The Finnish Economic Depression of the 1990s: Causes, Consequences and Cure

By Osman, Jack W. | Scandinavian Review, Spring 1998 | Go to article overview

The Finnish Economic Depression of the 1990s: Causes, Consequences and Cure


Osman, Jack W., Scandinavian Review


Following World War II and the payment of massive reparations in physical goods and commodities to the former Soviet Union, Finland was transformed from an agrarian society to a modern technologically advanced economy. The 1980s were characterized by sustained economic growth. The expansion was so robust during this decade that the expression "Nordic Tiger" was used to describe the Finnish economic performance. This expression was, of course, a pointed reference to the rapidly growing "Tigers" of the Far East.

The growth of production averaged 3.7% during the 1980s and reached a high of 5.7% in 1989. Unemployment had fallen in the 1980s and by 1989 was but 3.5% of the work force. By the end of the 1980s Finland, along with her fellow Scandinavian countries, had one of the world's highest standards of living and lowest rates of joblessness. All of this came to an end near the start of the current decade. What is not widely understood is the speed and severity of the collapse of the Finnish national economy. Following a zero growth performance in 1990, Finland's output of goods and services, corrected for price changes, fell over 11 % by 1993. Unemployment in 1994 was over 18%. Finland was in an economic depression.

Table 1 (page 18) shows the sudden surge in joblessness in the early 1990s and the painfully slow recovery that is far from complete. As severe a picture as these numbers depict, the total extent of the economic collapse is understated. Many workers, discouraged by the inability to find work, retired, or otherwise stopped actively looking for the nonexistent jobs. In addition, counted among the employed were persons undergoing paid training or subsidized employment. By one estimate (Professor Jouko Yla-Liedenpohja of the University of Tampere) the "true rate of effective unemployment was 28.3% at the end of 1996." This rivals that of the United States during the "Great Depression" of the 1930s.

Costs of the Finnish Depression

In economic terms the direct and most immediate cost of the Finnish depression was the production and income that was lost when workers and equipment were employed at far below capacity. In 1993 alone, this loss was about $15 billion in today's terms or just under $3000 per person.

During the depression, investment in new machinery and infrastructure by both private firms and the government fell. This, together with the curtailed spending for schools and colleges, reduced Finland's capacity to produce. Thus, the effects of the depression will continue well beyond the period of downturn.

The costs of the depression have not been borne evenly. Youth unemployment exceeded 30% in both 1993 and 1994. For three years beginning in 1993, the construction industry recorded over 30% unemployed. Finally, the effects of the depression have not been felt evenly across the land. Generally, the northern and eastern provinces have had higher rates of unemployment than those in the south and west. In 1994, for example, Lapland had 25.0% of its labor force unemployed, while Uudenmaa - the province in which the capital city Helsinki is located - had a much lower, but still very high, 14.9% jobless. The western island and semi-autonomous province of Ahvenanmaa (Aland in Swedish) had but 3.1% unemployed in that year. The result of these differential rates of unemployment among the Finnish provinces has been an acceleration in internal migration as people seek jobs in the less depressed areas. Generally, the pattern of migration has been from north to south and east to west.

With rising unemployment and lower incomes, government revenues fell sharply. But with increased joblessness, expenditures for social welfare programs shot up. The result was a burgeoning annual government deficit and increase in government debt. Whereas Finland had a general government surplus (revenues exceeded spending) in 1990, the budget deficit was about 8.0% of gross domestic product (total output) in 1993. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Finnish Economic Depression of the 1990s: Causes, Consequences and Cure
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.