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Expanding People’s Spaces in the Globalizing Economy
NORDIC WELFARE SOCIETY -
A HOLISTIC WOMEN-FRIENDLY DEVELOPMENT STRATEGY FOR ERADICATING POVERTY AND BUILDING UP AN EQUAL AND JUST HUMAN SECURITY
Hilkka Pietilä, M.Sc.
Finland as a Case Study
THE NORDIC WELFARE SOCIETY
Not the Luxury of the Rich but the Way out of Poverty for the Poor
WELFARE SOCIETY FINANCES ITSELF
Nordic Welfare Model, a Development Model for Sustainable Wealth
WELFARE IN FINLAND BUILT BY PEOPLE AND THE STATE
Introduction The prevailing notions and understandings about what welfare implies seem to differ a great deal from country to country. They range from the totalitarian way of provisioning once practiced in the socialist countries of Eastern Europe to the public charity called welfare in the United States. Even within Europe, the welfare state is implemented in a different form in each country.
Among this variety of notions the welfare state, as evolved in the Nordic countries, is a very particular kind of realization of the idea. It is originally based on the long historical and cultural heritage of these countries and has been developed for about a century. The founding principles of the Nordic Model are democracy, social justice and equality together with collective responsibility for the well-being of the people living in these countries. Since these principles are deeply rooted in our social matrix, the term Welfare Society describes the systems more appropriately than the term welfare state.
One of the prerequisites for the Nordic welfare societies has been the influence of women and their contributions during the decades to the political and societal progress. Thus, the systems have become clearly "women-friendly", contrary to the situation in many other countries. Another typical feature of these countries - a consequence of the manner in which welfare is provided - is that the citizens in general and women in particular regard the state as a popular, positive institution.
Today the neo-liberal trends in economics have called welfare states into question. Therefore it is not only timely and pertinent but necessary to recall the ideals and principles behind the welfare systems in the form they were constructed in Finland and other Nordic countries. This paper is a case study about the evolvement of the welfare society and its characteristic features in Finland.
The way welfare state is often presented in current debate gives the impression that the whole concept has been misunderstood - intentionally or not. A fundamentally important fact is that resources invested in provisioning for the people - in one way or an other - are not merely expenses but productive investments in healthy society as a basis for effective and sustainable national economy.
1. Emergence of public welfare over time and in politics
"Socialism failed - it is obvious that the only ideology that works is capitalism". This was the conclusion of many in the beginning of the 1990s. Socialism, in fact, was not an alternative but a reaction to the ills of industrial capitalism. Thus socialism and capitalism, rather than being alternatives, are connected like Siamese twins. They are two ways of being Western, as professor Johan Galtung pointed out as early as the late 1970s. (Galtung, 1978)
Therefore it could as well be that the "real" socialism failed in socialist countries because it was implemented as a social and political ideology of its own - not as the counterforce to capitalism. In the Nordic countries socialism has functioned according to its theory; it has countervailed the odds of capitalism. Capitalism has been strong enough to produce wealth for the nations and socialism - leftist parties and trade unions - has been strong enough to control capitalism and give the democratic legitimation to the Governments to collect enough revenue for creating welfare for all.
The workers movement has been relatively strong in the Nordic countries since the beginning of the century. This was also the case in Finland as early as the time of the constitutional reform in 1906. Although the country was primarily agrarian at that time, the campaigning for general and equal franchise politically mobilised the rural proletariat, too. It gave momentum to the leftist movement which then also lead to a rapid unionisation along with the emerging industrialisation.
Finland became an independent state in 1917 and only had some 20 years to build the society before the war against the Soviet Union broke out in 1939 as a prelude to the Second World War in Europe. However, the first acts towards the welfare society were passed in those years. The obligation to the municipalities to provide free school meals to all pupils in the public schools became operative in 1943, the Act on Child Allowances was passed in 1948 and the National Pensions Act in 1956. The systematic policies and legislation for welfare society have been progressing in Finland since the beginning of 1960s (Kuusi, 1961).
In Sweden, building the welfare state, "the folks home", was very much a project of the Social Democratic Party which held power without interruption for more than 40 years since the 1930s. The Governments in Finland have always been coalition cabinets composed of several major parties. Politically, the welfare state was built primarily by two major forces operating together: the Left and the "Rural Union" (Maalaisliitto), the rural agrarian party which that time was also an advocate of "the sake of the poor" and the building of the education system and social institutions. Thus the welfare state had in Finland a much broader support than the leftist parties right from the beginning.
But the most important "third party" throughout the process was the Finnish women working within each political party ever since they were granted full political rights in 1906. The promotion of equality, welfare and democracy and attempts to eliminate disparities and poverty were the obvious interests of women, irrespective of which parties they were affiliated with. (Pietilä, 1995.)
All this mutually regulating and balancing interplay of socialist and capitalist forces together with the prevailing strong democratic ethos provide an explanation as to why neither socialism nor capitalism but a Nordic model of welfare society became the prevailing system in the Nordic countries.
