|From: Foundation for Economic Growth
Finlands Growth Path
By Phil Scott
May 15, 2004, 18:12
Finland developed the institutions of the Nation State around 800 years ago and has a unified population which has successfully survived the depredations of Russia and Germany in the middle of the last century.
Industrialisation started at the same time as other European countries and although under State control, traded successfully.
- The State has deregulated some of the important sectors of the economy, reversing a legacy of state control.
- The State has a high R & D expenditure.
- Very successful industrial trade and growth from 1950 to 1990.
- Large downturn from 1990 to 1994.
- Turnaround from 1995 to 2000 but, very low growth from 2001 to 2003.
- High unemployment and a rapidly aging population underline the need to spread reforms across all parts of Finnish society.
- The public sector remains large relative to other OECD countries.
- Strong unions defeat Government moves to improve the commercial and industrial situation.
- Tax burdens are too large.
- Government jobs account for nearly a quarter of total employment.
- Steps are needed to promote greater efficiency in the State sector.
- Stronger political drive for impact assessments of new laws and regulations is needed.
- There is urgency for further reform because of Finland's aging population.
- Centralized wage negotiations offer little incentive for improvement in sheltered sectors of the economy.
- The regulatory regime does little to encourage unemployed individuals to return to work.
It would appear that the Welfare State and the strong Unions have conspired to halt Finland‚s 5% growth rate and drop it down to around 1% for the last three years. The OECD report seems quite clear on what needs to be done. Let us hope that New Zealand‚s strong growth up to 2003 continues. Unfortunately, it looks like our growth is set to decline to 1% or 2% over the next few years, and for the same reasons!
Our task is to change all this.
© Copyright 2003 - 2007 Foundation for Economic Growth