Oily Trap for Putin

Eight oil-producing countries have decided to increase their oil production by a total of 547,000 barrels per day. This amount is a significant addition to the market and is expected to lower the price Russia receives for its own oil.

If and when this happens, the change will have a crucial impact on the combat capability of Vladimir Putin’s army in Ukraine. This alone may influence the outcome of the war, but if U.S. President Donald Trump imposes the 100% tariffs he has threatened on countries that mediate Russian oil, the Russian dictator will face an extremely difficult situation as export revenues collapse.

Therefore, it is likely that in the near future, Putin will seek both a breakthrough on the Ukrainian front lines and a way to maintain his war chest. And of course, he cannot ignore the need to look after the standard of living of nearly 150 million Russians, since its collapse would increase the risk of revolution.

It remains to be seen whether significant changes will occur in the war between Russia and Ukraine during the current year, or whether its resolution will shift to next year or even further into the future. What is clear at this point is that the democratic world cannot accept a Russian victory in the war; it must end in a just peace—one that does not embolden Putin, or Moscow’s future rulers, to continue power politics against neighboring countries.

Previous thoughts on the same topic:
A Growing Sino-Russian Threat to the West
AI Drones: Ukraine’s New Edge in the War?
Ukraine Risks Losing Western Trust by Muzzling Corruption Watchdog

Has President Trump Lost His Grip on Reality?

The further President Donald Trump's term has progressed, the more obvious it seems that he has lost his grip on reality. The latest sign of this was his demand that Europe should retroactively pay compensation to the USA for not being able to produce goods competitive on the European market (example).

It is clear that European countries will not agree to such extortion. Nor will they stop exporting goods to the U.S. if Americans wish to buy them.

In this respect, it will be particularly interesting to see how much Trump manages to reduce the sales of European products in the United States. One would assume that price increases of even tens of percentage points—caused by tariffs—would significantly reduce their sales. However, it is also true that, in a similar way, the sale of American products to Europe will become more difficult due to countertariffs.

Lately, I have begun to suspect that Trump does not genuinely understand this. And therefore, he does not realize he should stop before irreversible damage is done to European-American trade relations.

And that is why I believe he has lost his grip on reality.

Previous thoughts on the same topic:
Economic Decline Awaits Americans as Trump Imposes Tariffs
Donald Trump’s Reliability as an Ally Has Proven to Be Questionable
The Real Problem with American Cars: Poor Market Fit

Economic Decline Awaits Americans as Trump Imposes Tariffs

Economists are quite unanimous in their view that tariffs hinder economic growth and overall welfare. They also agree that free trade and the removal of trade barriers boost economic growth.

These views stem from the fact that free trade lowers the prices of goods and services for both producers and consumers. Moreover, tariffs partly translate into higher prices, which negatively affect importers, exporters, and consumers alike.

This holds true even when tariffs are intended to protect a specific industry, as they inevitably increase production input costs and trigger retaliatory tariffs. Import tariffs can also harm domestic exporters by disrupting supply chains and raising their input costs.

In the long run, an even more harmful effect of tariffs is that they reduce competition between companies. As a result, businesses operating in tariff-protected markets become inefficient and less innovative, ultimately leading to difficulties—especially if the tariff barriers are later removed.

All of this seems to be entirely unknown to U.S. President Donald Trump, who is set to announce import tariffs on "all" trade partners today. This is despite the fact that the tariffs he imposed during his first term had a negative impact on American employment, as noted by Jyrki Ali-Yrkkö, Director of the Research Institute of the Finnish Economy.

Unfortunately, potential U.S. tariffs would have equally negative effects on America's trade partners. As a result, it won’t be just Americans who "enjoy" economic decline, but almost all nations across the world.

Previous thoughts on the same topic:
The Real Problem with American Cars: Poor Market Fit
Finland and the USA: Strong Allies with Shared Interests or a Trade Dispute?
Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?

The Real Problem with American Cars: Poor Market Fit

The President of the United States, Donald Trump, says he plans to impose import tariffs on the European Union quite soon. The reason for this is the weak demand for American products on the old continent.

This also affects Finland, as e.g. Tesla is the only American car brand with a significant market share here. Moreover, many of its models are manufactured either in Germany or China.

When it comes to cars, the problem with sales in Finland is not anything other than the weakness of American offerings. American cars are simply too large to fit comfortably into local parking spaces, and they consume far too much fuel.

The latter issue is largely due to the high fuel taxes in EU countries. While a gallon of regular gasoline costs just over three dollars in the U.S., the same amount costs around seven dollars (6.8 euros) in Finland. Additionally, the income level of Finns is about one-third lower than in the U.S., while taxation is significantly higher.

Therefore, the export problems of the U.S. automobile industry will not be solved by imposing tariffs on EU countries but rather by designing cars that are suitable for Finland and Europe in general. However, it remains to be seen whether American companies - and the USA under Trump's leadership - have the necessary willingness to do so.

Previous thoughts on the same topic:
Finland and the USA: Strong Allies with Shared Interests or a Trade Dispute?
Trump’s Tariff Weapon Worked, but Will Finland’s Development Aid Strategy Succeed?
Former President Donald Trump is Also the Upcoming President – But What Does It Mean?

History of Finland V: The pursuit of economic profit saved the country

This blog post is the fifth installment of a series that delves into the significant phases of Finnish history. In the previous post, I discussed how the ascendancy of the highest aristocracy led to the deterioration of living conditions for the common people.

However, this trend eventually came to a halt through a transformative process that culminated in the triumph of the official aristocracy over the highest aristocracy. The catalyst behind this shift was the economic collapse of the great power.