2. Pioneering women - social development from below
It was in fact women who started the work for raising the quality of life in Finnish families decades before the public policies for welfare development ever started. About a hundred years ago the majority of Finnish homes were still living in poverty and ignorance, a lot of misery prevailed. In the late 19th century an energetic and very patriotic group of well-educated, middle-class women felt a duty and vocation to initiate a movement for "civilization to homes" in Finland. The issue was to work for both the economic and cultural advancement of life in families through cooperation with women in the wide Finnish countryside where most of the population lived.
These women established the Martha organization in 1899 as a sister organization to the first feminist suffragette organization, Womens Union, from the year 1893. The altruistic and patriotic aim of the Martha organization was to start the education and training of housewives all around the country. The strategy was very simple, to mobilize educated women - often teachers and home economists - to volunteer as kind of "missionaries" to travel around the country, visiting homes and women, teaching and training them, organizing meetings, seminars and courses with them on practical and citizenship skills. In the beginning the work was voluntary, teachers using their summer holidays for this work.
The training provided highly practical and useful knowledge, such as the importance of cleanliness and hygiene, nutritious food, fresh air and good care for the health of children and everybody at home, the skills for child care, better cooking and housekeeping, handicrafts, raising chicken, cattle and pigs, establishing kitchen gardens and growing vegetables and fruits, improving the utilization of berries, mushrooms and wildlife from the forests and fish from the thousands of lakes.
This "Martha method" was very effective for improving the health and well-being of children and families in the country. It did not require big public investments into huge welfare institutions - for which there would have been no economic resources in that time anyway. Along with the increasing skills and knowledge of rural women, their status in the families and communities and their self-confidence and respect was rising. The issue was also to help women to acquire personal earnings because often the husband held the family finances totally in his hands and many women had no access to money - except by stealing from him.
At the time of rising national consciousness and dawning political independence one of the aims of the Martha work - together with the suffragette organizations - also was the political awakening of women and preparing them for political participation. After the constitutional reform in 1906 and in preparation for the first elections in 1907 when women had both the right to vote and run for political mandate in Finland, the first country in the world, the training of women in using their political rights was very much called for. The result was that in the first modern parliamentary election in Finland 1907, 19 women were elected into the parliament of 200 members. Many of these women were spontaneous supporters of all efforts for the improvement of social conditions of women, children and families in the society. Thus since 1907 the Martha organization started to receive state support to cover part of the expenses of their work.
Soon the voluntary missionaries were substituted for professional extension workers, although their salaries remained very low, sometimes the only compensation they received was their travel and other expences. However, the social ethos, motivation and vocation within the Martha movement was so strong that even the professionals were ready to work on very modest terms. The professional education of home economics teachers started in Finland late last century (Sysiharju, 1995).
The Martha clubs were sprouting rapidly around the country, and in 1925 they organized themselves into the Martha Union, a national central organization to coordinate the nation-wide work. The regional Martha organizations employed the extension workers for their regions. They visited homes and villages, organized evening clubs, courses, fairs, competitions and all kinds of events for women to gain and prove their skills. These events and opportunities became very popular among women. The Martha organization as a whole gained prestige and popularity, and participation in Martha work was both a duty and a pleasure for women (Haltia, 1949).
In the early 1920s there were over 30,000 members in the Martha organization and more than 200 extension workers permanently active around the country. During the decades, there have been ups and downs in the membership of the organization. The peak was achieved in the 1960s with almost 100, 000, women as active members, the latest number being 55,000 in 1997. Lately, a new renaissance of Martha work seems to be beginning, as young academic women are joining the organization. The Martha work is boldly taking on new tasks according to the shifting needs of time, it is therefore still strong and viable. In recent decades the Marthas have shared their skills and experiences in long-term cooperation with their sisters in Kenia 1980-90, Zambia 1989-1994 and Zimbabwe 1991-1998.
The effectivity and immensely beneficial impact of home economics extension work was very obvious in Finland in those early decades. Therefore many other organizations, such as farming extension organizations, the cooperative movement as well as some political womens organizations, also initiated household extension work within their overall activities. In 1940 - 1960s the number of people engaged in this work through these other organizations most likely was even two to three times as many as the staff of the Marthas. In the 1930s even the communities, towns and rural municipalities started household extension services under the auspices of their household committees. Home economics was included in school curricula in 1941 and has remained there ever since.
A young Finnish researcher Visa Heinonen considers in his recent thesis that the home economics extension work of womens organizations "stood in for missing social policies" in the 1920s and 1930s (Heinonen, 1998, p. 434). This work was building the foundations for the welfare society at an early stage. The results were seen, for instance, in the very rapidly declining birthrates in those decades, the infant mortality declining from 11. 2% in 1911 - 20 to 5.7% in 1941 - 50, the average life expectations increasing from 50.7 years for men and 55.1 years for women in 1921 - 30 to 58.6 years for men and 65.9 years for women in 1946 - 50, indicating a significant improvement of peoples health (Sysiharju, 1995, pp. 69-70).
