Finland

The fortieth anniversary of independence, celebrated last December 6, found Finland in a mood of national soul-searching. The cost-of-living index had risen 25 per cent in less than two years. Export markets were increasingly competitive and uncertain. Unemployment, already at the 50,000 mark in late November, threatened to reach the highest figure since the 1930s.

It was too early to know whether the drastic financial surgery of September, when the Finnmark was devalued by 28 per cent, would stimulate the export industry fast enough to improve the employment situation. It might be merely the prelude to still higher prices and a further round of inflationary wage increases. Meanwhile, the longest political crisis in the nation’s history ended just in time for the country to have a government by Independence Day.

Finland, with a population of 4.4 million — smaller than that of Massachusetts — lies under the eye of its watchful Eastern neighbor. If the Finns today, in spite of their neighbor and their internal difficulties, seem remarkably free of panic, it is because they have been through worse times.

Long before Finland broke away from Russia in 1917, it was torn by a growing bitterness between the have’s and the have-not’s — an antagonism which erupted into the savage Civil War of 1918 between the Reds and the Whites. The social scars of that war, which was won by the Whites under Mannerheim, are still clearly visible. To a large extent the voting pattern reflects the alignment of the old battlefields. The intellectuals, remembering 1918, lean heavily toward conservatism. Amateur sports remain divided into two national organizations, and the considerable political skill of President Kekkonen has not been able to effect a merger.

Finland more than survived the Civil War. Democracy and the traditional freedoms were established, seemingly on a firm basis. At the very end of the 1920s, however, the latent class antipathies, rubbed raw by the Depression, exploded into violence. The Lapua Movement sprang up, McCarthyite in mentality and Ku Klux in methods. For two years it pressured the government into antiliberal measures. Legislation was passed virtually prohibiting strikes and hamstringing the labor unions. And the Communist Party was driven underground.

The Lapua Movement eventually overplayed its hand; the democratic tradition reasserted itself and a remarkably united nation faced the challenge of the Soviet giant in the Winter War of 1939-1940. During the Continuation War of 1941—1944, Finland discovered itself effectively if unofficially allied with Germany, though from the Finnish viewpoint this was coincidence rather than ideological cooperation. When Finland saw the hopelessness of the military situation in 1944, it negotiated an armistice with the Soviet Union and agreed to disarm the 200,000 picked German troops in the north. The latter resisted, and in their retreat during the Lapland War carried out a scorched-earth policy of vindictive thoroughness.

Three separate wars in the course of World War II, more than eighty thousand lives lost, war reparations set at $300 million to be paid in kind, mostly at 1938 prices —— this was part of the cost to Finland. In addition, it ceded to the Soviet Union more than a tenth of its territory, including the fourth largest city, Viipuri. Nearly half a million displaced persons poured westward and had to be given a new start in life. But Finland kept its independence and its democracy.

Economic miracle

Once more Finland produced a miracle, an economic one. Payment of reparations, which the Soviet Union had meanwhile reduced by one fourth, was finished in 1952. The miracle was aided by foreign loans and good trade conditions. Reparations had one desirable by-product: the country took a long stride toward industrialization, particularly in engineering and shipbuilding. At the same time, the refugees were resettled, mostly on small farms especially created for them. The earlier efforts toward social welfare were expanded.

In foreign policy, the “Paasikivi line,” named for the president from 1946 to 1956, called for friendship and neutrality toward all nations, and especial care to give the distrustful Soviets no pretext for suspicion. After reparations were paid, the country moved rapidly toward economic recovery. It is only in the past couple of years that the economic warning signals have been flying conspicuously.

Like the other Scandinavian countries, Finland has a mixed economy. The railroads are publicly owned and the government controls almost a third of the timber, but for the most part business is divided between private enterprise and the coöperatives. The latter enjoy a flourishing existence. More than one third of the retail trade passes at some point through the hands of one or other of the two largest coöperative organizations. In the marketing of agricultural products, the coöperative movement is even stronger.

Finland’s mounting economic troubles are variously explained. The wartime losses and the drain of reparations are part of the background. Another factor frequently cited is the attempt to extend social services too fast.

More basic to Finland’s present condition is the familiar problem of farm subsidies, designed to keep the small farmers going. The average Finnish farm contains only 22 acres of arable land, and many of the farmers must do part-time work in forestry or industry. As a pressure group, the farmers are well organized, and in recent years they have been able to assert their claims more effectively than the factory workers.

