Finland Flourishing After 100 Years Of Independence.
This week’s 100th-anniversary celebrations of Finland’s independence are partly a celebration of survival against the odds. Even Lenin, who became the first world leader to recognize the country’s autonomy from Russia days after he seized power, didn’t expect it to last long; he calculated Finland would soon succumb to its own Bolshevik revolution and join the Soviet Union. But that revolution failed despite a bloody civil war, as did the Soviet attempt to annex Finland during World War II. Through cautious diplomacy, not least throughout the Cold War, Finland was able to survive and secure its place as a Western nation. But the Dec. 6 anniversary is also a celebration of the country that Finns have built. Over the past 100 years, they have turned one of the poorest corners of Europe into one of the richest, most equal, most contented countries in the world. Finland consistently ranks near the top for education, innovation, political stability and quality of life. Its “Nordic model” based on robust institutions and a strong social safety net, has become a beacon for developing countries, particularly those seeking to rebuild after conflict.
This Nordic model emerged more by necessity than design, as Finns are the first to acknowledge. Finland’s famed egalitarianism can be traced to the need to heal rapidly the wounds of the civil war by accepting much of the Bolshevik agenda, especially in relation to land reform. Its postwar achievements in building an industrial base, providing high-quality education and a strong social safety net and promoting gender equality were driven largely by the need to mobilize all the country’s resources to pay war reparations to the Soviet Union. Nor did Finland’s challenges end with the Cold War. It experienced a deep depression in the early 1990s following the collapse of the Soviet Union, then its major trading partner. More recently, a series of shocks caused the economy to shrink for four years between 2011 and 2015. These included a sharp downturn in global demand for paper, which hit the forestry sector; the near-collapse of telecommunications giant Nokia whose mobile phone business was eclipsed by the iPhone; the loss of Russian trade following the introduction of European Union sanctions in 2014; the collapse in the oil price and the devaluation of the Ruble; and the eurozone crisis.
Indeed, there were times during those years of rising unemployment and falling living standards when it seemed that Finland might become a source of European instability. The True Finns, a right-wing eurosceptic nationalist party, came in third in the 2011 parliamentary elections with 19% of the votes and second in 2015 with 17%—a forerunner of the populist revolt that has swept Europe in the past two years. In 2015, the True Finns even entered the government as part of a coalition, raising fears that Finland would veto bailouts being offered to Greece to prevent a collapse of the euro. At the same time, some commentators were arguing that Finland should itself abandon the euro, which they claimed had become a straitjacket preventing a much-needed devaluation. Yet Finland has defied the doom-mongers and is flourishing again. The government forecasts that the economy will have grown by 2.9% this year, thanks to strong growth in exports and investment. The shocks that hit Finland’s economy have largely reversed, with the eurozone in the midst of a strong recovery, Russian trade picking up as the oil price rises despite sanctions remaining in place, and Nokia and the forestry sectors having restructured and recovered. Meanwhile, the True Finns have split and lost popular support.
Finland still faces challenges. An ageing population will lead to medium-term pressure on public finances as age-related spending rises. Productivity growth has halved over the past decade, in common with other advanced economies, raising doubts about Finland’s ability to sustain its generous welfare system. And although the current government was able to agree—after more than a year’s negotiation—a “competitiveness pact” with employers and trade unions that froze wages and boosted working hours, it has been unable to agree on an overhaul to the country’s highly inflexible labour market that might improve long-term productivity.
Nonetheless, Finland’s destiny may hinge more on its capacity to innovate than government action. On this score, the outlook looks promising, judging by the success of last week’s SLUSH startup gathering in Helsinki. This unconventional event, the only one of its kind to be run by student volunteers, attracted 20,000 entrepreneurs, investors and service providers from around the world including global industry luminaries as well as a smattering of royalty for a serious business conference with a festival vibe. Over the years, SLUSH has helped bring investment and know-how to Finland’s flourishing tech sector, which includes gaming giants Supercell and Rovio, helping to cement Helsinki’s place at the core of a dynamic Nordic tech ecosystem. More important, the success of SLUSH appears to be helping to drive a cultural shift both among younger Finns, who have embraced the startup culture and in the public sector, turning Finland into a laboratory for new ideas on how to harness technology to wider social challenges. Just as Finland’s survival in the last century owed much to its ability to adapt its Nordic model to new challenges, so it appears poised to do in the next.
Credit: Simon Nixon for The Wall Street Journal, 3 December 2017.