The Finnish experiences of the impact and great social progress in the early decades of this century are proof that building the foundations of national well-being is possible in a popular way without huge public investments. Strengthening especially the potential, knowledge and competence of women to help themselves is the way of proceeding towards eradication of poverty. It is social policy from below, building self-reliant and sustainable well-being for the nation.
Referring to an old saying, "If you educate a man, you educate a single person. If you educate a woman, you educate the whole nation".
3. What do we mean by welfare?
In an effort to describe the different interpretations and implementations of the concept of welfare state or welfare society in the popular understanding of the term, there seem to exist rough distinctions between the following perceptions:
"Being on welfare"; social support in special cases to those facing particular hardships like disability, poverty, being a migrant or refugee, etc; "welfare" seen as a kind of state charity, disgraceful mercy humiliating the recipients;
A distribution system of direct financial support, subsidies or reductions of expenses in cases of special needs like unemployment, illness, maternity, old age, etc and often appropriated as regards conditions like family or employment relations (ie either employed or married to somebody with employment benefits);
c) Social security, benefits and services as rights that everybody living permanently in the country concerned is entitled to.
The first two represent a kind of "a welfare pluralist vision" which is "something very different from the Scandinavian social service state model" where "social services are social rights, so that every citizen is entitled to services such as childrens day care or home help", as Anneli Anttonen (1994) points out. The category c) above represents the Nordic welfare model.
Anttonen makes a clear distinction between the concepts of social service state and social security state. The Nordic welfare system is composed of both allowances and services which are regarded as public utilities and social rights belonging to everyone, not as disgraceful mercy to the few. In this kind of a system people have triple citizenship: economic and social citizenship in addition to the political one. Therefore the preferred term for this system is welfare society rather than welfare state.
From the womens point of view it is particularly important that the social benefits and services are individual, belonging to everyone without distinction as to sex, marital status, labour relationships, income level, race or nationality. Thus the women are entitled to enjoy their social entitlements, for instance pensions, irrespective whether they are married and employed or not. Also the taxation is separate, each one paying taxes only according to his or her own income irrespective of the income of the partner.
"All of these concepts (social service state, caring society, women-friendly society, etc) try to make visible the female world in the western welfare states. They do not deal so much with money transfers but with womens remunerated work and women as carers. Furthermore, instead of analysing labour-capital compromises, these concepts have opened up a way to analyse sexual contracts and compromises." (Anttonen, 1994)
"Social and other services are needed to make women full and autonomous citizens. - However, womens path from private to public, from daughters and wives to workers and full citizens has gone through the welfare state. In countries where there does not exist any established social service state, womens role has remained more traditional." "Services in kind have been as important as money transfers in equality plans and programmes."(ibid.)
Raija Julkunen (1992), a leading welfare researcher in Finland, also sees this as a particular expression of the society's gender perspective: "A society's gender system tells about the way in which gender is organised in social structures, cultural meanings and personal identities. The national differences are embodied in economic and cultural structures, as well as in the national welfare model and employment pattern."
"In an international comparison, the Nordic countries appear exemplary in respect to social welfare and gender equality," says Raija Julkunen. "The usual indicators of gender gaps or the participation of women in the labour force, education and political institutions place them in the vanguard of developed nations; in some statistics Finland is the most equal society. In the Nordic societies women have, to an exceptional degree, been integrated into the male society. Womens and men's status as citizens has become more similar than perhaps in any other country in the world."
Raija Julkunen has pointed out that the issue is also the concept of the State. In the Nordic countries the State is a mechanism for the redistribution of wealth, rights and utilities. If the State did not perform these duties there would not be any other conceivable mechanism for it. The market will never operate for the elimination of disparities and for equalisation and justice in the society, they operate just towards the opposite. Therefore the maintenance of the welfare society is very difficult without regulation of the market.
In 1994, the Polish professor Joachim Messner presented a very interesting comparison between the socialist and capitalist systems and the Nordic and German models of welfare state. These kind of deliberations have in recent years been very common in the former socialist states in their search for a better alternative.
Professor Messners summary about the experiences of the Poles was that socialism and capitalist market can both be good servants but neither one is a good master. What is needed for providing a good life for people is a controlled market economy.
"As much free market as possible and as much state control as necessary," was his conclusion. According to Messners analysis, the public resources rotate differently in the Nordic welfare system than, for instance, in the German social system due to the different constructions and modes of operation of the systems.
In the Nordic system the emphasis is placed upon the provision of services more than monetary benefits. Therefore the social allocations are not only expenses but at the same time productive investments. The major proportion of social allocations keep rotating in the system instead of being channelled directly to consumption as monetary benefits to the needy.
The historically traced values form the basis for the emergence of the Nordic form of the welfare society. The leading principles and aims of welfare thinking here are equality and social justice in general, not only between men and women; mutual social responsibility applied publicly, and democracy as the equal right to real participation by all citizens.
