Why hasn't the Nordic welfare state succumbed
under the strain of global crisis, rising costs, high taxationm, aggressive
market liberalism, mass unemployment? If the criticism against the welfare
state coming from the Thatcherite conservatism, Gingrichian right radicalism
or Blairian third way social democracy can be said to have a real
target, it is the Nordic welfare state (for a rather balanced American
discussion, see Wolfe 198x) The American society cannot by a long
stretch be called a welfare state except in the very restrictive meaning
of a state which gives some aid ("welfare") to the very poor. The british
"welfare state" was already much eroded and outdated when Margaret Thatcher
attacked it and (at least partially) succeeded in taking away most of the
remaining aspects of a welfare state. Thus, the third way is simply a question
of how to find one's way back to a much leaner, meaner welfare state.
But in the Nordic countries, there is by consensus, a
welfare state at work, which has long origins, but was fully developed
only by the 60's and 70's. It is precisely this welfare state which is
the enemy, the empire of evil for both the American right and more moderate
European conservatives or market-oriented social democrats. And it has
been declared dead already in the 80's by the more hasty theorists according
to whom it simply could not work.
But the real test came in the 90's, in the guise
of a very severe economic crisis, extremely strict criteria for a new kind
of monetary policy and a general global market orientation which has -
according to its proponents - made the national state obsolete.
In fact, it is not only the critics, but even some of the proponents
of a welfare state, who accept this analysis. So, Ulrtich Beck has in his
recent articles and lectures (eg. in Helsinki 1999), talked of "zombie
concepts" concepts which are dead, but still refuse to die. Among
these concepts the state, the nation-state, the welfare state, full
employment etc. figure very prominently (as do "family" or "class"). All
those defending the welfare state and striving to full employment as the
main fundament for a sustainable welfare state are simply defending a line
which has been bypassed ong ago.
We shall ask in this article if this is so, and raise
the disturbing question: if the Nordic welfare state cannot work, so how
come it has worked very well precisely in the 90's, when it was supposed
to have gone bankrupt and has been threatened from all sides?
The Nordic welfare model has very complex
origins. The Bismarckian insurance schemes, Beveridgean universal
flat rate benefits, and finally universal income related tax-based benefit
systems, have all influenced the outcome which in the final analysis was
a result of political negotiations between more conservative, market-oriented
and more socialist, welfare- oriented political parties on the other hand
and more and less paternalistically oriented social actors on the other
hand (so we can have combinations of radical, liberal, socialist orien
tation or conservative, paternalistic welfare orientation which both result
in a common compromise) . Another important factor is the ongoing negotiation
process between the major social partners: the employers, the employees
and the farmers, whose bargaining position has been stronger than their
actual numbers because of continuing political support to the agrarian
center parties in both countries (more so in Finland than in Sweden). In
a regional perspective, this means that except for the southern part of
the country and the large cities in the south, the rest is dominated by
the agrarian party.
Also the politics of the gender equality has had an important
influence on the social welfare services, so that one of the specificities
of the Nordic model is a much higher labour force participation of women
- and in the Finnish case, an extremely low share of part time work so
that both men and women, if employed, work mainly full time and regular
hours. For the new entrants in the labour market, it has become popular
to talk of "pätkätyö", period work (?), i.e. periodic employment
and irregular employment conditions; still this is a marginal phenomenon
on the labour markets.
It should also be noted that the fully developed Nordic
model is actually very recent, in Sweden it can be said to date from the
50's and in Finland only from the 70's with its greatest expansion in the
80's just before the crisis. Pertti Alasuutari (1997) speaks of three
discursive spaces or discursive economies: the "moral economy" of the 40's
and 50's when the discussion was ideological and the opposition to the
Beveridgean welfare state was still quite strong, so that the first legislative
attempts at developing the Nordic welfare state (in Finland the law on
child benefits, universal, flat rate payments) met with a strong opposition.
The next stage (in the 1960' and 70's) was that of "planning economy" (a
better term would probably be social corporatism) in which the emphasis
was on the development of a comprehensive, planned social state and during
which the groundwork for the welfare state was laid: pensions reform, health
insurance, unemployment insurance, day care and other social services.
