Finland has showed great results in many important statistics during this decade: the best public basic education system among the OECD countries, the most innovative country of the world, always in the top three among the most honest countries to live, frequently exchanging with Norway the first or the second places as the best country to be a mother, usually in the top 10 among the most competitive countries of the world, and this list could be longer than this. These awesome results international media loves so much to talk about have brought to many people who don´t know Finland and do not follow Finnish news, the idea that this is the last oasis in the desert, a country with no problems where everybody is happy, well educated and rich.

I also write about Finland for a very popular Brazilian website/blog and for this reason I frequently receive messages of readers with questions about this paradise. Most of the people have the same idea: this is the perfect country to immigrate and start building a perfect and fair life.

I am not an economist but I love reading economists´opinions. I´ve read several texts from people who support very different theories. In this text I want to share with you my opinion based on my readings about the Finnish economic crisis.

For those who ask me if Finland is a paradise I would say: this is an awesome country, the country I chose to live and build my family but it´s not perfect and I don´t think this is a good moment to immigrate if you don´t have a good job in here waiting for you.

Since 2009 Finland has been facing contractions in its economic activity. There is more than one reason for it and however people like to blame it on “the euro”, this is just one of the reasons. Of course we cannot deny the fact that there is a global crisis going on but I would dare to say that even without this general crisis, the country would be facing problems anyway, perhaps just in a lower proportion.

If you research about Finland´s economic history you will see a country which has faced several problems until the international boom in the middle of the 90´s, that happened mainly as a consequence of Nokia´s boom. When the Finnish company became the world leader in telecommunications, it contributed significanlty to raise the economy, the GDP, Finnish exports and the R&D system. Of course as a multinational company Nokia has also generated tons of jobs. The Economist has published: ”NOKIA contributed a quarter of Finnish growth from 1998 to 2007, according to figures from the Research Institute of the Finnish Economy (ETLA). Over the same period, the mobile-phone manufacturer’s spending on research and development made up 30% of the country’s total, and it generated nearly a fifth of Finland’s exports. In the decade to 2007, Nokia was sometimes paying as much as 23% of all Finnish corporation tax.” 

https://sarftrading.files.wordpress.com/2015/08/reason-behind-nokia_s-great-fall.jpg?w=450&h=300
Picture: https://sarftrading.wordpress.com

With this information you can imagine the size of the damage when the company´s share price started to fall, going as low as 90% of its price in 2012. This can always be a huge problem: when a country relies on one company.

Another industry that used to be very strong and important to Finland which has also lost position is the forest industry. The high prices of the raw material and logistics in Finland made it impossible to compete with countries which besides better prices have also better climate for growing trees.

All in all, Finland has seen significant loss in the whole manufacturing industry in this last decade.

Another thing some economists point as a big problem is the weak stimulation of the domestic aggregate demand. But of course it is understandable since to stimulate aggregate demand, there has to be a boost in the exports which cannot happen if the manufacturing sector is in decline. Declining doesn´t give the private sector ability to invest and innovate and the consequence of it is, of course, making the domestic demand for domestic products go down.

A very important point which I would place at the top of all problems but so far I haven´t seen people worrying about it the way they should is the fact that Finland´s population is ageing. Every year the birth rate is lower and people are living much longer. A country rulled mainly by the old with small chances of renovation has to go down. It´s obvious. Without renovation in the way of thinking, if society itself can´t innovate, of course the system will just get older and older to the point of breaking down.

Live births 1971–2014
Live births 1971-2014 Picture: http://www.stat.fi

An older population consumes less, produces less, and is more reluctant to accept changes, which is the total opposite of what should be happening when you live in a globalized world. The internal market shrinks, unemployment happens and, of course, it costs a lot to the government.

To base what I have just written I would like to invite you to read this research article, published in 2009 on my absolute favorite Finnish website: Statistics Finland. The research shows a population projection from 2009 to 2060 and so far it´s been quite accurate, which I think it is really scary.

Demographic depedency ratio 1865–2060
Population projection Picture: http://www.stat.fi

This is not only a Finnish problem, all nordic countries have the same problem. It seems to be a little worse in Finland because the country has gone for many years in the opposite direction of internationalization from outside in. The neighbour Sweden, for example, has promoted a dynamism in the labour force, universities and research centers for a long time. Finland has recently started to do the same promoting internationalization in universities, reseach centers and in some areas of labour force. This third area, however, is going in a very low speed and there´s been a lot of negative reaction regarding foreign labour force, even though it is more than proved that the country needs it, not having in its internal market enough people and neither enough experts to promote the necessary growth.

Companies hardly ever hire a person who does not speak Finnish even if the job requires English. People are refused on jobs many times just for having a strong accent or a foreign last name. This internationalization is too new and many Finns have not seen how necessary it is for the future of this nation. But going deeper in this subject requests a new text…

I know this is a natural reaction specially when unemployment rates are so high but the thing is: it is high because the market is not growing.

To sum up these are, in my opinion, some of the internal reasons for the crisis that would be happening even if there was no international crisis:

  • Nokia´s fall
  • Ageing population
  • Declining of the manufacturing industry
  • Declining of domestic demand for domestic products
  • Declining of the internal market
  • Late internationalization of universities, research centers and labour force

Add these to all problems the Euro zone has been facing and to the Russian crisis (Russia is a very important commercial partner for Finland) and you will understand what´s going on here.

As I wrote at the beginning of this text, I am not an economist so of course people who are and understand the subject better than me might have different points of view. So if you are one of these people, please, feel free to share your opinion. I could learn more and this kind of debate is what I am willing for with this blog.