These values have also given ground for women's participation from the early stages of nation building and for getting their say in the society. The story of the early activities of the Finnish Martha organization serves as an example of this in practice.
4. Welfare society the Finnish way - a case study
This paper is an effort to outline the characteristics and policies of the Finnish welfare society as a case study. This fits well into the picture presented by a leading Swedish welfare researcher, Assar Lindbeck, who sees the Nordic welfare society as the most effective way to create social security and equality. He considers the fact that people are taken care of "from the womb to the tomb" as one of the triumphs of Western civilization.
Allocations and services
The Nordic welfare system is composed of both allocations and services as individual rights and entitlements to all residents living permanently in these countries. The following allocations and services are important, characteristic features of the Finnish system but not at all a complete picture of it.
The whole system relates individually to everybody living permanently in Finland. Therefore everyone is entitled to the following allocations: - a minimum salary or basic unemployment benefit; - child support allowances (initiated in 1948) for all children until 17 years of age; - 263 weekdays (about 44 weeks) paid parental leave and thereafter unpaid child- care leave until the child becomes 3 years, with a guaranteed resumption of the job; - child home care allowance for all families who care for their children under the age of 3 at home; - general pension according to the National Pension Act of 1957 and a personal minimum income (since 1985); - pensions in proportion to earlier income level prescribed by law; and everyone has the right to - free education up to university level and highly subsidised loans for living during the studies; - free school meals to all pupils in comprehensive schools (since 1943); - highly subsidised public health services and hospitals (the parallel private system also subsidised); - free maternity and child care for all mothers (since 1944); - day care services for all children under school age, fully completed in 1996; - effective information and easy access to facilities for family planning, access to abortion on social and medical grounds (since 1970); - various forms of highly subsidised care for the aged.
As already underlined, this is by no means an exhaustive list, but it only gives an idea about the major rights and benefits available for everyone. There are innumerable allowances, benefits, forms of support and reductions of various kinds in this field.
In fact, from the point of view of people, the welfare system here is a life-long social insurance, an insurance to guarantee for people that for instance - their children would not lose their opportunity to education, - the family will not be left at the mercy of relatives or charity organizations, - they themselves will not be abandoned in case of illnesses, accidents, unemployment or bankruptcy, - they will have some old age security irrespective of their own entrepreneurship or employment.
The welfare society provides a reliable safety net in case of any kind of collapse in life. Therefore open poverty and misery are almost nonexistent here. This aspect has not often been thought of, although people automatically use their entitlements, whenever they need to. Now when people are increasingly "abandoned" upon their own entrepreneurship and competitiveness, the safety nets will become increasingly important.
The third parent in the family
As already indicated above with regard to the rights and services, one of the basic points of departure and original goals of the founders of the Finnish social policy was to equalise the living standards and the purchasing power between those who raise children and those who do not, ie between single adults or couples without children and those having children. Highly progressive taxation as such is a means to make people with higher salaries and no dependants share the costs of family and child allowances and other public services needed for families with children.
In practice, the individual social entitlements - regardless of ones marital status or employment relationship - and the access to the above-mentioned services are the most important means for women both to achieve economic independence through participation in working life and to have a family and children without too much extra burden. In practice, the child and family allowances and child care services mean that the state shares with the families both the expenses and workload of having children. Therefore, the state is in a way a third parent in every family.
The most important single factor enabling women to control their lives is the liberal legislation concerning reproductive health and family planning services. A new Abortion Act took effect in Finland in 1970, and it eased the conditions for legal abortion and simplified the procedure. Alongside the new legislation the dissemination of the family planning information and education, and the availability of the contraceptives was significantly improved through maternity and sexual health clinics as well as through schools for the teenage boys and girls. The effect was that illegal abortions vanished entirely, teenage pregnancies have become very rare and the abortion rate in general has gradually declined to one of the lowest in the world.
The services provided for maternity health care and allowances, day care, school meals etc and, for women the facilities to control their fertility safely and legally create a setting where women do have the choice and opportunity to enjoy their social, economic and political human rights equally in all walks of life. The relatively high birth rate - in the European context - in Nordic countries in recent years seems to indicate that here women do have a choice whether to have children or not, and even to have as many children as they please.
From the viewpoint of the State and national economy, these kinds of social policies do also bring women into the labour force to contribute to the statistical economic growth of the country. In reality, these measures for the equalisation of incomes and purchasing power have also resulted in a system where it is not only an opportunity but a necessity that both parents work outside the home. The efforts to equalise the incomes of men and women - even though the complete equality is not achieved - contribute to the effect, that one breadwinner families are disappearing, since most women do want to use their opportunity to paid work. Most families find that one salary alone does not provide enough for the desired living standard for the family.
With all this "feminization" of the society here it is sometimes spoken also about 'state feminism' and 'femocrats', meaning feminist bureaucrats in public service. The femocrats respond positively from above to the initiatives and aspirations of women's movement and organisations from below, and then some progress takes place - slowly.
