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|GDP: $171.7 billion .|
GDP growth rate: 4.9%.
Per capita income: $32,800 .
Inflation rate: 1.6%.
Budget: Income .............. $33 Billion
Main Crops:Cereals, sugar beets, potatoes; dairy cattle; fish.Natural Resources: Timber, copper, zinc, iron ore, silver Major Industries: Metal products, shipbuilding, pulp and paper, copper refining, foodstuffs, chemicals, textiles, clothing
Finland has an industrial economy based on abundant forest resources, capital investments, and high technology. Traditionally, Finland has been a net importer of capital to finance industrial growth; in recent years it has become a net exporter of capital. Finland has one of the best performing economies in the EU and Europe.
The Finnish economy has made enormous strides since the severe recession of the early 1990s. Finland successfully joined the euro zone and has outperformed euro-area partners in terms of economic growth and public finance. Even under the difficult circumstances of the last 2 years, the Finnish economy has performed reasonably well-- though the pace of activity has slowed considerably and remains subject to volatility. Finnish GDP growth slowed sharply from 5.1% in 2000 to 1.2% in 2001, largely as a result of a collapse in exports. The economy picked up slightly in 2002, when GDP growth amounted to 2.2%. In 2003, slow international economic growth has had a pronounced impact on Finland, as on other countries, by way of the export sector. In the first quarter of 2003, total output was markedly smaller than in the previous quarter and exceeded the level of 2 years ago only by a narrow margin. Nevertheless, growth appears to have picked up over the spring and summer, and recent tax decisions together with the expected upswing in the international economy toward the end of the year will bolster stronger growth. The 1.2% growth in total output that is forecast for 2003 will come by and large from services. Both industrial and construction production will come in at roughly the volumes reported last year. Growth is forecast at 1.1% in 2003 and 2.5% in 2004.
Unemployment has decreased significantly since 1994; however, the current 9.1% unemployment rate (2002) remains above the EU average. A relatively inflexible labor market and high employer-paid social security taxes hamper growth in employment.
Exports of goods and services contribute 38% of Finland's GDP. Metals and engineering (including electronics) and timber (including pulp and paper) are Finland's main industries. The United States is Finland's most important trading partner outside of Europe. With a 6.6% share of imports in 2002, the United States is Finland's fourth- largest supplier after Germany, Sweden, and Russia. The total value of U.S. exports to Finland in 2002 was $2.2 billion. Major exports from the United States to Finland continue to be machinery, telecommunications equipment and parts, aircraft and aircraft parts, computers, peripherals and software, electronic components, chemicals, medical equipment, and some agricultural products. The primary competition for American companies comes from European suppliers, especially German, Swedish, and British. The main export items from Finland to the United States are ships and boats, paper and paperboard, refined petroleum products, telecommunications equipment and parts, and automobiles. In 2002, the United States was Finland's third-largest customer after Germany (11.8%) and the U.K. (9.6%) with an export share of 8.9%, or $4.0 billion. However, trade is only part of the totality: the 10 biggest Finnish companies in the United States have a combined turnover that is three times the value of Finland's total exports to the United States. About 4% of the Finnish GDP comes from exports to the United States.
Except for timber and several minerals, Finland depends on imported raw materials, energy, and some components for its manufactured products. Farms tend to be small, but farmers own sizable timber stands that are harvested for supplementary income in winter. The country's main agricultural products are dairy, meat, and grains. Finland's EU accession has accelerated the process of restructuring and downsizing of this sector.
What’s happening to Finland’s economy?
Finland’s economy has had a torrid time since the onset of the financial crisis and the euro crisis that followed it.
Indeed, 2015 looks set to be the fourth consecutive year that the economy has either contracted or stagnated, even as the recovery in the rest of the euro area (excluding Greece) seems to be picking up pace.
Here is how Finland’s GDP has fared compared with other advanced economies:
A part of this story has been the failure of exports to increase as much as expected. One factor that helps explain this is the decline of one of the country’s major exporting companies: Nokia. In 2000, the company accounted for some 4% of Finland’s GDP, but its fortunes reversed dramatically following the introduction of the Apple iPhone and Android devices into the market. By 2013 it accounted for less than 0.5% of the country’s output.
However, the problems are not confined to a single company or industry. The deeper problems are in the composition of Finland’s export market. Almost half of the country’s exports are raw materials and production supplies used in manufacturing and a further third are investment goods.
