144 economies! The more astute amongst you will wonder under which local conditions these statistics were collected and how they have been used to create the illusion of national wellbeing and to feed the so-called ‘positive psychology industry’, which is undergirded by a plethora of fluffy happiness indexes.  

Before the publication of the Global Competitiveness Index report, Finland had already been recognised as a flagship example of “secular stagnation.” According to Alvin Hansen, the American economist who coined the term, this refers to a series of sick “recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment.” On his influential blog, the economist Edward Hugh has shown how “this seems to fit the Finnish case to a T.”

Rising labour costs and a diminishing working population have also presented Finland with further challenges. Its public finances have come under increased pressure and labour resources have retracted to tip the economy into a recession. Writing in the Financial Times, Richard Milne had this to say: “After advocating austerity for others, Finland is now pondering cuts of its own to deal with years of recession.” The signs are plain for all to see. The most recent European Commission’s Country Report for Finland shows that, from 2007 to 2012 unit labour costs in manufacturing rose by 6.3% a year, faster than in any of the countries surveyed except Australia and Japan. At the same time, Finland’s productivity fell by 3.9% per year, far more than in any other country in the same survey.  

There’s no shortage of doomsayers. According to Paul Jonker-Hoffrén from the University of Turku, “the country [Finland] is facing a perfect storm of structural change in two key economic sectors (IT and forestry industries), austerity policies, a potential housing bubble and the damaging effect of the euro on its exports.” This bleak view is also supported by the latest economic outlook from Nordea Bank which recently stated that, “Finland is finding it very difficult to shake off the financial crisis.”

A number of reports have also pointed to further problems. Finland’s population is set to age rapidly in the coming decades.  According to a Commission Report this will mean that the working age population in Finland will decline by over 5% in this decade, which will have a significant impact on the economy's growth potential. An ageing population will only add to the weight already pressing down on Finland’s public budget and pension system. Pekka Myrskylä, a former Senior Adviser at Statistics Finland, estimates that at least 10,000 employees exit the domestic market annually owing to an ageing population.

There is also the risk of escalating unemployment. Indeed, a falling share in the working population means that relatively fewer people will pay taxes and social contributions at a time when national unemployment is rising. In 2014, the national official unemployment rate was 7.4%, but when one includes all those who fall outside the statistics, the figure may be as high as 19.1%. By the end of 2015, the Bank of Finland predicts that the unemployment rate will stand at 8.5% before dropping only slightly to 8.2% in 2016. The former Prime Minister Alexander Stubb has rightly warned that, “Finland's golden era is over and the country faces a lost decade unless it makes far-reaching changes.” Unfortunately for Stubb, his right wing National Coalition Party did not fare as well as they expected in the most recent Finnish national election.

What about some feasible solutions? Could public policy reforms help to alleviate the labour market problems brought about by an ageing population? Erkki Liikanen, the Governor of the Bank of Finland thinks so. At the end of 2014 he encouraged policy-makers to take more determined action in the face of alarmingly sluggish economic growth. He pointed to the need to overcome the key obstacles to economic growth: the weak productivity of work, lack of investments and a shrinking labour force.

Liikanen’s warning about a shrinking labour force is also an ongoing concern for those organisations that support increasing work-based immigration to Finland. A report published in April 2015 by The Confederation of Finnish Industries, whose main task is to make Finland an internationally attractive and competitive business environment, recommended doubling current levels of immigration in order to meet future labour demands. This would mean an annual increase from 18,000 immigrants to 34,000 to offset the worst effects of Finland’s ageing population. This recommendation confirms an earlier one from the pro-business Finnish think tank, EVA who warned that employment will remain low in Finland unless there is a strong influx of workers from abroad.

These expert recommendations seem to have fallen upon sand filled ears. In Finland’s most recent election, in April 2015, voters were rightly concerned about the state of the national economy. The results, however, suggest that Finland is on track to becoming an ‘ostrich nation.’ As if burying their heads in the sand, large swathes of the electorate voted to give more national influence to the Finns Party, whose vision and policies are nothing short of Machiavellian.

Two main trends define the Finnish political landscape: the decline of the centre-left Social Democratic Party, which for a time was the largest in Finland and coalition governments that have struggled to stitch together the patchwork quilt of the electorate. There are many political axes in Finland including left, right, liberal, authoritarian, urban and rural. The Finnish media described the previous coalition as a “six pack government” because it was made of six different political parties. As an uncompromising blend of right wing liberalism with a strong urban base, it was formed by Stubb and his predecessor Jyrki Katainen. The recent national election results suggest that Finland is heading for a more centre, authoritarian rural coalition.     