And the last stage is, unsurprisingly, the "market economy" in the 80's
when the emphasis was on the development of markets, privatisation, criticism
of the welfare state. This direction did not have wide-ranging effects
on the welfare state (in a sense it was thought that the market economy
would develop on the fundament of a strong welfare state) until the 90's
when the economic crisis created a new situation.
It should be noted that, when comparing Finland and Sweden,
there is the important fact that Finland has started from a much lower
level of economic development and has been, until quite recently, clearly
the poor cousin of the Nordic welfare states. In the 1960's, when the building
of the welfare state began in earnes in Sweden and Denmark, Finland lagged
still considerably behind, its GNP per capita being about 60-70 % of the
Swedish level. When this article is being written, the Finnish newspapers
have reported triumphantly that Finland has passed Sweden in GNP per capita
(this was already the case in 1990-91 when the Finnish markka was strongly
overvalued and the Swedish economy was sluggish, but now we can almost
speak of a real event - but not completely as the Swedish crown is floating
and the Finnish markka has been arbitrarily fixed to the euro, on a level
which probably is overvalued). This same difference has been true of the
benefit levels, even with some exaggeration, because the Finnish share
of social expenditure of the GNP has been clearly lower (see Julkunen,
Kosonen 1998, Kautto) throughout the postwar period.
Those not familiar with the political history of the Nordic
countries should know that Norway and Finland have under some time of the
history been under the rule of either Sweden (Finland, Norway) or Denmark
(Norway). Finland was, in addition, part of Russia between 1809 to 1917,
when it became independent, as the last Nordic country. Traditions of law
and administration are therefore quite similar (Finland continued to apply
Swedish period laws even under Russian rule) and cultural differences are
relatively small. Swedes, Danes and Norwegians understand each other, more
or less, whereas the Finnish language does not belong to the same language
group, even though it has many words in common.
It must also be said that the statistics of social welfare
in the 1980's and 90's are very misleading because of two reasons: the
strong increase of the unemployment benefits and the slower but steady
increase in the pensions has tended to hide the cuts and restrictions,
whereas the rapid decrease of the GNP in both Finland and Sweden has made
the share of the social expenditure to rise to unprecedented heights (38.7
in Sweden and 35.5 in Finland in 1993, see Kautto & Heikkilä 1998,
310) - just as the Keynesian anticyclical policy was intended to work (at
the time it had, of course, been declared completely bankrupt). But behind
these there is the reality of quite radical and deep changes which are
expected to have many important long term consequences (Heikkilä-Uusitalo
1997, Kortteinen-Tuomikoski 1998). For instance, unemployment and sickness
insurance benefits have been cut considerably, pension benefits have been
reduced for future pensioners, the public employment has gone down, the
funding of the local governments has been sharply restricted, so that hospitals,
schools, universities have all experienced real reductions. When the unemployment
and the need for social assistance diminish, the real extent of the cuts
will become visible in the share of social expenditure (according to one
estimate, the level of public social expenditure in the year 2000 will
be 8.5% lower than it would be without the cuts, Heikkilä- Uusitalo
1997, 1).
In the beginning of the 1990's Finland and Sweden experienced
a severe depression, for both the most severe since the 1930's. In Finland
the depression was much deeper and has had longer lasting consequences
than in Sweden. In both countries the main consequence was the rise of
the unemployment to a permanently much higher level than before the crisis.
The so called non- inflationary rate of employment (NAIRU), or structural
unemploy ment in Finland is considered by experts to be close to 10 %.
Also the number of long-term unemployed rose to previously unprecendented
levels. The highest estimates point to somewhere between 60-80 000 long
term unemployed, but an exact figure is very difficult to give because
of statistical juggling in the EU- Finland (see the section on umemployment)
The depression is now over and both the Finnnish and Swedish
economies are experiencing strong growth, having returned to the previous
growth paths (slower in Sweden, faster in Finland). The question is, what
has happened to social welfare policies in these countries, both from the
point of view of public support and the practical resources.
My/our discussion will be mainly based on a recently published
collection volume Nordic Social Policy. Changing Welfare States (edited
by Mikko Kautto, Matti Heikkilä, Bjørn Hvinden, Staffan Marklund
and Niels Ploug, 1999) which analyses the situation in Denmark, Finland,
Norway and Sweden. Its data reaches in most cases to 1995; we shall make
some conjectures up to 1998.
