This is the sixteenth - and last - part of a blog post series where I go through the most significant periods of Finnish history. In the fifteenth post, I described how Finland managed to navigate towards the Western world after World War II, under the shadow of the so-called Paasikivi-Kekkonen line of Finlandization policy. At the same time, the education level of the youth increased significantly, but it also gave rise to an extreme leftist student movement, which lost its momentum due to the rise in living standards and emigration.
In the next phase, 1980s Finland headed towards an unprecedented economic boom. The driving force behind it was the liberalization of monetary policy, which allowed banks to trade foreign currencies and grant foreign currency loans to companies that did not have income billed in foreign currencies. However, the Finnish mark was still politically regulated, meaning its value was not left to the market forces to decide.
This contradiction laid the groundwork for the exceptional depth of the 1990s recession in Finland. As a result of the liberalization of foreign currency loans, money flooded into the markets, mainly directed towards the domestic market. At the same time, the policy of strong mark choked export companies, and expectations of a politically-forbidden devaluation raised domestic interest rates.
Therefore, the Finnish mark was pegged to the euro's predecessor, the ECU, at an excessively high rate. Eventually, the entire structure collapsed, many banks went bankrupt, and particularly domestic market companies collapsed under their excessively expensive foreign currency loans after forced devaluation, the state debt exploded, the competitiveness of export companies decreased, unemployment rates skyrocketed, and indebted people lost their future by going bankrupt.
As a result of all this, the mark was eventually allowed to float, which led to a rapid improvement in the competitiveness of export companies. As a result, the Finnish economy became dominated by large companies and subcontractors of extremely successful Nokia. At the same time, Finnish large companies began to internationalize rapidly.
The depth of the recession was also influenced by the collapse of the Soviet Union at the same time, which led to the collapse of trade with the East. As a result, Finnish politicians missed the opportunity to join the Western military alliance, NATO, like the former members of the Warsaw Pact and the Baltic states that had broken away from the Soviet Union, because it would have confirmed the suspicions of Finland's decades-long Finlandization. However, Finland did join the European Union in 1995, even though it was considered a completely unrealistic goal in 1991.
After the Great Depression, the Finnish economy became more neoliberal, as evidenced by the blurring of the relationship between employers and employees through option arrangements linked to company profits. This weakened the relative position of wage earners, and high unemployment did not allow for active action by workers to eliminate it.
This concludes the series of articles based mostly on Professor Heikki Ylikangas's work, where the destruction of Nokia, Finland's defense policy orientation toward the West, and the events that followed were left unaddressed. However, I wish to make few comments related to them.
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One of the most significant measures during the recession was investing in Finnish education. This led to unprecedented expertise in the country, which enabled Nokia mobile phones to rise to a unique position in Finnish economic history. At its best, it was the world's clear market leader in its field, with about 40 percent market share and an even greater share of the profits, but it made two disastrous mistakes.
Firstly, Nokia lost its innovativeness, probably as a result of flawed personnel policies. This was caused by the company's product development based on internal competition, which resulted in an unhealthy competition within the company that directed people's attention to thwarting the product development of competing groups.
Secondly, the company's almost dominant position in the market led to maximizing profits by minimizing costs. As a result, Nokia's products were manufactured in low-wage countries, from which they eventually recruited product development labor without realizing that the difference in living standards between developed and developing countries is also based on factual reasons.
With Nokia's downfall, the flagship of Finnish economy was lost, and large corporations based on "green gold" (i.e. forestry) returned to be the backbone of the economy. However, Nokia's skilled workforce did not disappear, but rather dispersed to benefit multiple Finnish companies.
At the same time, Finland has lost some of its independence to Brussels through the EU integration process, and has had to finance less productive countries in times of crisis. On the other hand, the development of information technology has led to a decline in paper consumption, which has revitalized the product development of the forest industry companies.
At this point, the harsh truth is that the Finnish economy has not yet regained the international position it had during Nokia's heyday. Moreover, the EU's restrictions on the use of forests for economic purposes may not be conducive to its future, if implemented.
In terms of foreign policy, Russia's attack on Ukraine exposed the hollowness of neutrality policy, and Finland quickly became part of the Western defense alliance NATO. This decision will ensure the country's military security well into the future, but may also lead to more frequent entanglements in international conflicts and damage relations with its large eastern neighbor.
Perhaps the biggest change in Finnish society, however, has occurred as a result of the international migration wave from developing countries to western countries. As a result of this and the declining birth rate of the native population, the quality of Finland's population base will change significantly from what it was before - and not all of the consequences of this fundamental change can be anticipated at this point. In any case, it is already clear that a poorly integratable population group has emerged in the country, which, growing faster than the native population, will change the basic structure of Finnish society as a whole.
Finally, in recent years, Finland has had a left-wing government, during which the state budget has been patched with debt to create permanent fixed expenses. As a result, Finland's public finances appear to be aligning with Southern European weak and indebted countries in the coming years, rather than the traditional Nordic benchmark. At the same time, the population has become increasingly divided between political right and left, so the near-future prospects for the country's economy seem quite challenging at this moment.
Throughout their history, however, Finns have demonstrated significant resilience in being able to set aside their internal disagreements and work together in a way that has allowed them to address and resolve issues that have arisen. For that reason, the future of Finland is likely brighter than one could deduce from the current situation.
The original blog post in Finnish:
Nousun ja tuhon kautta uudenlaiseen tulevaisuuteen
All the blog posts in this series:
History of Finland I: How did Finland become culturally part of the West?
History of Finland II: From a hinterland of the Union into a modern state
History of Finland III: The legal and economic weakening of the position of the people
History of Finland IV: The bleakest time in Finnish history
History of Finland V: The pursuit of economic profit saved the country
History of Finland VI: Age of freedom and utility
History of Finland VII: The dictator of the era of Enlightenment promoted capitalist economy
History of Finland VIII: Joining of Finland to Russia led to an increase in crime
History of Finland IX: Enlightended dictator initiated economic growth
History of Finland X: The birth of Finnish identity
History of Finland XI: Finnish democracy and gender equality for women
History of Finland XII: Bloody civil war
History of Finland XIII: The far-right's rebellion
History of Finland XIV: The end of the first Finnish Republic
History of Finland XV: Paasikivi-Kekkonen doctrine
History of Finland XVI: Through rise and fall to a new kind of future
