Two companies in Finland have received huge support from the government – and that is your money, Mr. & Mrs. Taxpayer.
This happens when big companies make big losses with failed bets made by the management even when the bets were not related to the reason why they are owned in part by the state in the first place.
We Pay to Cover Their Losses
Let’s take two examples:
- Finnair exists to transport business folk to buy and sell in the export markets, for other work, and for education and recreation in Finland and abroad. Several years ago Finnair decided to start shipping thousands of Chinese and other Asians to Lapland and other parts of Europe on a faster route over Russia. This had nothing to do with important or strategic needs of Finnish taxpayers, but it produced some profits for the company. However, Finnair expanded its crews and fleet quickly, only to find after Putin’s brutal invasion of Ukraine, that flights were stopped resulting in huge losses… The government stepped in with huge funding.
- Putin’s brutal war also brought huge losses to Fortum’s “wonderful” investment in Uniper AG, the German fossil fuel company that was one of the “lucky” few companies to import low-cost Russian gas which was sold on long-term contracts at a fixed price. Fortum wanted to buy a majority stake in this then highly profitable fossil fuel giant to pay for new investments in renewable energy projects. The fact that most of the fossil fuel came from Russia and was sold to German consumers and industry at a fixed price was not seen then as risky. The fact that Fortum was buying a company many times bigger than Fortum and one that was really exposed to big risks, (like a big dependence on Russia and sales with long-term fixed price contracts), appeared to be waved aside by the bosses of Fortum. This business project was in no way related to Fortum’s core activities – fact that the CEO and the board chose to ignore with fateful consequences that cost taxpayers billions of Euros.
They Don’t Pay to Cover Our Losses…
Now let’s look at some large companies that are profiting handsomely because of this war.
Many other companies producing oil and fossil fuels, owning wind farms, owning hydro-electric plants and other low cost energy producers are benefiting handsomely from the high price of electricity because Russia has stopped selling us gas…
These companies see huge profits because of sudden huge price increases for their products. They resist calls for an extra tax on their huge profits (a windfall tax) even though the increases are completely random and do not reflect management’s clever strategies. They fervently resist such windfall taxes even though they demand the cash from the governments for help to cover their losses…
The same situation happened with the banking crisis back in the 1990’s, and again in the financial crisis of 2007 and 2008.
The banks and energy companies have excellent lobbies that look after their own interests, but not that of our society. Goldman Sachs former CEO said that banks are doing “God’s work”. The same words could have come from the mouths of the energy companies. Of course, nothing could be further from the truth.
Banks, like the energy companies, have privatised profits and socialised their losses. Moral hazard is rife in banking and in the energy companies, and nothing has changed even though the same stories keep on being repeated. Fossil fuels giants profits come from fossil fuels that pollute our planet, but these fossil fuel giants does not pay for the cleaning these greenhouse gases… this is a much bigger case of more hazard…
Many fossil fuel companies brought in staggering profits once again as the world struggled with high gasoline and energy prices.
Banks are now showing stronger profits not because of better management but because of higher interest rates as inflation from energy costs. Energy giants like Exxon, Shell and TotalEnergies have all reported huge profits.
Such news is fuelling calls for a windfall tax on these profits on such companies caused by Russia’s invasion of Ukraine. These calls are justified given the costs of the economic and political challenges caused by the invasion. These companies and banks, like the whole of the western world, will benefit too from the defeat of Russia in the Ukraine. They should be forced to pay their share of the bounty, along with Russia, the aggressor.