The main result of this book is that the Nordic model
is still going strong but it stands on shaky ground (this is the title
of the concluding chapter). There have been cuts and increasing restrictions
as well as lowering of the standards in the services but the fundamental
principles (of the Nordic social policy model) have not been fatally touched:
a large social sector, active employment policies, universalism, citizenship
as basic criterion, state (taxation) as the main source of financing, and
a combination of income related and flat rate benefits (see p. 13). But
as Pekka Kosonen points out, there may be fundamental changes behind the
facade of identical concepts. So, "unive rsalism" means nowadays a very
different thing from the original idea of universal, flat rate benefits
to everybody. This type of universalism does not have very much relevance
except in child benefits: both flat rate universal pensions and the employment
related pensions are strongly income related, unemployment and sickness
benefits are income related etc. Thus "universality" means nowadays only
that every citizen is entitled to benefits roughly equal to their previous
earnings, being therefore treated "equally". The opposite of this kind
of universalism is means- testing, (jäänne) marginal benefits
which are intended only to those in need. As has been often pointed out,
the universal, income related benefits are, against expectations, much
more efficient and guarantee acceptable conditions even to the poorest,
whereas the marginal benefits do not work even there they are intended
to (see Kosonen 1998 167, Korpi-Palme 1996). The reason is also simple:
in marginal systems the willingness of the society to make an effort is
much lower than in a system where everybody is entitled to benefits.
Actually we can speak of a "welfare backlash" in the sense that
from a largely liberalistic, anti-welfare orientation in the 80's combined
with the panic concerning state finances during the crisis we have moved
to a situation where the support for the Nordic welfare state is as strong
as ever (even stronger than before in Denmark and Finland) and the financial
pressures towards cuts are much less strong.
It is customary to talk about "welfare contracts":
cor poratist, generation, gender and disadvantage contracts. The corporatist
contract refers to the connection between incomes policy, social reforms
and the "social partners": the state, the employers and the employees,
and the farmers. In Finland and in Sweden, the organisation rate of the
employees and employers is extremely high, and the collective agreements
are valid even for non-members if the agreement covers more than half of
the employees in a given field. The generation contract refers to the commitment
of the society to ensure adequate and reasonable care for the elderly people
- regardless of whether they are insured or not. But it also means
that the care of children is seen as a public responsibility. This
is also covered by the gender contract which entails equal opportinuties
for both genders to to pursue working careers outside home, efforts to
reach equal pay between the sexes and the provision of day care services
(see Heikkilä-Karjalainen, 1999, 5) In fact, the day care services
have been expanded throughout the 90's, when all other services have been
curtailed.
Finland has experienced a much more uneven development
than Sweden in the 80's and 90's so that during the latter part of the
eighties its economy grew consistently 3-5 % yearly whereas in Sweden the
growth figures were much lower (between 0 to 2 %). When the crisis hit,
the Finnish economy had to endure three years of negative growth, in the
worst year -8 % of the GNP whereas in Sweden growth was only sligthly negative,
but for a little longer time. Recovery was faster in Finland, but with
much more losses to recoup. According to some authors, the cuts in Sweden
went deeper (Marklund 1995, 411), but this is doubtful, as Sweden has maintained
clearly higher deficits during the 90's which means that its social expenditure
has been less dependent of the economic resources.
Both countries had also a long period of negative
fiscal balances with Sweden going here much more deeply into the red (i.e.
with much less savage cuts of the welfare spending and smaller increases
in taxation: actually the Swedish tax reform lowered the level of income
and business taxes considerably in 1990). At worst Sweden had a public
deficit of about 13% of the GDP whereas Finland's deficit only reached
to about 8% (from a much diminished GDP, as compared to Sweden). Since
then Finland has already reached zero deficit levels whereas Sweden is
still a net borrower.