Founded in 1995, the Finns Party is Finland’s most populist and nationalist political party, which has been led by the charismatic Timo Soini since 1997. From 1999 to 2011, the Finns Party’s popularity ballooned from 0.1% to 19.1% of the national vote. They have more or less managed to maintain this position. In the most recent national election, in April 2015, the Finns Party ended up in second place with 38 seats (around 18% of the overall vote) in the 200-member parliament. Millionaire businessman Juha Sipilä’s Centre Party won 49 seats; Alexander Stubb’s right wing National Coalition won 37 seats with the Social Democrats picking up 34 seats. Four other parties, including the Greens, each took fewer than 9% of the votes for the remaining 42 seats. Nasima Razmyar from the Social Democrats and Ozan Yanar from the Greens were elected as the only two candidates from immigrant backgrounds.

In an attempt to shake off claims that they are a bunch of navel-gazing racists, the Finns Party has been promoting its own politics of decency. This includes a number of amicable sounding policies, including support for work-based immigration. On more than one occasion, Soini has eagerly expressed that he wants Finland to be a country open to immigrants, despite his party’s negative attitude towards the matter. Initially I was encouraged by Soini’s coming out in support of work-based immigration to Finland, but it wasn’t long before the classic quote from Mandy Rice-Davies, during the time of Profumo Affair, popped into my mind: “He would, wouldn’t he?”   

It is one thing for Soini to say that his party supports work-based immigration, but quite another to follow through with transparency and fairness after the immigrants arrive to take up work in Finland. Talent retention is crucial. While Soini is welcoming immigrants, he has no intention of letting them gain any real standing in Finnish society. This is where a careful reading of Niccolò Machiavelli’s The Prince is, I think, most revealing.

In Machiavelli’s discussion of Greece, he explains how the Romans had a problem which they could not deal with on their own. To weaken the Kingdom of Macedonia and chase out the Greek King Antiochus, they supported the Achaeans and the Aetolians.  Despite the help that the Achaeans and the Aetolians provided, the Romans ensured that they always knew their place. The Finns Party’s support for work-based immigration is based on a similar principle. They are publically behind an official policy which allows immigrants into Finland to boost the tax base, support the ageing population and offset the worst effects of the contracting labour market, which Finland alone cannot deal with, but unofficially, said immigrants are expected to ‘know their place.’

There also exists an unofficial policy, an invisible rule if you will, running in parallel to ensure that Finns end up with the best paid and most secure jobs, which would include permanent contracts with good pensions attached. The Finns Party’s policy on work-based immigration is, thus, a text book example of a working ambidextrous state: The left hand is pandering to immigrants while the right hand is knowingly ringfencing the best opportunities for Finns. This is precisely what David Goodhart, the former editor of Prospect, meant by “citizen first favouritism”, which, I imagine Soini and some of his supporters would argue is not the same thing as racism.   

The current Finnish scene is surely depressing enough, but it was complicated by the results of a recent online survey conducted by Yle, Finland’s national news broadcaster. In April 2015, when asked whether or not Finland should embrace work-based immigration, an overwhelming 3 out of 4 respondents opposed the idea. This survey suggests that the majority of Finns are happy to carry on piping an anti work-based immigration tune, whilst caught in the sharp jaws of an economic recession. 

Six years of living in Finland taught me many things. I observed a culture in denial made up of three layers, each inordinately doughy and uninspiring, each of them without flavour or savour. The first layer is put down during the primary and high school years when many young Finns are told by their teachers that “we [in Finland] have the best of everything in the world so you shouldn’t bother to complain.” The second layer is baked into the cake of the Finnish Parliament, where the political parties operate in a similar fashion to “the Establishment.” The brilliant British journalist Henry Fairlie was quite clear about what he meant: “By the ‘Establishment’, I do not only mean the centres of official power—though they are certainly part of it—but rather the whole matrix of official and social relations within which power is exercised.”

The Finnish Establishment is closely orbited by the boys’ club, the well-heeled, Volvo driving, yachting cabals who frequent the Baltic coastline. When making public policy decisions the Establishment refuse to put themselves into the shoes of certain others, especially immigrants, who, if given the opportunity, could contribute much to Finnish society. What the boys’ club don’t care to recognise is, to paraphrase JFK, that a rising tide doesn’t raise all boats...only yachts. The third layer is a more hardened version of the first one. It is largely composed of those Finns who were told all those years ago that they have the best of everything, except now they have actually come to believe it. As polished white specimens of previous social conditioning, they are in a strong position to deny the uncomfortable realities discussed above.

The political and economic situation in Finland remains perplexing. The previous coalition government failed to fully exploit expert advice from those in the know, which would have at least helped to alleviate some of the country’s economic ills. The challenge for the new coalition is to get through to those Finns, who, like ostriches, would rather bury their heads in the sand. My fear is that, if their numbers grow they are not likely to run out of sand any time soon; Finland’s coastline is nearly 800 miles in length.

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