The future of the finnish welfare society

The traditional Nordic welfare society is not doing so well anymore in Finland. The government’s principal strategy seems to be to achieve savings through cuts. The trade balance is about to collapse, yet we hear disconcertingly little about what the government might be doing to the address most serious problems of the country: the loss of jobs without the prospect of new ones on the horizon. In an interview in Helsingin Sanomat last Sunday (4 March 2012), the economist Juhana Vartiainen gave his own view of why Sweden has by all economic indicators clearly overtaken Finland in the past few years: Sweden has focused primarily on improving the labour supply by such measures as increased earned income deductions, whereas Finland has chosen to cut VAT on food and implement other measures that do not directly provide incentives for people to find work or set up businesses.

The reason for the difference is clear: the Finnish corporatist system which gives labour market organizations a considerably greater role than in Sweden. These organizations have the government on a leash and eating from their hand. Increasing the supply of labour is not one of the primary interests of the Finnish corporatist system. The headlines of the past few days and weeks demonstrate the current cluelessness of the trade union movement: some of the leaders have not realized that the times have changed and people are sick of the power games between elites. Meanwhile, the employers still have their eyes set mostly on high-tech companies when there is another challenge which is at least as great, namely to give a boost to small enterprises, the service sector in particular.

All in all, what is needed is a much more radical shift from income, corporation and capital taxation towards the taxation of resource exploitation and consumption. Disposable culture needs to be curbed while facilitating the market entry of services. Finland should be turned into a paragon of resource efficiency. Unlike Sweden, Finland is well set for this both culturally and historically, for it is basically about the commonsense of a people who have been through war: how to repair and mend things instead of throwing them away, how to save in one place while investing in new things in another.

The current structure of municipalities in Finland means we are facing an unprecedented and uncontrolled reduction of municipal services. In this situation the government should push through a rapid and complete overhaul of the municipal structure of the country. The sacred cow of retirement age reform also needs to be addressed, putting an end to unnecessary ‘unemployment pathways’: while retirement age must be raised , it must also be accompanied by flexible new options for the growing number of people who still want to work when they are past 70.

The Finnish model of the welfare state must be revisited and recreated within the next few years, otherwise we are in trouble. We must build a new welfare state which is more motivating and flexible, one which responds better to the needs of the post-industrial world.