FINNISH POLITICAL CULTURE AND SYSTEM

THE WELFARE STATE:

CASE OF FINLAND

Michal Saidl

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Table of Contents

Introduction ......................................................................................................................... 3

Discussion ............................................................................................................................ 4

References ........................................................................................................................... 8

Introduction

Gërxhani and Koster (2012) introduce the modern welfare state as a system where state

takes the responsibility to provide social protection, solidarity and economic equality in order to

make available services and benefits to fulfil basic needs for education, health, income and

housing. It has its origins in Europe in 19th

century.

The Nordic welfare state system had to overcome an immense number of difficult

occasions during its development since the end of Second World War and later on since the

beginning of 1970s and especially during the two decades of 1980s and 1990s. As Nordlund

(2000) indicates, it was particularly economic problems and critiques by neo-classical

economists, pressure of the globalisation, challenges from conservative parties and societal

transformation.

While Nordlund (2000) in his article further describes arguments to support the

“durability hypothesis” more than the “dismantling hypothesis” of the Nordic and especially

Finnish welfare state system, Gërxhani and Koster (2012) in their article focus more on the

societal approach as they provide results of their empirical test based performed on a large

dataset of respondents across European states. They imply that the informal support (social

support; support of the people) is also an important factor in maintaining the welfare state

durable and sustainable; it is not only the decisions of the formal institutions, authorities and

political agenda.

Furthermore Kantola and Kananen (2013) explain four elements (or phases) which took

part in the shift of the traditional Nordic welfare state paradigm as it “has been facing the new

international economic order of free capital movements, post-industrialisation, European

regional integration and global competition.”

Discussion

Nordlund (2000) describes that as in most of the industrialised countries, the welfare state

system in Nordic countries remained unchallenged until the 1970s. Since then there have been

indisputable evidences that the Nordic states have shown outstanding toughness and elasticity.

During the 1970s, it has started with two oil-shocks which emerged in economic

problems and created a ground for political opponents, neo-classical economists and other

opponents to attack and criticize the welfare state policies and theories. Nordlund (2010) also

mentions attitudes of two significant politicians of the time, Margaret Thatcher and Ronald

Reagan: “The welfare state represents principal cause of poor economic performance and not

something that contributes positively to the economy.”

During 1970s, the dominating economic policy changed to neo-classical theory which

resulted in overwhelming criticism, for example about high taxes which according to neo-

classical theory lead to economic inefficiencies or that providing income protection and

employment guarantees lead to creating work barriers.

Nordlund (2000) further refers to societal transformation of which western societies went

through during last three decades of the 20th

century. Simultaneously, reconstruction of the

capitalism system began in the 1980s and also the real political challenges occurred in the 1980s

and 1990s which were also the two decades when the Nordic welfare state system went through

the most intense transformation.

To decide whether the Nordic welfare state is dismantling or it is remaining its durability,

Nordlund (2000) conducted an empirical analysis of social expenditure data – three social

security programs: old age pensions, unemployment insurance and sickness insurance. Nordlund

(2000) also mentions that these three insurance schemes are Esping-Andersen’s famous

classification of the welfare state.

From the data Nordlund has provided in his article, it is clear that Finnish welfare system

has adapted very well to the conditions that have emerged with demographic, societal, economic

and political transformation. The expenditure on social protection has increased from 21 per cent

to 32 per cent of GPD in Finland between 1980 and 1996. As Nordlund (2000) indicates, this can

be only interpreted as a real expansion of resources used to finance statutory social protection.

Besides this, also per capita allocation has increased since 1980s up to mid-1990s in all four

countries – including Finland.

Nordlund (2000) also shows data of allocation change to different areas of the welfare

state. Between 1981 and 1996, sickness insurance and health care area decreased by 7 per cent to

21 per cent and miscellaneous area by 2 per cent to 5 per cent – particularly of the reason to

finance increase of other areas. On the other hand, old age, disability and survivors expenses

increased by 1 per cent to 47 per cent, unemployment by 7 per cent to 14 per cent and social

assistance by 1 per cent to 2 per cent. Old age, disability and survivors expenses increased most

likely because of number of citizens aged 65 or older and number of pensioners permitted to

additional pension has grown in all four Nordic countries since the beginning of the 1980s.

Unemployment allocation has changed mainly due to the unemployment shocks in the beginning

of the 1990s in Finland (and also Sweden).