Despite the broad uptick in growth across the Eurozone, neither manufacturing nor the pace of corporate investment are growing at a sufficient pace to boost Finnish trade prospects. This is having spillover effects on domestic company expansion plans, with private-sector investment at its lowest point for 15 years, according to Nordea Bank.
So are there any grounds for optimism?
In the short term, it looks like it’s going to be a difficult period for Finnish workers. On 22 July, Finnish Prime Minister Juha Sipila announced plans to cut the country’s wage costs by 5% by 2019. In other words, there are going to be significant pay cuts.
Currently Finland has the seventh-highest labour costs in the Eurozone, joint with Germany. However, its labour productivity (GDP per hour worked) is significantly below the Eurozone average.
As a consequence of this, unit labour costs are some 20% higher in Finland than they are in Germany.
Without a free-floating currency to help boost competitiveness with its fellow euro member states through devaluation, the adjustment has to be carried out through internal devaluation (lower wages and/or higher unemployment). The signs of this can already be seen with unemployment at 9.4% and likely to stay above 9% through 2016.
One way of achieving this adjustment without significantly increasing job losses or forcing people to accept nominal pay cuts is to increase the amount of hours worked without raising wages accordingly. Yet there will have to be some difficult negotiations with the country’s unions if they are to achieve this.
The hope is that the painful adjustment will allow Finland to benefit, once corporate investment starts picking up across the Eurozone, as survey data has been suggesting it will, and the manufacturing sector begins to increase activity.
Author: Tomas Hirst is editorial director and co-founder of Pieria magazine and was previously commissioning editor, digital content at the World Economic Forum. His work has been featured in the Times, the Guardian, Prospect Magazine, the Financial Times and Quartz.
Image: The Finnish flag is raised above members of their nation’s team during the formal flag raising ceremony at the Sydney Olympic athlete’s village September 5, 2000. JDP/JIR
Until the early twentieth century, Finland was part of Sweden or Russia. In 1155, the first missionaries arrived in Finland from Sweden. Sweden ruled Finland from the twelfth to the nineteenth centuries. Russia ruled Finland from 1809 to 1917, when Finland finally won its independence.
The political and social character of the Finnish people has been shaped by their relationships with Sweden, Russia, and, in the twentieth century, the Soviet Union and the West. Under Swedish rule, the Swedish language was the official language, and much of the administration of the country was directed from Sweden and carried out by Swedes. Finland moved from Swedish to Russian control as a part of a deal struck between Napoleon of France and Czar Alexander I of Russia in an effort to complete Napoleon's blockage of England (1809). In the process, Russian troops occupied Finland (Jakobson 1998).
In an important way, this was the beginning of Finnish independence. As a Grand Duchy of the Czar, Finland was given its own administration headed by a senate. "As grand duke of Finland, the Russian Czar, an autocrat with absolute power in the rest of his empire, accepted the role of constitutional monarch" in Finland (Jakobson 1998). Thus began Finnish self-rule.
Along with self-rule, the Finnish language became the language of the government, furthering a sense of Finish identity. In 1835, Kalevala, the Finnish national epic, was published. This collection of Finnish folk poems, compiled and edited by Elias Lönnrot, played an important role in the development of the Finnish language and, more generally, of Finnish culture. This epic poem brought a small, unknown people to the attention of other Europeans. Within the Grand Duchy of Finland, the Kalevala bolstered self-confidence. These factors furthered faith in the possibility of an independent Finland, complete with a Finnish language and culture.
Finland declared its independence from Russia on December 6, 1917, though there were Russian troops in Finland. At the end of December 1917, Lenin recognized Finnish independence. The new state was also recognized by France, Germany, and Sweden. Thus began a long period of a complex and sometimes stormy relationship with the USSR.
With the encouragement of the Bolsheviks, a group of Finns broke from the "Red Guard" and engaged the "White Army" led by General Mannerhein. About 30,000 Finns lost their lives on both sides of the civil war that lasted from January to May 1918. The White Army forces won the day. In 1919 the present constitution was adopted, and Finland became a republic with a president as head of state. The legislative branch of government has a unicameral parliament or Eduskunta of 200 seats members are elected by popular vote on a proportional basis to serve 4 year terms. A supreme court or Korkein Oikeus heads the judicial branch. The president appoints the Korkein Oikeus judges.