One important difference to note is that Finland joined
the EMU (European Monetary Union) in 1999 having been in the ERM (European
exchange rate mechanism) before that, and following strictly the ERM-requirements
concerning budget deficits, inflation and the debt ratio to GDP whereas
Sweden made the decision to opt out of the EMU (and exceeded clearly the
allowed debt ratio). Which means at present that ALL the Nordic countries
have fundamentally different positions concerning the European Union: Norway
is not a member (but hangs on, belonging to the EES and being included
via the Nordic pass freedom in the Schengen agreement), Denmark has special
privileges from Maastricht and is not in the EMU, Sweden has no Maastricht
privileges but is not member of the EMU (formally because it did not fulfil
the criteria) and Finland as the only Nordic country is an earnest member
("the best pupil in the class"). Paradoxically, it is Denmark and Norway
which are NATO members and therefore much less independent in their foreign
and defence policies, at the same time as independent room for action has
been a major argument against membership in the EU, or the EMU.
In my view this will have a very important effect on the
future development of the Nordic model - i.e. that the Nordic countries
will become less and less "Nordic" and their identities become more "German"
(Denmark), Anglo-American (Norway), "European" (Finland). Only Sweden tries
to stay Swedish, which is seen as the main reason of its lagging behind
the others ...
In fact, the Nordic countries used to present a clear
alter native to the development of the European Union: a fully free labour
market, free movement between the countries, free trade - but NO regulations,
no cumbersome bureaucracy, no fake par liaments, no federal structures.
The Nordic model has NOT developed because of directives but because there
has been a common wish to strive at largely similar arrangements. It is
actually a strange paradox that the EU has developed only in the context
of globalisation, liberalism and anti-regulation whereas a completely unregulated,
"liberal" system of intergovermental cooperation without force was developed
by the bureuacratic, socialist, illiberal nordic governments. Their error
was precisely not to give a symbolic dimension to their achievement.
Finland reached the "Nordic" level of social expenditure
only from 1983 to 1994 (in 1990 Finland was still much closer to the OECD
average than to the other Nordic countries) and incidentally here the unemployment
expenditure has had a big effect. (see Table 2.1), but also old age and
disability pensions as well as family benefits have increased rapidly (and
more rapidly than the number of recipients, while the increase in unemployment
benefits is solely based on the increase in the number of unemployed) (Figures
4.1.-4.6)
Compared to Sweden, Finland has been on a consistently
lower level so that the benefits in Sweden have been both relatively and
absolutely clearly higher and the conditions more generous (see Andersen
et al the distribution of income): the Finnish expenditure level
is, measured in purchasing power parity, about 20-30% lower. Finland has
also cut back the benefits more consistently whereas Sweden has had a politically
less stable situation with the bourgeois government first introducing cuts,
then going back on them, losing elections anyway and the social democratic
government reembarking on the austerity course, with a vengeange.
In unemployment, the Finnish situation has
been also much more dramatic than in Sweden. From a consistently low unemploy
ment rate in the 1980's (around 4 %) the Finnish unemployment rate exploded
in a few years to almost 20 % (almost half a million unemployed)
and has since declined slowly - and actually more with the help of statistical
juggling than because of a real decrease (the new EU/ILO definition of
unemployment defines as "unemployed" a person who has been actively seeking
employment during the past few weeks which means that many long-term unemp
loyed are excluded: the figure of unemployed has consistently been about
20-25 % lower than the number of people registered as unemployed, while
even the latter figure is in reality an underestimate. I have not seen
yet any reasonable arguments for this statistical misrepresentation the
socially and politically highly important concept). In Sweden the rate
was originally about half the Finnish level and and it never exploded in
the same way as in Finland (remaining below 10 % throughout the depression)
(Fig 2.10)
It should be noted that in addition to the above mentioned statistical
juggling, Sweden's active labour policies make a part of the unemployed
"invisible" in the statistics. In fact, it would be a good idea to speak
of different empirical unemployment concepts: the number of active jobseekers
(normally lowest), the number of jobseekers and those in training courses
(higher), the number of registered unemployed (even higher), and finally
the number of all unemployed: jobseekers, registered, in training, and
those not seeking and not in registers either because they have been left
out or because they have not wanted to. But note that these are not additive
statistics: part of the jobseekers are not registered, some of the registered
are actually working etc. And of course the "grey" economies, which are
already notable in Finland and Sweden due to high taxation, have an opposite
effect, so that especially in the building trades it has been complained
that even when the number of registered unemploy ment is high, it is very
difficult to find available workers.
