The Virus has shown up most of the biggest weaknesses in Finland.
The country has been living beyond its means for many years and allowed creeping rot to infect large parts of the economy.
Urgent and rather obvious reforms that have not been implemented because there has been no sense of urgency and strong vested interests have blocked almost all discussion on the need for such reforms.
The Finnish government is now seeing a huge fall in tax revenues and a major hike in costs for supporting companies and banks, consumers and regional governments.
They have announced today that they expect GDP to fall by 5.5% this year and the public deficit to reach €17 billion or 7.2% of GDP while government debt is expected to hit 80% of GDP – more if the Virus keeps on biting hard for longer than the next three months.
In all developed countries the government is being asked to pick up the tab to save big and small companies and those who are laid off or cannot work.
Big companies and banks appear to be receiving such handouts even though they should have emergency reserves given the trade tensions and significant changes in weather patterns. Even the coming of the Virus was an event that was not entirely unexpected. These same companies and banks have been paying huge bonuses, using free cash to buy back shares and pay out large dividends. Cash reserves have not been insufficient to cover emergencies – why should governments (taxpayers) then have to step in without being offered equity in these companies and without stringent conditions on pay, bonuses, share buybacks and dividends.
But let’s look at the necessary reforms – the list is not long but each one is important:
- We need to cut the number of municipalities to a reasonable number say between 100 and 120 down from 300 which is a “luxury” that we can no longer afford. There are too many resources tied up in small inefficient units. The annual cost savings would be in the order of several billion over time.
- We need to merge the “private” pension firms into the public sector pensions system to create one big single unit run by the public sector. There is absolutely no need for a few private sector managers to receive huge salaries and bonuses when most of the business is outsourced to fund managers and highly regulated. The public sector also spends huge amounts of time and money trying to regulate this group, and when the going gets tough the regulations have to be eased as we see again in this crisis! The cost savings here are large and can amount to a 2% to 3% of the total funds under management – a saving of €4 billion to €5 billion.
- The present proposals for public healthcare and social care need to be under one roof with the purse string securely controlled by central government. Private players have secured too much power inside public health and they need to be reigned in and we have seen the dreadful results of their greed in care of the elderly…
- Life long education is still and will always be the key to a healthy and balanced society – we need to keep it in good shape and efficient. The recent cuts have resulted in young people dropping out and adults missing job changing opportunities. This is one of the best investments a country can make – and Finland like Singapore is recognised as a world leader in the education sector, something that supports our high standard of living.
- We need to have reform the labour market to allow firms to set their own wage levels without the ridiculous nationally demanded extras for working late, on weekends or during public holidays. We should protect workers from abusive labor market practices but the present system of 150 to 200 pages labour contracts (TES in Finnish) are a thing of the past.
- We need more support and encouragement for small growing firms and stop unnecsary support for big companies. These are the ones that employ, invest and come up with innovations – much more than the big ones. We have too many big oligopolies here in retail, banking, construction, etc. We all know the names of these companies and they stifle competition and hang on to cartel-like arrangements. They need to be broken up to keep things healthy.
- We cannot afford to have a 75% employment rate – we need a 80% employment rate and people who are fit should be working until they are 70 years old – if Trump can so can you… nobody has the right to take from the work of others unless there are good reasons.
The long-term results of most of these reforms are strongly positive for important savings in public spending and by encouraging people to find jobs and work, thus boosting the employment rate.