The land between the powers

To the outside world Finland may not appear particularly diverse, but its own people see things rather differently, particularly when looking at the complex history and shifting politics in the years up to the Second World War. Writing in October 1939, one American media mogul claimed “Stalin is treading on dangerous ground when he attacks Finland […] Finland is the most upright and honest nation in Europe. She is the one nation that has recently paid its duly contracted debts to us. She is the one nation whose word of honor is worth a centime or a farthing. She is the one nation that the United States has reason to respect” (Hearst 1939). It may well have been William Randolph Hearst, the model for the protagonist of Orson Welles’ film Citizen Kane, who helped create the myth of the steadfast, independent-minded, stubborn yet diplomatic character of the Finns.

From the early twelfth century until 1945, Finns were caught in the middle of larger nations’ ambitions and empires: Sweden in the west, Russia in the east, Germany to the south, and with the cold relentlessly sweeping down from the north to add to the drama. Finland was, in effect, controlled by Denmark in the form of the Kalmar Union of Scandinavia aristocracy from 1397 to 1523, ending with Sweden's rebellion. Sweden then ruled Finland more or less uninterrupted until 1809, although at the end of the Great Northern War (1700–21) its grip was perilously weak. From 1809, Russia dominated Finland, invading at times, ruling at others, until independence day, 6 December 1917. During the period 1941–44, Finland was – despite not being run by Nazis – an ally of Germany and reliant on it for imports of food, fuel and armaments. In 1944, however, the Finns turned on Germany, in the Lapland War (September 1944 to April 1945).

Decreasing fertility and the effects of climate emergency are phenomena that all western, developed countries face. On the one hand, a shrinking and greying population risks the future tax base needed to fund government policies. On the other hand, a larger population would almost inevitably use up more of the planet's scarce resources and further intensify climate change. Immigration is proposed as the solution. The previous chapter illustrated the difficulties Finnish politics and society have faced in adapting to immigration, and detailed the populist backlash against multiculturalism. This chapter, on demography and the environment, delves further into how the contradictory need for greater fertility and the certain need for climate action has played out in Europe, as this will significantly affect Finland's capacity to sustain its welfare state at current levels.

Long-term trends in birth and death rates in Finland reflect the country's chequered history. Spikes in the death rate followed major events such as the 1808–09 war between Sweden and Russia, which culminated in Finland being ceded to its eastern neighbour; and in the Finnish famine of 1866–68 some 270,000 people – 9 per cent of the population – died of hunger. The civil war in 1918 that followed Finnish independence from Russia in 1917 led to the deaths of 37,000 people – mostly men in prison camps. There were smaller spikes during the Winter War (1939–40) and the Continuation War (1941–44) against the Soviet Union, when around 96,000 Finns (2.5 per cent of the population) perished. Since 1945, annual death rates have remained low and stable, at 10 per 1,000 population, while in the past few years birth rates have fallen so low that they are now below death rates (see Figure 8.1).

In this final section of Finntopia, we begin with politics and populism, looking at how turnout in elections varies among affluent countries and across the states of the United States. Finland, alongside other more equitable countries, has relatively high voter turnout – and it has been rising in recent years. However, voter participation is still lower than in Norway, Sweden, Denmark and the Netherlands. Politics in Finland is complex, with coalition governments made up of many political parties, and voter fatigue is common.

As we write, in early 2020, the country is governed by a very new, politically progressive coalition made up of a diverse group of parties. To explain how this happened, in Chapter 7 we have redrawn a complex political-space map originally disseminated by the Finnish state broadcaster Yleisradio Oy (Yle) in April 2019. That political map helped explain the positions of political parties’ candidates on a number of issues. We end by mapping the results of the most recent general election over population-space using a population cartogram.

In Chapter 8, we focus on demography and the environment. We begin by depicting how birth and death rates in Finland have varied from 1749 through to the present day, not only highlighting the impacts of famine and war, but also showing how, since 2014, death rates have consistently exceeded birth rates. Next, we consider the fall in fertility over the past century, and then the fall in migration to Finland in the early 1990s and its rise in the twenty-first century. Today net in-migration is the only reason that the population of Finland is not falling. We show where migrants to Finland have come from, and then link all of this to the major environmental challenges being faced by Finland – and the world – today. In matters of environmental action, Finland punches well above its weight.

Chapter 9, on future challenges and success fatigue, begins with the concerns of young people who are suffering or struggling. Mental health is a problem in Finland, but worldwide only Denmark has a smaller percentage of young people who say they are not thriving mentally.

Challenger ecosystem

In 2020 Finland is performing remarkably well in numerous global economic and social rankings and has been for some time. Two years earlier, the World Economic Forum's Global Competitiveness Report (World Economic Forum 2018) ranked Finland eleventh in competitiveness, and first for the soundness of its banks. In 2019 the World Economic Forum named Greater Helsinki as one of its 12 “Challenger Ecosystems”, cities close behind the top ten globally leading start-up hubs (Penzel 2019). Finland is also ranked as the most politically stable country in the world, with some of the highest levels of press freedom, and has been proclaimed the happiest place to live (see Parkkinen 2019). In many ways it has achieved what many idealists in the past dreamt of – the winning of freedoms – rather than merely a superficial commitment to the idea of freedom.

Statistics released shortly after the turn of the century led the United Nations to rank Finland as the thirteenth most developed country in the world in its Human Development Report of 2004, twelfth by 2009 and twelfth again by 2019. At the time, few people noticed how quickly it had risen up the ranks, not least because its Nordic neighbours, Norway and Sweden, overshadowed it in their even more rapid rise. However, what is remarkable about Finland is that it has achieved this without the oil advantages of Norway or the historic imperial advantages of Sweden.

