8 May 2006

Dismantling the Finnish welfare state

By Tapani Lausti

After the economic convulsions of the 1990s, Finland is now "richer, more open, more efficient, more unequal and more cruel than in the 80s". This is the conclusion drawn recently by Professor Risto Heiskala from the University of Jyväskylä.

The change has been quite rapid and triggered hardly any resistence. The new reality was already emerging in the 80s but the economic depression of the early 90s opened the gates to a sea-change in societal and economic thinking. After the depression there emerged a new economic deal which deepened inequalities.

"The cards have been re-dealt in such a way that although some hands are in a better playing position, others cannot even join the game", Heiskala writes with his colleague Eeva Luhtakallio.

Heiskala and Luhtakallio's analyses are part of the book which they edited together, Uusi jako: Miten Suomesta tuli kilpailukyky-yhteiskunta? (New deal: How Finland became a society geared for competitiveness?). The writers are puzzled how such a dramatic change was possible in a country which has a strong social democratic party and trade union movement and in which even other parties are committed to welfare state thinking. Neo-liberalism somehow penetrated the whole societal discourse without becoming a swear word. Thatcherite influences swam effortlessly into Finnish legislation.

Professor Pertti Alasuutari from the University of Tampere seeks an answer as to how neo-liberalism from the 80s onwards gained a dominant position in public opinion, especially among the elites. Faith in an unregulated world economy became the new dogma for corporate leaders and politicians.

In Finland other reasons also contributed to the change. Alasuutari talks about a double hangover. Finland suffered from a hangover from kowtowing for so long to the Soviet Union. The left-wing intelligentsia suffered from a hangover for their fellow-travelling role in regard to the Brezhnevite years.

Against this background a brilliant rhetoric invention, according to Alasuutari, was the introduction of the concept of "citizen friendly" (kansalaiskeskeisyys). The origin of this critical attitude to the state was in the West German left-wing debate. There the mood had turned against a strong capitalist state. In talking about "citizen friendliness" the aim was to join the criticism of "the social state" to the notions of dismantling bureaucracy by privatisation and outsourcing.

It also became easier to renew the competition laws in accordance with capitalist principles when the Soviet Union started to take the road towards a market economy. One reason why there wasn't much resistance was that some important segments of the economy such as the labour market and agriculture were left outside competition.

Risto Heiskala observes, however, that in this process the values of the elite and the people took divergent roads. The elite talked about "unavoidable" and continuous change, while ordinary people longed for more security and communality. Heiskala does not find it surprising that people criticise the elite views and ask why it is necessary in one of the wealthiest countries of world history to implement policies which increase inequality between social groups and makes work and other aspects of life more stressful.

Kai Hirvasnoro in the left-wing newspaper Kansan Uutiset finds more illumination to the question from ex-Prime Minister Paavo Lipponen's collection of articles, Marginaalista ytimeen - Suomi Euroopan unionissa 1989-2003 (From the margins to the nucleus: Finland in the European Union 1989-2003). Lipponen criticises people who in his view have got stuck with the achievements of building the welfare state in the 1980s. According to Lipponen, these people don't understand how these achievements were largely based an unsustainable economic system, with Soviet trade and agriculture at its heart. Furthermore Lipponen thinks that it has not been understood in Finland what a fundamental change took place when the country moved from the closed economy of the 80s to the EU internal market. The whole edifice of the closed economy collapsed with the Soviet Union in 1991.

There has been some debate about the increase of inequality in Finnish society. The leading national newspaper Helsingin Sanomat, which most often echoes elite opinions, recently commented in an editorial that "the most highly valued strengths of the Nordic welfare state has been the fact that income differences have remained very small compared with the rest of the world". The editorial continued: "The current growth of welfare, however, is unavoidably connected with the growth of income differencials and more generally differencials in various forms of welfare." According to Helsingin Sanomat, this does not need to be a problem as long as everybody's welfare grows. The paper admits, however, that corrective measures are needed if some social groups are clearly left behind average development. ("Hyvinvointierojen kasvu vaatii korjaavia toimia", Helsingin Sanomat, 24 February 2006)

Helsingin Sanomat concludes that correcting the growth of income differentials which are connected with the growth of welfare can hardly be done by increasing the share of social benefits. The paper notes with satisfaction that even many experts recommend means testing to replace the current principle of universality of social benefits.

Many Finns would, however, see this as the end of the welfare state as they know it. The principle of universality has been one of the corner stones of the system because it has guaranteed a feeling of communality between various social groups. It is also widely believed that only by universality can the good quality of social services be maintained.

(This article is mainly based on Kai Hirvasnoro's report "Näin hyvinvointivaltiosta trimmattiin kilpailuvaltio", published in the left-wing newspaper Kansan Uutiset, 17 February 2006.)

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