In the winter of 1939-1940, the Soviet Union attacked Finland, and the Winter War was fought. While the Finns did not defeat the USSR, they managed to hold them off and won wide respect in Europe and the world for their efforts. It is not exactly correct to say that Finland was the only country to fight on both sides during the Second World War. Finland was a co-belligerent with Germany against the USSR. Finland signed a peace agreement with the Soviet Union in the summer of 1944, and ceded some territory to the Soviet Union, but was never occupied by Soviet troops. Finnish independence and sovereignty were preserved.
After the war, the government of Finland walked a fine line between the two camps of the "Cold War." On the one hand, Finland refused to accept an American offer to participate in the Marshall plan, developed a trade relationship with the Soviet Union, and paid off its war debt to the USSR. On the other hand, Finland worked towards becoming a member of the European Union, succeeding in 1995.
Political, Social, & Cultural Bases: Finland's official name is Republic of Finland (Suomen Tasavalta). Its short local form is Suomi. The population of Finland is approximately 5.2 million. It is the sixth largest country in Europe in area, with a low population density of 17 persons per square kilometer. Most Finns, some 65 percent of the population, now live in urban areas, while 35 percent of Finns live in a rural environment. Metropolitan Helsinki is composed of three cities: Helsinki, the capital, with a population 551,000 Espoo, with a population of 210,000 and Vantaa, with a population of 176,000. These urban centers are home to roughly one-sixth of the country's total population. Other important cities include Tampere (193,000), Turku (172,000), and Oulu (118,000).
The Finnish language is a member of the Finno-Ugric linguistic family that includes, in one branch, Finnish, Estonian, and a number of other Finnic tongues and, in the other, Hungarian, by far the biggest language of the Ugric group. An indigenous minority language is Sami, spoken by the Sami people (also known as Lapps) of Lapland.
The number of foreign citizens living permanently in Finland was about 85,000 in 1999. The biggest groups were from the neighboring countries of Russia, Estonia, and Sweden. The Finnish currency is the markka.
Lutherans constitute 86 percent of the population, with 1 percent of the population professing the Finnish Orthodox religion. Sweden, Norway, and Russia border Finland. Forests cover 68 percent of Finland, while 10 percent is water (188,000 lakes). Cultivated land constitutes 8 percent of Finnish territory with 14 percent listed as "other." The official languages of the country are Finnish (92.6 percent), Swedish (5.7 percent), and other (1.7 percent). This latter figure is consistent with the percentage of foreign residents in Finland (1.7 percent in 1999). There are 2.5 million workers in the labor force (53 percent male and 47 percent female). The service industry comprises 64 percent of the labor force, with industry and construction making up 28 percent, and agriculture and farming making up the final 8 percent. Finnish exports are led by metal and engineering (43 percent), followed by paper (39 percent), with chemical, textiles, and clothing making up the final 18 percent. Finland's main trading partners are Germany, Sweden, and the United Kingdom. (Havén 1999)
Since 1917 Finland has been a sovereign parliamentary republic with a separately elected president. The president's term is six years. Two hundred members of parliament are elected for four-year terms. The voting age is 18 and is universal. The major political parties in Finland are the Social Democrats, Center Party of Finland, National Coalition Party, Left Alliance, Green League, Swedish People's Party of Finland, and Christian League of Finland. As of the March 1999 election, women held 37 percent of the seats in parliament, the largest female percentage in the European Union. For administrative purposes the country is divided into six provinces (laanit): Aland, Etela-Suomen Laani, Ita-Suomen Laani, Lansi-Suomen Laani, Lappi, and Oulun Laani.
Geographically, Finland is in the far north of Europe. This means that the southern tip of Finland has 19 hours of sun in the summer and 6 hours of sun in the winter. In the northernmost parts of the country, on the other hand, the sun does not rise for about six weeks in winter and does not set for about two months in summer. Despite its northern location, the Baltic Sea warms the south of the country so that both summer and winter temperatures are moderate.
Health care in Finland is under the guidance of the Ministry of Social Affairs and Health. While the ministry sets board guidelines and supervises the implementation of programs, the delivery of health services lies with the approximately 450 local municipal authorities. These authorities provide services independently or in cooperation with neighboring municipalities in joint municipal boards set up in a joint health center. Health services are funded with national and local taxes with around 10 percent of costs covered by the patient. Life expectancy at birth is 77.41 years for the total population. For males it is 73.74 years, while females have a life expectancy of 81.2 years.
