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Egalitarian Finland most competitive, too

Despite hefty government spending on social benefits, Finland tops global economies. Second in a three-part series.

By Staff writer of The Christian Science Monitor / October 26, 2005


Fifty years ago, Finland was known for little more than the wood pulp from its endless forests. A poverty-stricken land of poorly educated loggers and farmers on the edge of the Arctic Circle, few paid it any attention.

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Today, this small Nordic nation boasts a thriving hi-tech economy ranked the most competitive in the world, the best educated citizenry of all the industrialized countries, and a welfare state that has created one of the globe's most egalitarian societies.

Envious policymakers from far and wide are beating a path to Helsinki to learn the secrets of Finland's success.

"We have a saying here," chuckles Stefan Nygard, a university lecturer, as he swings his baby daughter gently, soothing her to sleep. "If you are Finnish, you've won the lottery."

But as the leaders of other European countries desperately seek ways to preserve their expensive systems of social protection in a competitive globalized world, Finland's circumstances and mind-set aren't easily copied. "Finland is an exceptional case Europe," cautions Riisto Erasaari, professor of social policy at Helsinki University. "We are a small homogenous country, heavily state-based, and our social model as a whole is so typically Finnish that it won't travel. But parts of it," - such as the government-funded focus on innovation and education, "are exportable."

Mr. Nygard and his partner, Minna Sirelius, have certainly enjoyed the fruits of Finland's exceptionalism.

Neither of them paid a cent for their university education, though they took seven years to complete their respective degrees in history and psychology. Ms. Sirelius enjoyed free healthcare throughout her pregnancy and the birth of their daughter, Emilia, and she plans to stay on leave from her job in IBM's human resources department for 11 months.

She can afford to: The government is paying her 60 percent of her salary to look after her baby. Next year Nygard and Sirelius will choose among the Finnish-, Swedish-, English-, or Spanish-language day-care centers in their neighborhood, and the state will pick up four-fifths of the cost.

If either of them loses their job, they will be able to count on unemployment benefits that range up to 70 percent of their salaries for 18 months. And when they retire they can look forward to generous pensions that amount, for the average Finn, to 60 percent of their last salary.

These benefits come at a cost, of course: Finland levies some of the highest taxes in the world, and if Ms. Sirelius does well in her career, she will pay more than 45 percent of her personal income toward taxes. But she does not object. "I feel that is what keeps our society and country running," she explains. "We can't keep the welfare state running unless everyone pitches in and helps with the costs."

In that she is like most of her fellow Finns, says Petri Rouvinen, research director for ETLA, a business-linked economic think tank. "The Finnish mindset is collectivist, with a very strong sense of fairness," he says. "It's that kind of mindset that makes it possible to have this sort of system."

But what Mikko Kautto, a researcher at the government's Welfare Research Center, calls "universalist thinking," goes further. Finns do not regard social spending as a drag on economic growth and job creation, he says, but as a positive force.

"The merit of thinking socially," he argues, "is that having everybody involved, with all our human capital working for the benefit of society, is part of the reason for our [economic] competitiveness." The World Economic Forum, which runs annual business summits in Davos, Switzerland, has ranked Finland the most competitive economy in the world, ahead of the United States, for four of the past five years.

Nowhere is this approach clearer than in Finland's schools, which at the end of World War II turned out some of the worst educated young people in the industrialized world, and now graduate the best, according to comparative studies by the Organization for Economic Cooperation and Development (OECD).