FCCJ Luncheon Meeting 22 January 2008
Guest Speaker: Mr. Dr. Vesa Vihriälä |
State Under-Secretary, Economic Affairs, Secretariat of the Economic Council
Theme: Finland's growth policy in the age of globalisation"
The essence of Finnish growth policy|
Ever since the 1950s growth (as opposed to cyclical stabilisation) the key priority of economic policy,
first promoting fixed investment in manufacturing the core.
Starting in the late 1960s gradual reorientation with more emphasis put on accumulating human capital and creating social policies to support labour market participation.
Boom-bust period forces reassessment, but not policy reversal
In the late 1980s a boom led by financial liberalisation
Macro economically unsustainable
The collapse of the Soviet market an extra shock
The deepest economic crisis in the OECD area since the 1930s
GDP declined by over 10 % in 1991-1993, by almost 20 % relative to trend
500 000 jobs lost, unemployment rate: 3.5 % -> 17 %
Central government borrowing to over 15 % of GDP
Restoration of price competitiveness through
Devaluation, floating and further depreciation of the currency
Pay freeze, successive moderate incomes policy agreements
Cleaning up of the banking sector (at the fiscal cost of almost 10 % of DGP)
Fiscal consolidation: cuts of expenditure, tax increases
Nevertheless, substantial and sustained increase in R&D expenditure, in particular on ICT
EU-membership followed by EMU-membership
Later on gradual reduction of labour taxes (which still high)
New thinking about economic growth becomes prevalent
The new growth model: education, research and technology the key drivers. Fixed investment becomes relatively less important, R&D expenditure relatively more important.
The meeting ended with a very lively Q&A session.
IMAGES FROM THE MEETING
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