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The Other Point of view – Critical Insights

How has Finland’s economy evolved in recent decades?

Finland’s economy has faced significant structural challenges, particularly due to the transformation of its industrial base, which has curtailed growth opportunities. The decline in the working-age population further exacerbates the growth outlook.

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Industrial production has historically been a critical growth engine for Finland. However, since the economic recession of the early 1990s, neoliberal economic policies have dominated, emphasizing corporate tax cuts under the assumption that they foster employment.

 

This belief persists despite a lack of empirical evidence supporting its effectiveness.

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Over the past 30 years, Finland has undergone numerous changes, including the dissolution of the YYA Agreement, the 1990s recession, entry into the European Union, and a shift in economic focus toward IT, artificial intelligence, and other high-tech industries.

The maritime sector has rebounded, bolstered by German support, while the rapidly growing gaming industry demonstrates Finland's newfound capability in consumer-oriented creative industries.

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Despite these advancements, Finnish exports remain "uniquely fragile" by European standards.

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According to Finnish Customs, the value of goods exports decreased by 6.9% in 2023. Export volume fell by 2.7%, while export prices declined by 3.6% compared to 2022. The total export value was €76.21 billion. Imports decreased by 17.6%, with volumes down 10.7% and prices down 7.4%, totaling €76.17 billion. For the first time since 2010, Finland achieved an annual trade surplus.

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Raw materials and production inputs still account for roughly half of goods exports in 2025, with investment goods contributing 30% and energy 10%. Consumer goods, which fare better during economic fluctuations, represent just 10%. This suggests Finland has not adequately modernized its economy and remains uncertain about its economic direction.

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Another issue is the two-decade-long increase in speculative virtual investments. Over 90% of investments are speculative rather than productive, indicating that capital avoids production in favor of quick profits.

 

This trend has led to cautionary tales and financial collapses.

In terms of creative industries, Finland lags behind in generating intangible value. Financial market deregulation and unwise credit practices have worsened the situation in recent decades.

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Corporate ownership in Finland has shifted significantly in the past 30 years, moving from state ownership, cooperatives, national identity, and family-led businesses to a faceless, market-driven subsidiary economy. Investors prioritize short-term gains, often neglecting investments in product development and innovation.

 

Meanwhile, corporate leadership focuses on immediate profits in a quarterly economy, a practice for which they are rewarded.

 

What challenges does Finland’s economy face today?

Finland’s economy has encountered numerous issues in recent decades, undermining its sustainability and growth potential.

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1. Structural Transformation in Industry and Exports:
   Finnish industry has suffered from structural shifts that have limited growth opportunities. Export structures remain weak compared to European standards, with raw materials and production inputs dominating. This leaves Finland’s economy vulnerable to economic cycles. Other Nordic countries, such as Sweden, perform better economically, despite higher labor costs.

2. Decline in Working-Age Population:
   The shrinking working-age population hampers economic growth potential. This underscores the need to invest in workforce skills and productivity while attracting skilled labor to aging Finland. Integrating immigrants into the workforce could also form part of the solution.

3. Lack of Investment:
   Insufficient industrial investments have led to stagnant demand and economic stagnation. This lack of investment also affects research and development, which require significant increases.

4. Impact of Multinational Corporations:
   Many of Finland's key industries are now foreign-owned, weakening the nation’s economic independence and control. Profits flow abroad, and Finland’s economy is increasingly exposed to global economic fluctuations.

5. Inequality and Greed:
   Economic concentration in a few hands has widened income gaps and increased social inequality, weakening consumer demand and exacerbating societal challenges. Greed and short-sighted profit-seeking have led to irresponsible economic practices and risky ventures, with severe consequences for society as a whole.

6. Tax Evasion, Avoidance, and Debt:
   The cycle of tax evasion and rising debt has increased economic instability and weakened public finances. National debt has multiplied in recent years, and liabilities to international financial institutions have grown significantly.

7. Leadership Trust and Outdated Models:
   A lack of trust in business and political leaders is a severe issue. Leadership mistakes and inability to adapt to market changes have weakened Finland’s competitiveness. Additionally, Finland struggles to adopt new models and move away from outdated industrial-era practices.

 

This analysis highlights the urgent need for innovative, sustainable, and equitable approaches to revitalize Finland's economy.

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