The recruitment of military personnel faced hindrances due to the landed estates owned by the upper nobility. These estates posed obstacles to enlisting individuals from their own ranks into military service. Moreover, the state lacked sufficient funds to pay its officials, as a significant portion of the income generated from land ownership predominantly benefited the upper nobility. To illustrate the magnitude of this disparity, consider the fact that Count Magnus de la Gardie's annual income in 1679 amounted to approximately five percent of Sweden's entire revenue and expenditure budget.

The conflicts of the late 1600s, which relied on France's assistance to maintain Sweden's great power status, played a crucial role in driving forward societal development. The noble-dominated council of state was held responsible for the situation and was compelled to cede its authority to King Charles XI, who implemented the decision of the Estates to reclaim the landed property in order to rescue the state from bankruptcy. As a result, former landowners were left with a mere tenth of their previous tax-exempt fiefs.

In practice, power became concentrated in the hands of a single individual, as the king possessed the right to pose questions to the Council of State, but the council lacked the authority to advise the monarch unless specifically solicited. This effectively dismantled the most potent tool of aristocratic governance with a single decree. To ensure the success of this transition, a law was passed a few years later in 1682, affirming that legislative power resided solely with the king.

Of particular significance to us Finns in this progression was the nearly unanimous support of our representatives in the Estates, including the nobility, for the king's absolute power, which placed them in opposition to the Swedish nobility. It is possible that it was during this time that the Finnish people's subsequent yearning for a strong monarchy, their belief in the righteousness of the Tsar, and ultimately the potent authority of the independent country's president originated.

Alongside the establishment of absolute monarchy in the late 1600s, there were additional significant developments. The administration of justice underwent a redirection towards the "law of nature", which was widely viewed as being largely consistent with the traditional Swedish law.

Previously, the nobility had exploited the flexibility of the old Swedish law, particularly drawing upon interpretations rooted in Roman law, enabling them to interpret it according to their own discretion. The recruitment of military personnel transitioned to a more stable conscription system, and civil servants' salaries were secured through the use of designated official positions.

Following the defeat of young King Charles XII in the Great Northern War, and ultimately his demise, the influence of the civil service serving the state did not waver. On the contrary, it continued to exert its power while the king lost much of his own authority. The Estates Assembly became the instrument through which the civil-service nobility wielded their power.

A notable change in public administration was the shift from hereditary status to formal education and other qualifications as the basis for filling positions. Furthermore, social changes enabled a commoner to marry a noblewoman without her family having the ability to disinherit her—an aspect not to be overlooked.

Simultaneously, Sweden's mercantilist policy also suffered a collapse. In this regard, the country followed a trajectory akin to the pre-capitalist development observed in England and the Netherlands, where exportation became an increasingly vital driving force. Sweden's primary export commodities included iron, copper, timber, and tar.

As a result, decisions and practices were instituted that favored the protection of private property rights, the freedom to engage in contractual agreements, the application of rationality in legal proceedings, and enhanced autonomy for citizens. The driving force behind this progression was particularly the pursuit of profit, which stemmed from the recognition and enforcement of private property rights.

For Finland and its people, these changes marked a gradual improvement in the status of the (lower) nobility, bourgeoisie, and peasants, filling the void left by the upper nobility. However, this transformation faced further challenges during the subsequent period of the Great Famine and the Great Northern War, which represented the lowest point for the upper nobility. The ascent of the eastern regions within the Swedish kingdom also became apparent through the emergence of notable Finnish figures who achieved prominence.

Notable examples include Fabian Wrede, a member of the lower nobility from Elimäki, who rose to become the chairman of the Reduction Commission, and Heikki Vaanila, a peasant estate owner from Lohja, who assumed leadership of the peasant estate in the Estates of the Realm. These Finnish individuals found themselves at the core of the kingdom's power structure, serving as compelling illustrations of Finland's growing influence within the realm.

The original blog post in Finnish: Voiton tavoittelu pelasti maan

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

Reducing taxes, enhancing export and paying the governmental debt

Finland is a small country with a relatively high standard of living. According to a new report, that is largely paid by the efforts of export industry.  

The report points out that "contribution of the export industry to the Finnish national economy is approximately 47 per cent of the value added and approximately 42 per cent of the employed. In terms of taxes, the impact is approximately one third of the total tax revenue."

The report also lists elements necessary for the future success of export industry. They need a lot of new talent i.e. sufficient number of competent experts, courage to be creative by increasing research, development and innovation as well as long-term industry policy ensuring competitiveness for themselves. 

I do not claim against the report. It will, however, be interesting to see how the Finnish political apparatus will respond to the needs of its industry. During the last years it has only succeeded to ruin the public economy by spending considerably more money than taxes and other incomes would have allowed. And therefore the government debt has increased from 106 billion euros in year 2019 to 129 billion euros in 2022. 

The interests of that burden alone are estimated to triple in this year to 2,4 billion euros. To be covered by Finnish tax payers for nothing. 

Fortunately, this reality is well understood by the ordinary people. According to a recent opinion poll only 18 percent would like to cover public spending by additional debt instead of reducing public spending. And to improve the operating conditions of companies.

The next elections of the Finnish parliament will be in April. The opinion polls suggest that the two most popular parties will be Conservatives and True Finns. Both of which have promised to reduce governmental budget. In other words, people are now looking for a change to the current left wing government led by the beautiful prime minister Sanna Marin of Social Democrats. 

Taken together: next summer we will see, whether Finland will have a government program improving operating conditions of export industry, reduce governmental debt and retain the best parts of the Nordic welfare society so, that the political left will not make a comeback in elections 2027 to return the country back to the harsh economic position it is right now.

 

Previous thoughts on the same topic:
Fair policy will build a strong Union
A notable difference between Social Democrats in Sweden and Finland
The beautiful PM of Finland has driven herself into a trouble