There are also some questions which repeatedly pop up in public discussions over here. Those frequently asked include - whether these measures have given women true equality or not; - whether women have the real choice between home and the labour market; - whether women have only changed the private dependence (on breadwinning husbands) to a public dependence on the male-controlled state and mens consent as taxpayers; - how stable or fragile is this emancipation provided by the state, how reliable is the state "as girls best friend"; - whether this development makes men feel frustrated and redundant since they can no longer gain their self-esteem by being the breadwinners of the family; - whether this has lead to an increased number of divorces - 3/4 initiated by women - thus eroding the family structures and social structures in general; - whether the gender equality in this form only integrates women into the male society.
The discussions continue.
The image of the State?
However, in advancing equality and alleviating disparities in the Nordic countries, the welfare policies go much further than that which was described above. In Finland the equality between the citizens as well as their well-being have also been promoted by gradually implementing
effective regional policies regulating the domestic development in toto, with a view to keeping the whole country inhabited and providing people all over the country with as equal opportunities for livelihood as possible - by subsidies for farming, trades and industries in relation to the circumstances and regional location of the communities where they operate; - by the Government sharing with the municipalities the financing of services in relation to the wealth, location and tax revenue of the municipalities; the further away from the centres and the lower the tax revenues in the municipality, the higher the proportions allocated by the State, (the lowest in Helsinki, and highest, 90% in Utsjoki, the northernmost municipality in Finland); - by thus facilitating the provision of basic services - schools, public transport, post offices and health care centres, banks and shops - all over the country; - by thus providing people with prerequisites for maintaining their lifestyle and culture also in the rural areas, ie not to be forced to migrate to the cities and industrial centres, even abroad;
good public transport system - public community transport, roads, railways, subsidised tickets on trains, buses and air traffic and thus also decreasing the number of private cars; --- the decentralisation of free universities in the past 40 years (in the 1950s there were universities only in two major cities; today in ten cities around the country as a result of effective policies for the decentralisation of higher education); --- public comprehensive schools, upper secondary schools and vocational training of equal quality available in the whole country; --- an efficient and comprehensive adult education systems network available in practically every municipality (about 600,000 beneficiaries annually, eg in the evening colleges for citizens and workers alone); excellent public libraries also offering art, music and computerised communication services all over the country; a very high rate of reading books, newspapers and magazines as a result; highly subsidised theatre, music and arts made available in all cities.
These features indicate that the ideals of welfare and equality penetrate the entire social and political matrix in the Nordic model, that this model is much more than a system merely for social security and support. Interestingly enough, women form the vast majority of those who utilise these learning and cultural facilities around the country, who fill the evening schools and theatres. Most men satisfy themselves primarily with sports and games!
No wonder that the image of the State here is generally positive in the minds of the people, contrary to many other parts of the world where the State is often taken as an antagonist or even an enemy of people. This is also partly due to the fact, that the Nordic states are so small as far as the number of people is concerned. In these small states people have been able to feel authentically that their will is reflected in the decisions of the representative political organs.
Before entering into the European Union the democracy in Finland was fairly real, as it often is in the small enough countries. Every citizen had a role participating in policy-making through different channels - the political system was fairly transparent, politicians easily accessible, the ladders of power structures and bureaucracy not very high, etc. This has been particularly accentuated by the effective local government system, the municipalities having significant power to decide upon their policies through democratically elected municipal councils and governments.
Where does the money come from?
Here we have to examine more closely how the interplay of capital and labour, capitalism and socialism, has taken place and produced interesting results. The case is probably indigenous for the Finnish circumstances in particular.
The most effective mechanism in the 1960s - 1990s for building up economic resources in Finnish politics was a kind of "rational marriage" between capital and labour which emerged around the early years of the 1960s. It was called "The Great Consensus", an unwritten social contract between the trade unions and employers' organisations confirmed by the warm blessings of the Governments. The general agreement in collective bargaining on wages and terms of employment was taken by consensus every year as a binding framework for the settlement of employment relations by all contracting parties.
This system effectively guaranteed peace in the labour market and became a kind of self-regulatory mechanism in the production system and automatic machinery for maintaining constant economic growth.
In this "marriage" both partners legitimated each others goals. The trade unions claimed that the enterprises will grow and increase their profits anyway, therefore the workers have the legitimate right to demand their fair share. And the employers' organisations said that the workers will demand better pay and social benefits anyway, therefore the companies have to grow and improve their productivity year by year. Since the way the growth of the wealth was shared was mutually agreed upon, no strikes or troubles appeared in the labour markets and everybody earned more year by year - even the Government as the tax revenues also grew. This provided the resources for further construction, development and advancement of the welfare society.
The main sources of financing the welfare system are the contributions, which the employers are legally obliged to pay, and the highly progressive taxation on wages and salaries.
Employers contributions are based on payrolls. In aggregate the contributions of the employers, the so-called obligatory indirect labour costs (national pension, health insurance, employment pension and unemployment insurance, etc.) have increased the total labour costs of the employers by up to 60 - 70% in recent years (The Research Institute of the Finnish Economy).