In Finland, unemployment (registered unemployed)
rose from 3.4. % in 1990 to almost 20% in 1994. Thus both the number of
recipients and expenditure was multiplied (roughly sevenfold). Several
cuts in the number of days the unemployed can receive full benefits and
in the requirements of eligibility were introduced but the expenditure
has still risen somewhat more than the recipients (see Ploug 1999, p. 82).
The number of the unemployed on social assistance level of benefits (the
so called labour market support) or receiving the flat rate unemployment
benefit is 207 000, (see Kautto-Heikkilä 1998, 312), i.e. about 60
% of the number of unemployed. (not possible? check!!) In fact, the number
of long term unemployed has grown almost tenfold from 22 000 (less
than 10 % of the unemployed) in 1991 (see Blom et al, 1999, 61)
In Sweden , unemployment rose for 1.3 % in 1989
to 8.2 in 1993. Also in Sweden, expenditure has risen more rapidly than
the number of recipients. There have not been any notable changes in the
unemployment benefits. Thus, in both countries, the effect of the
unemployment insurance has been to cushion dramatically the effects of
the depression on the living standards, but on the other hand to make the
situation more dramatic as to the government expenditure.
In Finland the level of benefits was cut from
80 to 66 % and the waiting period extended. The compensation for medicines
has been throughout very low and fully compensated medicines have become
fewer (There is a misleading practice of claiming that medicine compensation
level is 50 %, or the doctor's fee compen sation 60 %, when there
is a ceiling on the price (and a self risk part) which has nothing to do
with the actual price so that the actual compensation level may be much
much lower, 20-30 %)
In Sweden, the system has been much more generous, and
there has for instance been no waiting period at all. It was reintrodu
ced in 199x, while in Finland it was extended from five to seven working
days, which is eliminates ordinary flus etc completely from the insurance
coverage)
Retirement pensions are in both countries based
on a double tier, universal system, so that there is a flat rate pension
meant for those citizens who do not have other sources of income, and income-related
pensions for those who have had regular income (and the flat rate pension
disappears completely, not only through progressive taxation). The latter
has been relatively generous and the universal retirement age is 65. The
third possibility has been individual pension insurance which has given
tax advantages for the insured. In this case, the payments have been tax
deductible up to a limit, but the pensions have not been allowed to exceed
the limits of ordinary pensions. Thus, somebody who has not been employed
for a sufficiently long period, may save for an individual pension to cover
the difference. It must be remembered that all this equality business does
not apply to higher echelons of management, where private pension schemes,
early retirement agreements, golden handshakes etc. have recently caused
much discussion and bitterness (in Finland, the former head of the Bank
of Finland, not yet sixty years old, when appointed as a director of the
European Central Bank, used her "right" to start receiving her not inconsiderable
pension from the Bank of Finland, and a former head of a state owned firm
who was not appointed CEO of the newly organized firm, had a clause in
his contract which allowed him to retire with immediate effect at 55).
Well-off retirees are being elected to the European parliament
to compensate for a loss of their pension (e.g. the former mayor
of Helsinki, a former head of the alcohol monopoly etc.)...
In Finland the actual retirement age is about 59,
so that only a very small part of those above 60 are actually working.
The difference to Sweden is dramatic. The recent governments have all included
in their programs the goal to raise the retirement age, with small results.
There are very few persons in respon sible positions who can nowadays speak
with moral authority about staying at work, because they are either themselves
going for early retirement, sending their employees masssively to early
retirement, have made agreements which guarantee an extremely early retirement
(55, 58).
In Sweden, most of the same people who in finland retire
early on a disability pension, stay in the labour force with the help of
active labour market measures.
The important point to make in the question
of health and social care services is that they are the responsibilities
of the local government so that the state gives some (in some cases full)
support and regulates the services. The important change here is that the
state has simultaneously decreased its share and its control over the provision
of the services, leaving the communities the freedom to make cuts. But
there are still laws regulating relatively strictly the supply side whereas
the financing is in crisis. For instance, the law requiring com munities
to provide day care to every child between 3 and 6 years (either in communal
day care or through a generous contribution for private day care (or home
care, so that the mother is actually paid for taking care of the child),
was intrduced only in the 90's (and the regulations concerning the number
of children in a group are being followed to the letter). In the city of
Helsinki this means that the day care personnel has grown much faster than
other categories, especially those engaged in the care of the old or teachers.