There are 56 weekly newspapers (published 4 to 7 times a week) and 158 weekly newspapers (published from 1 to 3 times a week). The total circulation of all newspapers is 3.3 million. The Finnish Broadcasting Company, Oy Yleiradio Ab (YLE), is the biggest national radio and television provider. YLE is a noncommercial public service broadcaster that operates two television channels with full national coverage. There are 2 privately owned TV channels with national coverage and some 30 local TV stations. The only radio broadcaster with full nationwide coverage is YLE. The importance of electronic media is growing fast. Internet connections per capita in Finland were the highest in the world in 1999 with 25 Internet users per 100 inhabitants.
Do you know the Moomins? They were invented by the Finnish-Swedish author Tove Jansson (1914-2001). Moomins are troll-like creatures that have a certain resemblance to hippos. Not only are they famous in Finland, the Moomin books are also available in German from us. The Moomins live in the Moomin Valley and experience all kinds of adventures. Finland even has an amusement park with the Moomins, Moominworld in Naantali on the west coast.
The word sauna is the only German word that has been adopted from Finnish. In Finland the sauna is very important and part of the culture. You don’t just go to the sauna in your free time, you can also meet business partners there. Almost every house has a sauna where you can relax and cleanse your body. In apartment buildings there is a community sauna for the residents.
The chances of seeing the Northern Lights are quite high in Finland, and most likely in September, October or March. Scientifically, the northern lights at the North Pole are called Aurora borealis. The lights dance green, pink or purple across the sky at night. Why do they arise at all? It’s pretty complicated, but it has something to do with the sun. When it hurls particles into space and hits the earth’s magnetic field, they are led to the magnetic north pole. In doing so, energy is released that we see as the northern lights.
Suomi-neito is the personification of Finland. So this girl stands for the country Finland, she is a symbol for it. Translated, the word means “Virgin of Finland”. Mostly she is depicted with long, blonde hair and blue eyes and wears a blue and white dress – the Finnish national colors. Finland’s outline on maps also resembles a woman with an arm up. It is also sometimes referred to as Suomi-neito.
The Road to Prosperity: An Economic History of Finland
Jari Ojala, Jari Eloranta and Jukka Jalava, editors, The Road to Prosperity: An Economic History of Finland. Helsinki: Suomalaisen Kirjallisuuden Seura, 2006. 343 pp. 43 Euro (cloth), ISBN: 951-746-818-0.
Reviewed for EH.NET by Lars Fredrik Andersson, Department of Economic History, Ume? University.
Just more than a century ago, Finland was an agrarian society featuring low per capita income and dependency of Russia. Today, Finland is a highly advanced independent industrial country in the top ten of the world income league. Finland’s twentieth-century economic miracle is a story of success over hardship, poverty and Russian dependence. How was this achieved? Considering the causes and consequences of this transition into modern economic growth, this book gives valuable insights into the challenges faced by Finland in particular and other small successful European countries in general.
This anthology, edited by Jari Ojala, Jari Eloranta and Jukka Jalava, sets out to provide a model of Finnish success. The so called “Finnish model” is characterized by: (1) solid institutional legacies, (2) long-term utilization of abundant natural resources, (3) rapid adoption to shifting economic and political structures, (4) heavy investments in human capital, (5) egalitarian society with an extensive welfare state, and (6) innovations in new technologies. Using this model as a point of departure, the chapters in the book underpin the specific features of Finnish economic and social development.
Finland’s long-term growth performance is outlined by Riita Hjerppe and Jukka Javala. The authors provide a description and analysis of Finland’s transition into modern economic growth. It is shown that the industrial breakthrough occurred during the period 1860 to 1940 and that rapid economic growth was achieved by high labor productivity growth. The labor productivity growth was driven by rapid technological progress. In turn, structural change was more an effect than a cause of the growth process.
Although the shift effects were small, one should not forget the importance of modernization in agriculture and the movement of labor from agriculture to industry and service production. Indeed, as noted by Jari Ojala and Ilkka Nummela, the shift from labor- to capital-intensive production in agriculture stimulated aggregated productivity growth and facilitated labor movement into the expanding industry and service sectors. In addition, the growth of industry and service production was also characterized by an evolution in business structures raging from merchant capitalism in the eighteenth and nineteenth centuries to industrial in the twentieth century and global capitalism today. To explain this evolution the authors Jari Ojala and Petri Karonen underpin the importance of competitive and institutional forces as well as long-term co-operation within and between companies in different industrial sectors.