Instead, Finland made use of what it had – forests. The forest industry provided material for exports that supported its economic growth throughout the twentieth century when demand was high (Poropudas 1996: 352). Instead of an important land-owning aristocracy or gentry Finland had a significant class of peasant proprietors, or talonpojat (Hakkinen & Forsberg 2015: 101).

Finland has become the “by way of contrast” country, as the British Medical Journal described it in 2018. Finland is the one place, above all other places in Europe, that shows that something much better is possible than the status quo. That is a weighty responsibility. Of course, Finland is not Utopia, but today it offers one of the closest approximations.

In 2018, when Finland first achieved its top placing in the UN's World Happiness Report, a UK newspaper reported the news with the caveat: ”… even though its GDP is below that of the US and Germany” (Boseley 2018). Finland shows why achieving a very high GDP is not necessary for great happiness as GDP is one of the measures where Finland does not top the tables. When Finland overtook Norway to take first place in the World Happiness Report, it did so with a GDP per capita that was more than a third lower than that of Norway; and it held that top ranked position in both 2019 and 2020.

Finland is the country that shows how it is possible for happiness to be achievable without becoming ever richer, and while having living standards in terms of material wealth that are far below those in the most affluent parts of the world, including its more affluent Scandinavian neighbours. However, the publication in August 2018 of “In the Shadow of Happiness”, a report on mental wellness, prompted some in the media to question the picture of Finland and its Nordic neighbours as happy places:

Chapter 7 focuses on the consequences of the EMU institutional set up. It shows that the signals and information about the imbalances that can arise do not flow evenly and effectively across states, contrary to what happens within them, and are often noisy or carry wrong messages to markets and governments. Thus, they do not offer sufficient incentives for change in the right direction. This is in contrast with both the orientation of the founding fathers of the Union and the literature before the creation of the EMU, which practically delegated most of the burden for integration, alignment, reforms, etc. to private institutions (markets). The common currency and the common monetary policy should be conceived as a tie to the action of private and public agents, not only because of the constraint imposed by the single currency (the external tie), but also for the conservative orientation of the ECB. These should have imposed a strong network of ties in particular on the conduct of the agents in the countries with higher inefficiencies, by indicating – almost naturally – the route to follow, compelling them to change their conduct and enacting the needed reforms.

Chapter 11 reiterates that after the (premature) celebration of the splendor of the EMU, the crisis has soon shown the sad reality. A debate on the various prospects open has then arisen, involving economists, politologists, political parties, and laymen. The EMU is now really at a crossroads. A number of differences divide the various countries and make amendments to its institutions very difficult to devise and, even more, to implement. The Union would need more common institutions, notably a fiscal union, but there are a number of obstacles to its implementation. These derive from structural differences between the countries that have even been exacerbated by the effects of the crisis and differences finding their roots in historical, cultural, and material differences. The main alternatives open to the EMU are: its break up, a many-speed Union, exit of some countries, structural reforms of the EMU institutions and policies. While the perspective of a break up seems to fade, the other alternatives are still grounded. Some steps for pursuing over the next years not only economic and political goals, but also democratic accountability and effective governance are possible. Much will depend on the orientation of the new Commission.

Chapter 8 starts from the observation that the theoretical foundations of the EMU are largely outdated and have shown a number of faults. The chapter suggests the broad lines along which the EMU could be reformed and indicates different growth and short-term strategies for the institutions as well as macroeconomic and microeconomic policies. It must certainly be realized that the economic performance in Europe has been nourished not only by the inadequacies in the Monetary Union institutions, but also by the way European policymakers, at all levels, operated, first in facilitating the development of the Great Recession in Europe and also in compounding its solution. In fact, the policies implemented to face it can make it clear why it prolonged beyond the period over which it hit the United States. Thus, the possible benefit of avoiding military confrontation between European countries must be balanced against the rising populism and resentment of some European countries against the others due to the clear insufficiency of European institutions and policies in dealing with the crisis. These can have lasting negative political consequences on the future of the Union. The need then arises of a deep reform of the EMU.

Chapter 5 investigates the consequences of the Great Recession on indicators of macroeconomic and microeconomic efficiency and equity. In Europe the financial crisis appeared initially under forms similar to those characterizing the United States, but soon assumed a very different form, due to the state intervention to save ailing banks, and the EMU peculiar institutions. More recently, the crisis has again changed its nature, as sovereign debt has been absorbed by banks, thus causing a problem for them and, in turn, again for the public finances that had to face bank failures. An important role was played by the specific financial imbalances that appeared in the EMU as a consequence of the formation of a currency area. Pre-existing imbalances became more intense when Germany decided to cope with the difficulties of a mature economy and unification with its Eastern Lander by adopting an export-led growth model supported by real devaluation. Then, European financial integration allowed for persistent net lending from core countries to peripheral countries, which compensated for the current account of the latter towards not only the former but also countries external to the EA.

Chapter 1 describes the path that brought to the current European Economic and Monetary Union (EMU). In contrast to a common tradition and culture, based on largely similar philosophical and religious foundations, Europe has a history of fierce opposition and wars among national states that culminated in World War II. An important impulse to some kind of European cooperation came exactly from the attempt to counter this tradition of conflicts, even if the past was still weighing. This largely explains the long process through which European institutions have reached their current state as well as their “incompleteness.” The cooperation evolved from the European Coal and Steel Community (1951), having a limited coverage, but active inter-country coordination and cooperation and limits to free market, to the European Economic Community (1957), with a larger coverage, but a free-market orientation in all fields. This partially changed with the Maastricht Treaty (originating the European Union(EU) and the EMU), with the introduction of common monetary policy and some constraints on national fiscal policies (1992). The former now gathers 28 countries. The latter had only 11 members when it started in 1999 and has now enlarged to 19.