Egalitarian Finland most competitive, too
Despite hefty government spending on social benefits, Finland tops global economies. Second in a three-part series.
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Making sure that every Finnish child, wherever he lived and whatever his background, could get a decent education had a very deliberate goal, says Riita Lampola, head of international relations for the Finnish Board of Education, which oversees schooling.Skip to next paragraph
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"As a poor country with a small population, if we wanted to be a modern society and to develop our country, we needed everybody here," she says. "That meant everybody had to be educated."
High level education is the key to what Pekka Himanen, a brilliant young philosopher who advises the Finnish government, calls his country's "virtuous circle."
"When people can fulfill their potential they become innovators," Dr. Himanen argues. "The innovative economy is competitive and makes it possible to finance the welfare state, which is not just a cost, but a sustainable basis for the economy, producing new innovators with social protection."
Other European countries could copy Finland's efforts to improve its education system, Himanen insists, just as they could emulate Finland's heavy investment in research and development (R&D) - currently standing at 3.6 percent of GDP, the highest level in Europe after Sweden.
It is this approach that has fostered firms such as Nokia, the largest cellphone producer in the world whose spectacular growth has boosted the Finnish economy and carried many high-tech subcontractors on its coattails. The telecommunications superstar singlehandedly accounts for one-quarter of Finland's exports, 4 percent of its GDP, and 35 percent of business sector R&D.
Finland maintained high R&D spending even during the dark days of an economic crisis in the early 1990s that saw GDP fall 13 percent in three years and unemployment climb to 17.9 percent.
The legacy of that crisis disappoints many Finns: for the past 10 years successive governments have grown stingier than they used to be, and though social spending has held steady, services have not improved in the way they used to.
The public health system in Helsinki, for example, is overcrowded with older Finns. "You wait a long time to see a doctor, and then you don't see him for very long," complains Sirelius.
Pensions have risen by only three percent in real terms since 1993 - ten times more slowly than wages. Many jobs lost in the crisis have not been replaced, and unemployment stands at 8.6 percent.
"The cleavage between rich and poor is perhaps widening," says Jouko Kajanajo, the head of social research at the Social Security headquarters. "At any rate, the increase in equality has stopped."
"We are the poor little brothers" of neighboring, more generous Scandinavian countries such as Sweden, acknowledges Dr. Kautto. Indeed, Sweden's social spending, which constitutes 28.9 percent of its GDP - compared to Finland's 24.8 percent, enables it to provide more social benefits. "Finland did not restore social protection to pre-crisis levels... but we have not forgotten our Nordic heritage in our social policy," says Kautto.
That policy enjoys enormous public and political support across the spectrum, founded on the consensual style of Finnish life where governments, employers, and unions are used to making compromises with each other. It helps, of course, that Finland's population of 5.3 million is largely homogenous, with a 6 percent Swedish minority and no significant immigration.
The result is that even the opposition Conservative party supports the country's social model: Its most daring attack on the status quo was a recent suggestion that Finns should be made to pay a token fee for using the public library system.
Indeed, says Mr. Rouvinen, the challenges of globalization mean that "we specifically need our social model. As a small country on the edge of the world we will have steep ups and downs. We have to have mechanisms so that individuals won't suffer from that."