Economist Aki Kangasharju declares war on Finland’s apathy

Aki Kangasharju says Finland needs “a war against apathy” after waiting too long for economic growth to accelerate. The chief executive of the Research Institute of the Finnish Economy is urging the country to undertake major reforms instead of waiting for better economic conditions.

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A war against apathy is needed. We have been waiting for economic growth to accelerate for far too long. Now we must boldly begin reforming the economy.

Finland’s GDP per capita has not grown for nearly 20 years, the article says. A stagnation of that length has never occurred in the country’s more than 160-year economic history. Kangasharju argues that successive governments have failed to carry out reforms that would improve the conditions for growth and secure the sustainability of public finances. The consequences of inaction have gradually intensified.

He rejects arguments that reforms should wait because the economic cycle is unfavorable. “We can no longer simply wait for the economic cycle to improve,” he says. He also disputes the idea that wide income differences or child poverty justify delaying reforms, pointing to Finland’s relatively small income disparities and low child poverty by OECD standards.

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We can no longer simply wait for the economic cycle to improve.

A further problem is the debt brake agreed by Finland’s parliamentary parties. Kangasharju says its targets cannot be met without putting growth at risk. Public revenues and spending would need to be balanced by 8 billion to 11 billion euros during the next parliamentary term. He calls the debt brake a “straitjacket” that could slow an already weak economy, while also saying that public finances should mainly be strengthened through spending cuts and structural reforms.

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The debt brake is a straitjacket that, at worst, slows already weak economic growth.

The institute’s 80th-anniversary book, Suomi 2051, presents proposals from its researchers and former chief executives. It identifies the stalled growth of labor productivity in companies as the main cause of the broader slowdown. Business-sector output accounted for 65% of total national output last year. Kangasharju says productivity stopped rising after the collapse of Nokia’s mobile-phone business and the forest industry, and that the economy has not renewed itself sufficiently since then.

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Productivity growth stopped with the collapse of Nokia’s mobile phones and the forest industry, and the economy has not renewed itself sufficiently since then.