It is precisely in the services that the Nordic
system was put in place and expanded most rapidly during the early 1980's.
Both health and old age services have therefore been subject to dramatic
cuts. Here we have still not sufficient information on all the effects
of the worsening of the level (e.g. productivity has been increased
by making a diminished number of personnel takes care of a higher number
of patients). A study conducted in the department of Social Policy
in Helsinki showed for instance that a number of retarded children
were forced (by the com munities who were paying for the care) to leave
the specialized care centers and died soon after being returned to their
home communities. The state was able to deny any wrongdoing as it was difficult
to prove the connection between the deaths and the diminished care.
The most important consequences have been the cuts in
the eligibility for the services (sickness insurance, home care) and the
cuts in personnel, where the long term consequences are yet to be seen.
There is much talk of the pension "bomb" in both countries.
The actual retirement age is as noted above, low (much lower in Finland
than in Sweden), the baby boomers are nearing this retirement age (it is
estimated that the number of pensioners will grow until 2030 when it starts
to go down), the pension systems is based on a combination of pay as you
go and pension funds which are underdimensioned for the full payment from
funds, and simultaneously the number of those paying for pensions is diminishing
rapidly (still, the calculated funds are almost 300 billion FIM).
On the other hand, the pension system has undergone important cuts which
affect future pensions drastical ly. Thus, the time which is needed to
receive full pension was extended from years to 40 years: as the
age when people actually begin working has risen due to longer studies,
and there have been more breaks in the job career, the number of those
actually receiving full pension will be much lower. Many people will therefore
have the incentive to save for their own pensions and or plan some other
retirement arrangements, typically combining retirement with income generating
activities. But presently the cuts in the pension system are not yet very
much visible: they form the other pillar of the Nordic welfare state together
with the unemployment benefits.
Family support has been very different in Finland and
Sweden. Children's benefits were introduced in Finland in 194 , suddenly
making a strong redistribution to large families in the country side. They
were kept lagging after the inflation so that the value of the benefits
went strongly down until 1980's when they were again raised. They are also
exceptionally tax-free, which means that they even count in middle class
families.
Another exception is that the only increase in social
policies in Finland relates to day care: it was made mandatory to the local
communities so that every child has a subjective right to day care. This
has caused important changes in the labour force divisions in the communities,
so that the share of nurses has gone clearly down whereas day care workers
are already more than half of the community workers. This year, the government
has decided to begin free preschool starting from 6th year (in finland,
the mandatory school age starts from age 7), which in practice means that
parents save one year of day care payments. However, the most recent studies
in the use of day care show that over half of the children under school
age are taken care at home.
In Sweden ...
The support for social welfare has been problematic
in the Nordic countries and especially in Sweden and Finland. In Finland
there has been a consistently high level of support for the welfare state
whereas in Sweden the opposite has been the case. In Finland there was
a dramatic dip in 1992 when the support ("the present level is appropriate")
went down form around 55 to over 40 (and the critical position: the present
level is too high, went up from under 30 to over 30), see Andersen
et al 1999 p 243
In Sweden, the percentage of those saying that the governemnt should
reduce social support has been between 60 and 70 % from 1970's to 1995)
and those supporting the welfare state as it is has been around 30 % except
for one time in late 60's. (Andersen et al 245) It is very strange that
the authors draw from this a completely opposite conclusion: that in Sweden
the support for the welfare state has been steadily high and has not diminished
during the crisis! It is my conclusion that actually in Sweden there is
a wide ranging popular consensus that the welfare state should be reduced,
something that the governments have not been doing very efficiently (and
there seems to be a blind spot here even among the researchers, see also
Svallfors 1995!) Another conclusion to be made from the data is that it
is the social democratic government which is able to make really deep budget
cuts: in Sweden the short bourgeois rule in the beginning of the 90's marked
the deepest budget deficit and some real increases in government spending
after which the social democratic govern ments have cut the spending and
the deficit steadily. Thus being a conservative and against the welfare
state does not help in the corporatistically structured welfare policy.