The highly progressive taxation on salaries and wages is a major source of the state revenue and a great part of the welfare benefits and services is naturally financed from the general budget of the state. The progressive taxation is also the most important means of effective equalisation of income distribution between people. Taxes may rise up to 50 - 60% of salaries and wages depending on the level of total income.
In addition, the building up and maintaining of welfare society has also called for several other measures. For decades, very extensive and strong regulatory measures in national economies were "normal" practices in most countries. In the Nordic countries regulation has been a decisively important part of the economic and development policies from the 1940s to the 1980s, and an important source of public revenue.
In Finland the regular measures for "governing" the economy have been the regulation of currency rates and transactions, devaluations and revaluations used as the ultimate means of adjusting the terms of trade according to the needs of the export industry. Until 1998 this was implemented in cooperation with the Bank of Finland which was a part of the governmental system under the control of the Parliament and the Cabinet; export/import trade was regulated through licence systems, legal protection for Finnish products and domestic industry, regulation of prices and purchasing power at the domestic market; protection and subsidies for agriculture, etc; With the socialist countries, particularly with the Soviet Union, trade was based on barter agreements between the Governments on the general framework, the amount and terms of exchange annually, thus providing guaranteed markets for the major industries;
high purchase and import taxes on alcohol, tobacco, petrol, cars and other luxury products, thus also regulating the amount of such products but still producing a very significant proportion of the State revenue. These were the major measures and policies for governing the economic development in the country and extracting the resources from the constantly growing economy for the gradual construction of the social security systems and services, ie increasing social security benefits, expanding and improving education, health care, child care, old age support systems and cultural services, transport and other public services.
All of these different types of regulation measures have been required and used in order to maintain the growth, collect revenues and channel the resources for "the common good", ie to build up welfare and equality for people. The liberalisation of capital and trade, the free movement of labour, goods and services, has in 1990s changed profoundly the economic policies and direction of development in the countries concerned.
Investments in welfare enhance the economy
The structure of welfare society can clearly be seen in the composition of the State budgets in Finland. The biggest sections in budgets have for decades been the chapters for Social Welfare and Health and Education and Culture. In 1999 the chapter for the first one is about FIM 43,000 and the second one 27,000 millions in comparison for instance with chapters such as Ministries for Labour with FIM 11,000, Defence with 9,000 and Trade and Industry 4,500 million.
We stated earlier that in the Nordic social systems the money rotates differently than in other European systems. This is seen very clearly in the Finnish system. The public welfare services and institutions here create a huge public sector of work which employs hundreds of thousands of people in caring for, educating, serving, even transporting other people. These jobs are necessary to be maintained even when other fields of work are mechanised and automatised. The better this sector is developed, the more jobs it provides. Most tasks in this sector - like caring professions in day care, hospitals, old age homes or teachers in schools, adult education system, universities - are so demanding that they require the qualification of "a human touch", something only "instruments" as sophisticated as professional persons can perform!
These people have meaningful jobs, earn their livelihood and use their incomes for their housing, clothing, food, services etc. This way the money invested in the social institutions keeps rotating, creates jobs, demand and consumption and thus also maintains other jobs, and gives revenues to the state through the taxes paid by these people.
In fulfilling their tasks the big social institutions - like schools, hospitals, institutions of all kinds - also create also a lot of demand for goods and products which they consume in their functions. For instance, think only of the school meals for about 500,000 - 600,000 pupils in basic and secondary education, and about 200,000 students in universities and vocational training institutions every weekday, as well as the premises, facilities and personnel of day care and pre-school centres for approximately 200,000 children below the school age.
There also are a few hundred thousands people working in the administration of the social system. As long as the highly needed services are maintained as a public system, the state can guarantee their availability and functioning. They can be developed according to the national needs and the quality of the provisions can be controlled.
Even the economies of scale can play a role here. The public system produces very economically the services needed by the whole society and particularly by those who could not afford to buy them from the privately run providers. As a whole, the public sector constitutes a huge buffer zone in the national economy, both as provider of jobs and services and a creator of demand and purchasing power.
Finland was poor - in need of welfare
Although the values and principles behind the welfare society have long historical and cultural roots here, the political process towards social welfare was emerging during and after the second world war. The theoretical foundations and systematic plans for national social policy were drafted by professors Heikki Waris and Pekka Kuusi in the early 1960s (Kuusi, 1961).
For Waris and Kuusi it was explicit that a consistent social policy is needed to assure and speed up the economic growth and to equalize the distribution of the gains and benefits of it. The improvement of peoples lives was seen as a means for sustaining economic growth, and for the common good of the whole nation. It was realized that these aims are interdependent and mutually enhancing, sustainable economic growth was not possible without healthy and capable people and the advancement of the life and well-being of people was not possible without growth.
