Debt is just a tool for dismantling the welfare state and weakening the labour movement
Writings on the Finnish growth model, part I
The public discourse on debt, the rescue of the welfare state, and the Nordic model in Finland is deliberately muddled. Prime minister Petteri Orpo's speeches on debt, finance minister Riikka Purra's jokes about spending cuts, or labour minister Arto Satonen's remarks about the Nordic countries cannot be understood without relating them to the government's views on Finland's economic growth.
First, Orpo’s cabinet decided drastic spending cuts worth of 6 billion euros in its government negotiations. However, Orpo's policies are not guided by some abstract goal of "balancing public finances." The National Coalition Party (Kokoomus) led by Orpo calculated long ago that, because Finns have been suspicious of public debt ever since Finnish statesman and the father of Finnish mark J. V. Snellman (1806-1881), "curbing public debt" can be used to justify any policy measures without fear of losing political support.
If there were genuine concern about public debt in Finland, the government’s fiscal consolidation would have addressed decrease in the overall tax rate. Between 2023 and 2027, approximately €34 billion in tax revenue will be lost because the overall tax burden is lower than in 2022. The planned savings in social and healthcare services are also unlikely to materialize on the desired scale. Additionally, austerity-focused adjustments reduce overall demand, which, in the economic downturn, prolongs economic problems and makes the government's goal of creating 100,000 new jobs even more unlikely.
And lo and behold, when the government's measures are not enough to "curb debt," further adjustments are needed. In spring 2024 the government agreed on new fiscal consolidation worth of €3 billion. This is not a failure of the government but a successful creation of conditions for continuous cuts in public spending. It is a perpetual motion machine, the existence of which the Ministry of Finance and editorial writers praise after the previous government of Sanna Marin.
Although austerity is often justified as saving the welfare society, these measures also actively reshape the Finnish welfare model. When Purra says that we do not deserve our current standard of living, she means that the welfare state can no longer afford to maintain the standard of living for the poor and sick who, for one reason or another, cannot find employment. This burden must be thrown overboard to return to export-driven growth at a lower cost level.
The red-green opposition has accused Purra of betraying voters, but the second main coalition party Finns Party (Perussuomalaiset) calculated long ago that not all Finnish workers are sympathetic to the unemployed, especially not to foreign unemployed. For many workers, weakening the trade union movement and tax cuts for the employed are more appealing. The Finns Party is saving a welfare state for the people that support themselves by working.
Finally, Satonen's efforts to return Finland to the ranks of the Nordic countries must be understood as competition. The government is not making reforms to become like Sweden but to become a significantly more cost-competitive country than Sweden. In this thinking, the current power resources of the labour movement are seen as a burden, akin to generous social security, which must also be thrown overboard. By weakening the labour movement through local bargaining and restricting the right to strike, standards can be lowered below those of Nordic competitor countries. Even if the government's employment targets are not met, this is prime, finance, and labour ministers’ vision of a new export-driven Finnish growth model.
To conclude, the government has a clear vision on economic growth, where the contradictory battle against debt is a tool for class politics. The rhetoric of necessity justifies the active dismantling of the welfare state and the weakening of the labour movement, redistributing power and income to the upper class. And if debt does not decrease, it can always be claimed that the medicine is right, but the treatment is too short and mild.
The vagueness of public discourse can be explained by the fact that the media and researchers allow the government to engage in deliberately vague talk about saving the welfare society in the name of national interest. The rhetoric of necessity is also facilitated by the opposition's difficulties in presenting a coherent alternative growth model that packages its own class politics as a common good for all Finns.
This text was written based on discussions with Joel Kaitila, who is finalizing his doctoral thesis at the University of Jyväskylä on ideas related to Finland's growth models. The Finnish version of the text was originally published in spring 2024.