Hardy Finnish economy may well weather trading -- partner downturn

By , Staff correspondent of The Christian Science Monitor

There's a telling group of immigrants coming to Finland recently: Finns. The numbers aren't stunning, but after losing thousands of skilled workers to higher pay in Sweden in recent decades, it marks a change of status for the Finnish economy.

Compared with sophisticated, modern Scandinavia, Finland is a country not yet jaded by prosperity.

Finland's economy has been in the fast track over the past two years, outpacing growth in every other Western country. Now a recession is descending on Sweden, Britain, and West Germany -- its main trading partners to the West -- but the Finns remain carefully optimistic.

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Yet, next to cosmopolitan Stockholm with its stainless steel parliament building an d sociable Old town, Helsinki's pastel plaster mien retains, in its affluence, a certain plainfaced simplicity.

Finland has never had the money other Scandinavian countries have had to bridge lean times with government spending. The cost has been high unemployment at times. the benefit has been a lean, fighting-weight economy based squarely on private demand, rather than Keynesian pump-priming.

The Finns began cutting government growth and encouraging business profits in 1976, long before the Swedes, Danes, or Americans.

A prominent Swedish businessman in Stockholm, just back from Finland, remarked that he hadn't had much sleep. "The Finns are tough," he explained, smiling.

"We are a poor country," businessmen often comment, a country without the options of Finland's rich neighbors. The label falls oddly in clean, consistent Helsinki, without bad neighborhoods or urban blight. But it speaks for a Finnish attitude.

The Finns carry into their sleek, industrial world some of the values of their peasant roots.

Americans can see this in the subtle yet simple and forthright prints on Marimekko textiles, the plain grace of the best of Arabia porcelain tableware, and in the buildings of Alvar Aalto and Eliel Saarinen.

Juhani Pallasmaa, director of the Museum of Finnish Architecture in Helsinki, calls it the value of "noble poverty." It shows up in the economic life of the country, but it's the value without the poverty.

For example, five weeks each summer Finnish workers and managers alike vacate modern industry for the islands west of Helsinki or wooded lakes to the north.

The Finns, American Ambassador James E. Goodby observes, still think of themselves as survivors, struggling to eke a living from tough ground. How industrial affluence will change the Finnish self-image, he notes, is yet to be seen.

"We have only two things to sell," says Juha Haapameri, bundled up and talking international trade as he sells leather gloves at Helsinki's outdoor market: "wood and brains."

The Finns must struggle for what they get, he explains. "EVerything's a fight."

Finland has built up a metalworking industry in recent years that gives it considerably more than wood and brains to sell, but the national sense of economic struggle against the odds is echoed elsewhere.

The Finnish economy is, in the Scandinavian manner, a welfare state based on the marketplace. Incomes are spread more evenly than in the United States -- some think too evenly, according to one Finn -- and cities are cleaner. Even Helsinki shipyards lack the grime of many industrial cities elsewhere.

On the edge of Europe, with an Eastern language, Finland is more Western in an economic sense than much of Western Europe. A cue is its 34 percent total tax burden, near the US figure and well under that of most Western European countries.

Another cue, perhaps, is 4.5 percent unemployment --high by Scandinavian standards, but evidence of an economy where labor market forces are allowed to work. It peaked at 8 percent in late 1978.

This year, as the Finns expect demand for their goods to fall off by around 4 percent in their depressed Western markets, their Eastern connection will provide some economic ballast.

In volume, Finnish trade with the Eastern bloc is slated to rise about 16 percent this year. Since it accounts for roughly a fifth of Finnish foreign trade, it about evenly balances the decline to the West.

The Soviet Union is Finland's biggest trading partner. The character of the trade -- given shape broadly in five-year plans -- is barter: generally Finnish ships for Russian oil.

While much of the increased exports to the USSR go to pay a rising oil bill, the output will nonetheless help keep Finnish industries running to capacity and workers employed.

The central concern in economic circles now is inflation, over 13 percent annually at the end of 1980. Finnish goods cost too much overseas. All the country's major economic troubles unravel from there: from government deficits to lack of jobs.

Finland has high costs built into whatever it makes. Its energy costs will always be a hurdle, as will Sweden's, for several reasons:

It's cold, the world's northernmost country except for Iceland. And a scant 4.75 million people must deal with one another across a country bigger than West Germany. The only energy sources native to Finland are wood and peat, both difficult to gather and transport.

So Finland can't compete with the lower-cost countries in high-volume, high-overhead products.

Instead Finnish industry, built around forest products and heavy equipment manufacturing, must put design and technology together in the right ways to sidestep the competition.

A symbol here is the icebreaker. Custom-engineered for various types of ice -- one-year Baltic ice; rocklike, perennial Antarctic ice; or shallow but deeply frozen Siberian rivers -- icebreakers are a low-volume, design-intensive business.

About half the icebreakers built since World War II have been made by Finns. Now the icebreaker is one of the reasons Finnish shipbuilders are staying above water, with a couple of years' worth of orders on the books, while the world is in the clutches of a shipbuilding crisis.

It is also an example of how the Finnish strategy of turning problems -- such as frozen sea lanes -- into advantages and selling them.

Another problem the Finns have found a way to market is their precarious position in the world political balance.

The evidence is Finnish names like Jaakko Poyry and Wartsila appearing on contracts and equipment in places like Burundi, Brazil, and Iraq. While Finland makes the capital goods these countries need to build up their industrial base, dealing with Finland does not threaten to draw a poor country into either the NATO or the East-bloc spheres of influence.

Often, Finnish businessmen say, these countries are wary of tangling not only with big, less neutral countries, but also with the monolithic, multinational corporations of the West.

Through most of the 1970s, Finland was finishing laying its own industrial foundation -- building houses and factories in the south for workers left jobless as forestry in the north was increasingly automated.

Last summer, the economy's managers were concerned that this continuing investment boom would lead to overheating -- production outpacing demand -- as demand for exports fell this year. But the investment has slowed now, and the danger somewhat abated.

The Finance Ministry forecasts about 3 percent growth in Finnish output this year. The Bank of Finland is less optimistic, predicting that any growth indications in 1981 will be statistical overhang from early in the year. Most other analysts split the difference.

Broader questions remain, such as how closely Finland's economy will follow the Swedish model as affluence grows and how successfully it can avoid the pitfalls.

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