Only being "for" the welfare state and working with all the corporatist
partners makes it possible to really bleed the welfare state. This has
been very clear in Finland where a rainbow coalition, led by the social
democrats has succeeded in what a centre-right coalition would have failed.
On the other hand, there is a much stronger support for continuing the
welfare state as it is in Finland than in Sweden.
Note then, that the famous thesis about the relationship
of social democracy and the welfare state (Castles 1978, see Kosonen 1998)
works very much inversely, too. Without social democrats, it would be much
more difficult to dismantle the welfare state, introduce the global economy,
liberalize the capital flows, give up major means of economic policy etc.
One extremely interesting but questionable result from
Kautto et al 1999 (Nordic Social Policy) is that whereas in Sweden the
results of the cuts can be seen in increasing inequalities, worsening poverty
and in deeper divisions in the society (strengthened by the cleavage between
the left and the right) in Finland, even though it experienced the deepest
depression, in the living conditions nothing of this was visible: economic
inequality did not increase (because (almost) everybody became poorer),
the number of relatively poor did not increase (for the same reason; even
though the number of people receiving social assistance rose dramatically).
Thus, the Finnish welfare state functioned precisely as it was supposed
to, whereas the Swedish welfare state although being heavier and more generous,
produced contrary results. There is however, much conflicting evidence
about this: the bread queues, the number of visible poor, the segregation
of the suburbs, the changes in disposable incomes etc (see especially Kosonen
1998, 371, also a discussion by Halleröd and Heikkilä 1999, 213).
In my view, this is a statistical construct which is not borne out by the
reality. And in this case, it should once more be remembered that both
the extremely rich and the extremely poor escape social surveys, on which
social scientist base their conclusions.
Poverty and power are phenomena not reachable by statistically representative
surveys.
Retirement and its financing is in many
ways THE question of the future of the welfare state. The absurdly low
actual retirement age (58) and even the legal retirement (when people have
to retire, only the self-employed have an option here) age are much too
low compared to the expectation of life at 65 (14.7 for men and 18.6 for
women). Many people may look forward to being active and healthy at least
another 15 years - an enormous burden to the state which is paying
both for retirement and increased health costs. The term "pension bomb"
seems more than adequate when the healthy baby boomers arrive at retirement
age. On the other hand, the baby boomers are expected to consume actively,
keeping thus the economy rolling, even during the depression years, and
on the other hand, recent European research shows that the grandparents
give increasing support to selected grandchildren so that it is actually
the grand parents which make it possible for the young generation to get
past their first economic hurdles.
The evidence is inconclusive. The trend towards being
indepen dent and staying at home longer, means also that the houses and
apartments of the older generation are not being liberated: only in rare
cases do the younger generation wish to move in while a parent is still
alive. The patrimony does not change hands and children will rarely
inherit their parents until they themselves are retired. In the worst scenario,
lonely aged persons are living in large houses and apartments in pleasant
neigbourhoods almost indefinitely, whereas couples with small children
are paying dearly for small apartments in inhospitable and unruly suburbs.
The timing is worse than bad, because this will affect the children also.
In all these questions, it seems that the Finnish society
is in deeper waters than the Swedish (?) where people work somewhat longer
and whose "baby boomers" are not so large a group - and who have a large
number of immigrants in the best working age. Thus the so-called elatussuhde,
the relationship of those at work and those not in wage work (children,
students, retirees etc) is clearly lowest in Finland and highest in Sweden
(Kautto-Uusitalo 1998, 304)
One of the most problematic questions is the long term
effect of the mass unemployment which hit the population in the Nordic
countries in the beginning of the nineties. Unemployment affected
both working classes and middle classes and it can be estimated to have
affected indirectly a very large number of children. In the short term,
as has been noted, the direct economic effects were relatively minor. But
in the long runs, both the economic and social effects of high unemployment
begin to make themselves felt. And especially the social effects: the employability
of the unemployed, the effects on their children etc will be considerable.
It there are now around 200 000 long- term unemployed in the country, there
are about same number of chldren affected.
How will these children grow up? Will there be an evil circle,
inheritance of the characteristics that lead to unemployability etc.