The stages of evolution in business and are furthermore shown in Yrj? Kaukianinen’s chapter on maritime trade. Finland was foremost a supplier of raw material back in the nineteenth century. During the twentieth century, these commodities were replaced by manufactured products emanating foremost from the forest industry. Only in the later part of the twentieth century was there a transition to higher value added and high technology exports.
As Finland’s economy became more industrialized, factor markets became increasingly important. The labor market started to evolve in the end of the twentieth century in conjunction with the expansion of the manufacturing and service sectors. In the post-war period, the growth of private services and welfare services created job opportunities for women as well as men. The authors, Matti Hannikainen and Sakari Heikkinen, also stress how the labor market changed from domination by employers to a system with strong trade unions and centralized collective bargaining. In turn, the financial sector had a strong involvement from the government. The authors Concepci?n Garc?a-Iglesias and Juha Kilponen maintain that the Finnish case in some sense was different from other countries as the strong involvement of the government and the central bank in regulating the financial markets after World War II delayed the start of the financial modernization.
The government was apparently important in the development of the welfare state as well. Jari Eloranta and Jari Kauppila argue that while growth of government’s spending primarily was an issue of institutional expansion, other factors also need to the considered. The building of the welfare state was closely tied to the development of incomes and the trade-off between social and military spending.
The equality ambitions of the welfare state were furthermore strengthened by the development of income distribution (taxable income of tax units). Indeed, as shown by Markus J?ntti, inequality was quite variable in the inter-war period, increased significantly in the period 1950-70 and declined rapidly after 1970. In the 1990s, Finland had one of the most equal distributions of income across the OECD.
Growing income and output have been enhanced by, among other things, investments in education, human capital and R&D. Rita Asplund and Mika Maliranta show that high investments in education and training has been important to foster economic growth as well as technology policy focusing on R&D and ICT investments. Part of this success has been the joint effort of private and public spending.
Summing up the chapters in the book, Pauli Kettunen concludes that Finland was a late-comer among the Nordic countries. The industrial take-off occurred late and the social structure remained agrarian for a long time. He maintains that Finland has indeed absorbed features of the other Nordic countries but still preserved features of its own. The “Finnish model” has been characterized by egalitarianism, a strong government role, innovativeness and geopolitical adjustment.
This book, written by three distinguished editors along with fourteen prominent contributors offers many kernels of insight. Numerous important issues are addressed around the topic of economic progress. However, the main explanation of this progress, “the Finnish model,” has deficits. It is quite hard to find that Finland is an exception. The explanatory factors of Finland’s economic progress ? solid institutional legacies, utilization of abundant natural resources, rapid adoption to shifting economic and political structures, investments in human capital, egalitarian society with an extensive welfare state, and innovations in new technologies ? are also keys features of the other Nordic countries. With this shortcoming in mind, I still would like to congratulate the editors and contributors for providing a comprehensive description and analysis of how Finland has evolved into the affluent society that it is today. This book should find a broad audience.
Lars Fredrik Andersson is active in a research project titled “The Historical Development of Swedish Insurance,” financed by the Bank of Sweden Tercentenary Foundation. Among his recent publications is “The Evolution and Development of the Swedish Insurance Market,” in Accounting, Business and Financial History (November 2006).
Finnish Independence and Civil War
Finland and Russia were not linked politically except through having a common monarch. The Tsar of Russia was separately the ruler of the Grand Duchy of Finland. When the Tsar of Russia was overthrown, Finland technically became separate from Russia. Although it is often overlooked there were two revolutions in Russia. The first, in March of 1917, overthrew the Tsar. A social democratic Provisional Government under Alexander Kerensky took control. The Provisional Government neither acknowledged nor denied the independence of Finland. In July of 1917 the governmental legislature in Finland attempted assert autonomy. The Provisional Government of Russia reacted to this attempt by dismissing the Finnish legislature and calling for new elections. There was a bitterly fought campaign of socialist and anti-socialists for control of the legislature. The socialists captured 92 of the 200 seats but not enough to control the legislature. The socialists began to call for direct revolutionary action rather than acceptance of governance by the legislature.