In the 1940s and 1950s Finland was by no means a wealthy country. We had just survived two devastating wars in 1939 - 44, lost about 15% of our territory, and the whole Northern Finland had been burned down.
The lost territory, Karelia, was a densely populated part of the country. There were almost half a million people living there, who had to be resettled in the rest of the country (about 12 % of the population of 3.6 million). The destroyed Lapland had to be reconstructed together with the damages to the towns and other parts of the country. In addition to other burdens, the peace treaty obliged Finland to pay heavy war indemnities to the Soviet Union for a period of eight years. In the first years, the value of this unpaid export exceeded the value of actual export trade of Finland. Furthermore, for political reasons, we refused to receive the Marshall Aid, the US scheme for reconstruction of Europe (Jutikkala & Pirinen, 1973. Pp.185-186).
The most descriptive information about the misery and poverty still prevailing in the peripheries of Finland at that time can be found in the reports of the officials of the United Nations Childrens Fund, UNICEF, which provided us with significant aid in the years after the war (Osman, 1991). The issue was very much underdevelopment and poverty, not only the consequences of the war. We received UNICEF aid in different forms until 1954 and financial support through the World Bank until the mid-1960s. That time Finland was still more a recipient than a contributor country in multilateral cooperation.
It was in those circumstances that the parliament of Finland passed very significant acts towards the welfare society. The public schools had been free from the beginning of the school system in the early 20th century. In 1943 free school meals for pupils was made the obligation of the municipalities in order to guarantee better satisfaction of childrens nutritional needs. In 1941 home economics was introduced to the secondary school curricula.
In 1944 the Act on Free Maternity and Child Care Centres was passed to guarantee appropriate guidance and medical care for expectant mothers and newly born babies in order to provide a good start for the life of the new generations. The Act on Child Allowances was passed in 1948 in order to equalize the purchasing power and living standards between the families with children and those who did not have dependants. The legislation on the national pension system started in 1938 and proceeded as the National Pensions Act in 1957 to the effect of general basic pensions for all.
As the result of decades of systematic policies and work for welfare and equality, Finland has become one of the wealthest countries in the world with a highly equal distribution of wealth.
A long-term assessment published in 1997 indicated that the income disparities have in the last 25 years declined not only between people but also geographically between the regions of the country. The income levels of people are about the same, irrespective whether they live in the centres or peripheries.
This equality was also preserved in the circumstances of recession in the beginning of this decade. "The recession was a very harsh test upon the welfare society, but it passed well. The gap opening between the income groups was effectively avoided by way of taxation and transfers of income between the social groups albeit the huge gap opened between the unemployed and employed in the society", stated professor Heikki Loikkanen who led the assessment (Helsingin Sanomat 12 April 1997).
There is no doubt about whether Finland has a welfare society today since it is a rich enough a country or whether Finland is so wealthy today because it has build the welfare society over the course of time. The Nordic welfare society is a result of a long term construction process towards equality, welfare and justice in general. It emerged during the decades as a carefully regulated and democratically controlled system, without becoming a centrally planned, rigid state. It has given enough freedom to the market to operate and enough democratically delegated power to the governments to channel the wealth for the welfare of people.
This picture of a highly developed welfare and service society described above was very much the reality in Finland until the early 1990s. In recent years, this has been at stake. The economic globalization process in Europe takes place under the auspices of the European Union. The liberalisation of capital transactions in the late 1980s meant that private companies gained new leverage and Finland had to increasingly open its economy to international competition.
At the beginning of 1995 Finland became a member of the European Union. In order to qualify for membership the Government started the austerity measures in advance. The recession and the requirements of the European Economic and Monetary Union EMU have served as appropriate excuses for demands to dismantle the welfare state. The EMU arguments have been used as a disguise for male business interests and the pressure of the globalisation process after the liberation of monetary traffic and trade.
Power relationships in the society have changed dramatically. National governmental and parliamentary systems have been intimidated in the circumstances where power is internationally centralized and transferred to the commercial structures which do not recognize any democracy. The deregulation has given full freedom of operation to business companies, competitiveness and cost-effectiveness have been made a rule for everything: universities, hospitals and schools as well as businesses.
All this has many consequences in the Finnish society. Both the recession at the beginnig of the decade and the new rules in the economy have resulted in a very high unemplyment rate becoming a long-term phenomenon. At worst, there were about half a million people, and now at the beginning of 1999 there still are about 350,000 people without jobs in the country.
The Government is processing the transformation of public institutions into private ones. The publicly owned service systems like railways, post and telecommunications, the state postal bank, the state-owned companies for the provision of necessities like oil, petrol, fertilisers, electricity, etc are being rapidly privatised.
The resources for schools and education have been curtailed to the extent that 500 small village schools have been closed this decade. Teachers in many communities in the country have been ordered to take temporary leave without pay and pupils are sitting there and "teaching each other"! The personnel in the hospitals and old age homes have been squeezed to the extent that the remaining employees are overburdened and the quality of care deteriorating. The exellent library system has suffered because of the cuts, 400 small or mobile libraries have been closed to the detriment of old people and people in the periferies. The remaining libraries lack the resources for renewing their book supply and extending their services.