Fighting inflation

Much of the present crisis dates from the beginning of 1956, when price controls were prematurely loosened. The prices of food in particular went skyrocketing. This led to a general strike a few months later, which was settled by a larger wage increase than was compatible with stable money. The galloping inflation continued, so that the wage gains were brief-lived. The average worker can buy less today than before the general strike.

The Bank of Finland has pursued an unyielding tight-money, deflationary policy which may eventually bring about stability but has so far contributed to a drop in purchasing power, to business stagnation, and to increased unemployment. The latter, fraught with dangerous social and political possibilities, requires heavy national and local expenditures for work relief.

In part, Finland’s troubles simply reflect the conditions of world trade. Most of the nation’s economic eggs are in one basket. Nearly 80 per cent of the exports are directly or indirectly from the “green gold” of the superb forests: lumber, plywood, prefabricated houses, paper, cellulose. The recent slight decline in world prices for lumber and plywood has been keenly felt in Finland. The market is becoming sharply competitive, and Canada and Sweden are cutting in on Finland’s traditional markets.

All these troubles are of a creeping kind, and the average citizen was not fully conscious of them until the spring of 1957, when the government ran short of ready money and had to postpone certain salary payments and the quarterly installment of children’s allowances.

Since the September devaluation, the government has moved toward a gradual relaxation of import controls, in the hope of restoring a freer economy. From a long-range viewpoint, the way out will probably also require a better balance between the interests of the workers and the farmers. Certainly, greater productivity in export products and lower production costs are essential, so that Finland can regain its position on the world market.

These goals run into formidable obstacles. There is a 20 per cent purchase tax on industrial machinery, which hardly encourages modernization or expansion of equipment. The farmers are not in a mood for sacrifices. The industrial workers, who earn about $130 a month before taxes (plus allowances for their children), will hardly welcome a further temporary lowering of their living standard. Nor is it certain that additional devaluation will help the economy. Real purchasing power is already low, and another cut might merely mean greater unemployment. It should be added that the labor unions, though caught in the cost-of-living squeeze, have shown remarkable restraint and statesmanship. Most of the recent collective bargaining contracts contain an escalator clause which calls for only twothirds compensation if the cost of living keeps inching up.

Politics as usual

All economic problems are compounded by politics. In times of unmistakable crisis, the wrangling parties would probably put country above politics, as they did during the war, but the present dilemma so far lacks suflicient dramatic urgency to suspend politics as usual. After a minority government, headed by the Agrarian leader V. J. Sukselainen, was ousted on October 18, efforts were made to patch together almost every conceivable coalition, but without success.

Finally, after six weeks without a government, President Kekkonen resorted to the rare expedient of asking Rainer von Fieandt, director general of the Bank of Finland, to create a nonpartisan “government of experts.” An impressive cabinet of specialists is now functioning.

Certainly Prime Minister von Fieandt is tough-minded. During the “cash crisis” of last spring, he refused to bail the government out. As head of the Bank of Finland he pushed so stringent a tight-money policy that interest on loans ranges from 8 to over 15 per cent.

One reason for very high interest rates is a fiscal novelty which the new premier vigorously sponsored — “index bank accounts.” These involve an escalator clause, so that when the cost-of-living index goes up, the depositor receives either 50 or 100 per cent compensation, depending on his type of account. Naturally, interest rates on loans have to be adjusted upward to make allowance for this factor.

The unanswered question is whether a sturdy defense of the Finnmark is the all-sufficient answer to Finland’s problems. Finland’s perils are not merely fiscal. Excessive unemployment could provoke serious disorders.

Forty years of achievement

Finland’s present troubles must be set against its forty years of solid achievement. For a country deeply divided by social and economic antagonisms, it has traveled very far toward inner unity. Partly this is due to the land reforms, which almost banished the tenant farmer from the Finnish countryside. Many small farmers may still be basically proletarian in their outlook, but they are certainly a less explosive force on their own land than they would be if they tilled the soil of a landlord.

The displaced persons have been so successfully integrated that they have no special political party to represent their grievances and interests. Since World War II, the labor unions have made good progress. A hopeful start toward a social welfare system has given the industrial workers a greater stake in society. And in general, Finland has become a country with fewer extremes of wealth than most.

The momentary drifting which one senses in Finland undoubtedly reflects a national mood of letdown. The country rose to heroic heights in the last war, and its time of reparations brought out the same stern virtues. But there is today little theater for obviously heroic deeds.