As Nordlund (2000) further states, Finland also experienced a slight increase in old-age

pension compensation levels between 1981 and 1994 and increase of unemployment insurance

compensation levels between 1984 and 1987 due to the new unemployment insurance which has

been passed in Finland in 1985. Also income protection during sickness has improved

significantly in Finland since the beginning of 1980s up to mid-1990s. The Nordic countries,

including Finland, were still able to provide solid income protection to pensioners after 1980s

and 1990s despite change in their pension programs.

These and other factors indicate that the changes that have been experienced in Nordic

countries did not dismantle the Nordic welfare state system. In fact, the allocation of resources

has actually increased considerably in Finland during 1980s and mid-1990s. Supplementary

pension coverage has increased, membership in unemployment funds has risen and the social

protection for employees with a rather steady position in work market has enhanced in Finland.

It is possible, however, that weak groups of employees have been affected in a different,

negative way by the changes in the insurance programs.

The Nordic welfare state system has proved to be durable and flexible enough to resist

difficult challenges in this era. Nevertheless, as Kantola and Kananen (2013) imply, the Nordic

welfare state system paradigm has changed since the 1980s when the model has been considered

to be at its peak. Kantola and Kananen (2013) divided the change into four phases during which

the welfare paradigm has been transformed and the former key ideas have been replaced. These

phases are: 1) politically latent ideas, 2) the banking crisis as a threshold to the Schumpeterian

paradigm, 3) budgetary discipline imposed by a power broker, 4) reconfiguring the labour

market and social policies.

As Kantola and Kananen (2013) explain that the paradigm change suggests shift in

paradigm regarding ideas, goals, problems and methods of problem-solving and also notions of

social order and social justice are rethought. In the end, Kantola and Kanone (2013) imply that

“the transformation could perhaps be described as the fall of the transparent welfare state and

the rise of the competition state, which works as a personal coach by giving detailed advice to its

citizens on how they should conduct their everyday lives.” This interpretation clearly warns from

the danger of how this new transformation might be a tool for a societal control, in certain way.

The article of Gërxhain and Koster (2012) brings an interesting point of view on the

problem from different angle. The authors have conducted an empirical test on a large dataset of

over 30,000+ correspondents from 25 European countries to gather data about links between

perceived social support, social trust in support availability and public attitudes towards welfare

states.

This research in context of, as they claim, that the public support of the welfare state

system also matters in implementation of the system and it sustainability. In their favour also

plays that as the literature shows, “public attitudes towards welfare state policies are

increasingly taken into account in the formal design of those policies.”

What Gërxhani’s and Koster’s (2012) results revealed is that social trust in support

availability and welfare state provisions are interdependently related to public attitudes towards

the welfare state. This means that social trust in support availability matters for welfare state

attitudes when the range of welfare provision is high.

Their research also exposed that in countries which are characterized by relatively high

levels of social trust in support availability, public support will be lower the larger welfare state

becomes. Gërxhani and Koster (2012) further continue: “This finding implies that being in a

society that is perceived as cohesive, supportive and reciprocal based on the availability of

social support encourages individuals to share the responsibility of support the needy themselves

(i.e. self-governance) rather than calling upon the state’s responsibility, the larger the welfare

states becomes.” This means that the more welfare is provided to the citizens by the state, the

less of it is desired in societies where individuals believe they can rely on each other for support.

The data also shows that social trust in support availability and welfare state provision

make stronger each other but the more there is of both at the same time the more persons will

find it fair and legitimate to all upon their own responsibility to provide for themselves. It is

mainly motivated by their belief that other persons in the society will help them in case of need.

With consideration of all three articles, the future of Finnish welfare state is unclear to

me. As citizens in Finland are used to live in a very stable welfare state system for decades, it

might drag and tempt them into more brave and “insecure” way of living where individuals are

more responsible for themselves than the state for them and it again might lead to criticism of

excessive social protection.

References

1st Gërxhani, K., Koster, F. (2012). ‘I am not alone‘: Understanding public support

for the welfare state. International Sociology, 27, 768-787.

2nd Kananen, J., Kantola, A. (2013). Seize the Moment: Financial Crisis and the

Making of the Finnish Competition State, New Political Economy, 18:6, 811-826.

3rd Nordlund, A. (2000). Social policy in harsh times. Social security development in

Denmark, Finland, Norway and Sweden during the 1980s and 1990s. Int J Soc

Welfare 2000: 9: 31-42.