Women have seen this development as a backlash against equality and democratisation, since the cuts and public savings have in particular hit the interests of women, both the social services they need and the jobs they have in the public service institutions. The austerity measures still continue, even though the economy runs on record profits and the allocations for technology and business projects do not meet any obstacles.
In recent years the equality between people has been deteriorating both where the levels of income and access to services are concerned. The latest assessment indicates that the disparities between the different income groups have increased. Between 1994 and 1996 the incomes of the lower earning 40 % have declined while the incomes of the 60 % of people better off have increased. "In this way we will soon get rid of our fame as the country of the lowest income disparities", recently said Hannu Uusitalo, the Deputy Director General of STAKES, the National Research and Development Centre for Welfare and Health (Helsingin Sanomat 12 December 1998).
People have expressed great concern about these trends in public opinion polls. Equality is one of the most deeply rooted social values in Finland. Although it is well known that the disparities in Finland are still lower than practically any country of the world, 71% of the people in the World Values survey 1996 said that the equality should be strengthened and income differences further levelled.
The recession was over years ago, and the growth of the GNP in Finland has broken records. Regardless of this, the austerity measures on social allocations continue; they are the terms adopted with the membership in the EMU and allotted by the common markets, globalized economy and international trade. At the beginning of 1999 Finland entered the EMU and thus gave up the power to decide upon its financial and monetary policies. The government is committed to the decisions and policies made by the Central Bank of Europe.
Thus the issue concerning the future of the welfare society is not about a lack of resources but about the terms and conditions of the neoliberal rules and the terms and conditions of the whole globalized trade and economy. In this situation the power relationships at the national level between corporate employers and trade unions are also totally different from what they used to be. The corporations derive strength from the international capital base and expansion of their operations, but the workers and trade unions are in the unemployment trap and can only retain a defensive position. The equal consensual arrangements have become just a distant memory. Again, we are in the midst of the conflict between capital and labour. However, we have seen in this paper that the ideals of democracy, social equality, justice and collective responsibility are deeply founded in the minds of the people and the social matrix in Finland and other Nordic countries. The welfare society is defended by the people themselves, therefore it still persists here. The perspectives towards the future are dull, it is difficult to see how to preserve the values on which the life and development here are founded.
Graph: Hilkka Pietilä
This figure is hoped to demonstrate how economic growth, increasing wealth and gradual construction of a welfare society are parallel processes which proceed in mutual interaction and enhance each other. The productivity and efficiency cannot be increased in the industry and business without healthy, educated and well-trained people. And without sustainable wealth the comprehensive welfare society cannot be maintained. This is a simple axiom and recipe for the successful progress towards a balanced and healthy society.
Another axiom is that a society cannot leap into sustainable wealth and well-being. An advanced welfare society can only be achieved through a process from below, democratically together with the people. Both the economy and people need to grow and the growth and civilization of a nation takes time across generations - and patience, persistence and assiduity as well as respect, love and understanding of people.
We need a new Social Contract It is important to realize that from the economic point of view constant, endless growth is not possible and from the social point of view endless growth of welfare is not necessary. The material needs of people and society can be assessed, there are natural limits to them. It is possible to see where and when the social needs and services become complete, for example when there are facilities in schools for all children in school age or in day-care centres for all children under school age - albeit there is always room to improve the quality of the services.
Economically and socially, a society can reach bliss, and then the purpose is to maintain the necessary institutions and live in harmony with the natural environment. Culturally and personally growth can continue throughout our lives and each one of us can reach the level of humanity allotted to her or him as a human being.
In this decade, the UN and the international community has highlighted the increasing poverty and disparities between the countries on the global scale more than ever before. In 1995 the UN summoned the World Summit for Social Development in Copenhagen for the eradication of poverty. It is tragic that in the conferences and international debate the approach to poverty is still as if it were a single separate malaise which could be eradicated without interfering with the world economic system, the policies of global corporations and the strong economic blocks of states.
This approach is false and hypocritical. Poverty is a pernicious plague as long as the international community will not tackle the world economic structures and the policies of the rich and strong industrial countries and trade blocks. We need policies for regulating the global trade and commerce for the advantage of equality and justice in the economic relationships at all levels. We need policies and measures for making the rich countries and global corporations accountable to the international community and people around the world and making them to take their part of the responsibility for the future of humanity.
Creating welfare is not a business - it is a human necessity. If the welfare of people is ignored, if caring, nurturing and education fail, if reproduction fails, everything else will collapse, too. Therefore we need a new kind of Social Contract - of a global nature - between the Capital and People, a contract which will ensure that fair share of the gigantic profits of the corporations be allotted for the common good, for the welfare of people. We also need to redefine and renew the methods for the redistribution of wealth to the people in a way which reflects the true human needs and aims at global social justice and sustainable utilization of natural resources.
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