And if the pessimistic claims about the inability of the modern society
to create new jobs to replace those eaten up by rationalization and
automation, are true, the problems will start to accumulate. A discussion
about a citizen's wage or negative income tax has been going on both in
Finland and Sweden, but is not being taken really seriously.
We have on the one hand a strong consensus that the
major problem of the Nordic welfare state in the 90's is increasing inequality
and segregation. And on the other hand, the statistics do not show this.
In my view the answer is clear. The statistics show that a large majority
of the population lives under relatively unchanging circumstances and relationships
whereas a very small and statistically insignificant group lives in extreme
wealth and in extreme poverty. Both groups, by the way, are able to avoid
"detection" by the normal research instruments but the economic effects
of the small group of rich people are real enough: both as the anonymous
"market forces" and effects on trendy consumption (I have always been impressed
by Werner Sombart's little known book "Liebe, luxus und kapitalismus" where
he attempts to show - polemically against Max Weber, of course - that it
was the luxury consumption, especially the upkeep of mistresses that set
the modern capitalism on its course, both as a system of wasteful consumption
and consumption oriented production).
The results of the actual depression and cuts are inconclu
sive: statistics do at least show that comparatively speaking, Finland
has been more egalitarian in the effects of depression than Sweden, but
on the other hand, in Finland there has been the phenomenon of highly visible
poverty: food banks and people complaining of going hungry while nothing
such has been experi enced in Sweden (see Heikkilä-Karjalainen 1999).
Finland has also, as the only "new" member of the EU, been obliged to take
EU food aid to help its poor. There have been regular food queues in the
bigger cities (unheard of since the great depression) and research has
indicated that around 100 000 persons reported going hungry at leqast occasionally
between the spring of 1992 and the spring of 1993 (Heikkilä- Karjalainen
23) The so-called Hunger Group, consisting of the heads of the labour unions,
the employers union, the speaker of the parliament and other notables,
published recently a report in which the reality of the hunger and marginalisation
was stigmatized and an action program to alleviate problems of poverty
proposed (Nälkäryhmän raportti 1999). The program was not
very concrete, but the names behind it were heavy-weight labour and employer
leaders, archbishops, parliament speakers etc. and represented various
shades of opinion. Therefore, it is perhaps right to say that at least
the extreme effects of the depression and the ensuing cuts were more dramatic
in Finland than in Sweden.
The welfare state cannot be expected to spread globally
very far. It has certain qualities which do not help its spreading. It
requires a modicum of law abiding and willingness to work by the population,
it requires some solidarity between different groups, mutual respect, recognition
of the human worth of every citizen (which usually also means that minorities
are protected and respected, not treated as unwanted aliens). And in fact,
in the Nordic welfare states the citizenship is not a criterion, but simply
being a legal inhabitant in the country. These conditions are not fulfilled
in many parts of the world. The welfare state model is thus not easily
exportable (one place where a sort of Nordic model does seem to exist are
the wealthy and well- regulated small city states of Asia which adhere
to the so-called Asian values, see Anne Haila 1999,p 3; there the model
is called Asian values).
On the other hand the global economy is, by definition, expor
table. The question is, will it succeed in killing the goose with golden
eggs? Until now, there has been an uneasy coexistence and interdependence
(As Ulrich Beck has pointed out, the heads of the global firms are the
last to accept the social effects of globalisation and therefore actually
depend quite a lot on the welfare state, see Beck 1998 ) so that the welfare
states are very much dependent on foreign trade, capital flows and the
international markets but also the global firms increasingly need countries
with well-educated, healthy employees in ecologically safe surroundings.
At least for the more higly qualified jobs and for their chiefs who prefer
the idea to lead ordinary lives without heavily armed body guards, around
the clock surveillance and other inconveniences of the global jungle (when
the head of Nokia, Jorma Ollila is being presented abroad, the journalists
often marvel his simple summer cottage and the self-made outhouse, with
no keep out- or armed response signs around ...).
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and cleavages, in Kautto et al (eds): Nordic Social Policy 1999
Ulrich Beck:
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Tammi, Helsinki 1998
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toiminta ja kannatusperusta. STM, Helsinki 1996
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1998
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in Kautto et al (eds): Nordic Social Policy Routledge 1999.
Werner Sombart: Liebe, luxus und kapitalismus
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