The second Russian revolution , under the leadership of Leon Trotsky, was more of a coup d'etat overthrew the Kerensky government in October of 1917. The success of direct action in Russia led the socialists in Finland to copy those methods. A general strike in November of 1917 gave socialists temporary control of the country. The political leaders of the socialists however did not declare workers' control. A middle-class government was established in December which declared Finland independent on December 6, 1917. Vladimir Lenin, who came to power after the October revolution, was then faced with acknowledging Finnish independence or having his government take on yet another military burden. He chose to acknowledge Finnish independence on December 31, 1917. He was well aware that there was a strong Bolshevik movement in Finland was quite likely to bring Finland under the control of a Communist Party and hence political independence for Finland would mean very little.
While these political events were developing the middle class of Finland was organizing a Civil Guard and the working class was organizing a Red Guard. The Civil Guard subsequently became known as the White Guard. German officers were brought into the White Guard to establish military discipline.
The middleclass government controlling the legislature in early January of 1918 gave the White Guard, authority to establish civil order. In effect the White Guard became the state security force.
Radical elements took control of the Red Guards and decided to rebel before the White Guard could establish civil control. They called for the revolution to begin on the night of January 27-28. Simultaneously, the leader of the White Guard, Carl Gustav Mannerheim, called for the White Guard to commence its military action to establish civil control on that same night.
In Finland the Boshevik movement was largely confined to the cities. Among the farmers in the countryside there was strong anti-Bolshevik sentiment. The farmers in Finland were aware of what was happening to the farmers in Russia. They were not willing to allow that to happen to them.
The troops for the White Guard were mostly farmers. The Red Guards were mainly workers from the cities. As the battles developed the Whites controlled the northern part of Finland and the rural areas of the south. The Reds controlled the cities in the southern part of Finland. The Reds had upwards of one hundred thousand soldiers the Whites had only about seventy thousand. But the Whites had the definite advantage of having professionally trained and experienced officers.
Both sides potentially had aid from outside forces. There were about forty thousand Russian army troops still in Finland. Germany sent units to help the Whites. Although the Russian troops could have been important they were withdrawn after Lenin's government signed the treaty of Brest-Litovsk on March 3, 1918. This treaty ended Russian involvement in World War I. The German troops landed in southern Finland and captured Helsinki on April 13th. With the stronghold of the Reds captured the forces of the Whites were able to defeat the rest of the Reds by early May of 1918. Thousands of the reds escaped to Russia rather than risk capture by the Whites.
In the last stages of the fighting the Reds carried out a reign of terror against people in the territories under their control whom they perceived as being their political enemies. Close to two thousand were executed in this reighn of terror. The Whites, when they found out about the Reds' reign of terror, reacted by treating the captured Red soldiers as criminals and executed about eight thousand. The Whites captured about eighty thousand Reds and they did not have the resources and facilities to properly care for them. About twelve thousand died from the conditions of imprisonment.
The Finnish Civil War lasted only a few months but about thirty thousand Finns died as a result of it. About three quarters of the deaths were from executions or privations of imprisonment rather than on the battlefields.
The bitterness from the Civil War lasted for generations. The wounds did not heal until the two elements united at the time of World War II to defend Finland from the Russians.
Finland Economy - overview
Finland has a highly industrialized, largely free-market economy with per capita GDP almost as high as that of Austria and the Netherlands and slightly above that of Germany and Belgium. Trade is important, with exports accounting for over one-third of GDP in recent years. The government is open to, and actively takes steps to attract, foreign direct investment.
Finland is historically competitive in manufacturing, particularly in the wood, metals, engineering, telecommunications, and electronics industries. Finland excels in export of technology as well as promotion of startups in the information and communications technology, gaming, cleantech, and biotechnology sectors. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the cold climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export industry, provides a secondary occupation for the rural population.
Finland had been one of the best performing economies within the EU before 2009 and its banks and financial markets avoided the worst of global financial crisis. However, the world slowdown hit exports and domestic demand hard in that year, causing Finland’s economy to contract from 2012 to 2014. The recession affected general government finances and the debt ratio. The economy returned to growth in 2016, posting a 1.9% GDP increase before growing an estimated 3.3% in 2017, supported by a strong increase in investment, private consumption, and net exports. Finnish economists expect GDP to grow a rate of 2-3% in the next few years.
Finland's main challenges will be reducing high labor costs and boosting demand for its exports. In June 2016, the government enacted a Competitiveness Pact aimed at reducing labor costs, increasing hours worked, and introducing more flexibility into the wage bargaining system. As a result, wage growth was nearly flat in 2017. The Government was also seeking to reform the health care system and social services. In the long term, Finland must address a rapidly aging population and decreasing productivity in traditional industries that threaten competitiveness, fiscal sustainability, and economic growth.
Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.
Source: CIA World Factbook - This page was last updated on Friday, November 27, 2020
Top Export Goods and Partners:
In 2014 Finland exported $77.3 billion worth of goods. That makes the country the 43th largest export economy in the world. The major exports of Finland include refined petroleum ($7.6B), kaolin coated paper ($5.73B), large flat-rolled stainless steel ($3.36B), saw wood ($2.11B) and sulfate chemical woodpulp ($1.92B). The top export partners that Finland has are Germany ($9.3B), Sweden ($7.87B), Russia ($5.7B), the United States ($5.2B) and the Netherlands($4.52B).
Like the United States, Finland has a capitalist economy. Why are Finns so much happier than us?
Every four years, we hear a lot from presidential candidates about America's freedom. They love to use the word "freedom" as a shorthand explaining all the possibilities we enjoy as Americans: the freedom to do what you want in your private life, the freedom to raise your kids how you please, the freedom to start over fresh. America, they argue, is the freest place on earth, a land of liberty where nobody is encumbered or constrained by forces beyond their control.
It's a lyrical ideal — a story that has been passed down from the Founding Fathers.
But when you investigate our actual freedoms as Americans, that story begins to break down. How free can you truly be if, like four out of every 10 Americans, you don't have $400 in the bank to cover an emergency expense? Can you truly enjoy your freedom when you're not saving for retirement and your faith in the economy is eroding at a rapid clip?
The truth is that in the modern world, economic security is key to freedom. If you don't have sufficient savings or a growing earning potential or the ability to help lay a foundation for your children, you're not free. If you can't leave your job for an exciting new possibility or get out from under a mountain of debt, you're not free — you're stuck in a cycle of increasing poverty that forces you to be reliant on your employer for (a shrinking) salary and (if you're lucky) health insurance.
Many young progressives online interpret this breakdown of American freedom as a failure of capitalism, and it's easy to understand why. When you've been fed the idea of "free market" capitalism, in which a shrinking menagerie of trickle-down "winners" keep growing their wallets at the expense of the bottom 90% of the economy for your entire life, it's easy to blame the whole system for failing you.
But what most people don't realize is that the rules of economies aren't inviolable. They're not constant everywhere in the known universe like physics. An economy is a choice, and it's possible to choose a better "flavor" of capitalism — one which provides more freedom and opportunity and choice to everyone.
In this week's episode of "Pitchfork Economics," Nick Hanauer and David Goldstein interview two experts about the most stable, safest, and best-governed nation in the world — a country that always ranks near the top of international surveys of individual wealth, lack of corruption, progressiveness, and social justice. That nation is Finland.
And before critics roll out the "S" word, let's make it clear that while Finns enjoy an expansive social safety net, good pensions, and robust sick and family leave protections, their economy cannot be characterized in good faith as a socialist. Finland is a thoroughly capitalist nation: Some people make lots of money, and others make very little. But Finland has chosen a more inclusive form of capitalism that ensures that the wealthiest Finns pay their fair share in taxes while the poorest Finns don't suffer for lack of access to food, clothing, shelter, and medical care. In so doing, they've redefined what freedom means in the modern world.
In her brilliant and accessible book "The Nordic Theory of Everything," author Anu Partanen argues that Finland offers a blueprint to any nation interested in embracing a more compassionate capitalism, which she describes as the "Nordic theory of love." In a New York Times editorial titled "Finland Is a Capitalist Paradise," Partanen and her coauthor Trevor Corson take the argument even further, arguing that after one year living in Finland together, they have experienced "an increase in personal freedom" over the United States.
In Partanen's book, she claims that the economies in Nordic nations like Finland are "intentionally designed to take into account the specific challenges of modern life and give citizens as much logistical and financial independence as possible." Through universal healthcare, affordable childcare that's capped at $300 per month, free college, and copious paid vacations, the authors have enjoyed the freedom to live their lives unencumbered by worries about a sudden large expense destroying their lives.
The only question that matters is this: Which kind of freedom is most important to you? The freedom for corporations to avoid taxes by lobbying to change the tax code, or the freedom for you to start a new career in your 40s? The freedom to deregulate pollution or the freedom to take a paid vacation? When you decide that the goal of your economy is to create more happiness for everyone rather than to optimize shareholder value, it's amazing to see how your definition of freedom can change for the better.