Revista Economia n. 13.pmd - Faap

Finnish political system still has semi-presidential features, though membership
in the European Union has strengthened the political position of the Prime
Minister and the government.
The post-WW II foreign policy of Finland tried until the very early 1990s
to square the circle (and largely succeeded in that nearly impossible task). The
main challenge was to maintain friendly and confidential relations with the Soviet
Union and at the same time participate in the international economic cooperation
and Western European integration. The maxim of the foreign policy at that
time was that economic integration with the West could not happen at the
expense of good relations with the Soviet Union. If this were to take place,
Finland’s security could have been jeopardized and, in any case, all-important
trade with the West and access to its capital and technology would have been
hampered. In the conservative circles in Western Europe the term
“Finlandization” was coined. It hinted to some real facts on Finland’s political
and economic dependence on the Soviet Union, but also exaggerated the situation
to warn about too close relations with Moscow.
At its peak, almost one-quarter of Finland’s trade was conducted with the
Soviet Union and two-thirds with Western Europe and North America; the key
trading partners were Britain, Germany, Sweden and the United States. The
Soviet trade, based on the bilaterally balanced clearing trade, was most important
for the Finnish metal and shipbuilding industry which had received a boost from
the war reparations that Finland had to pay in 1947-52 to the Soviet Union
following the terms of the Paris Peace Treaty. At its peak in 1947, war reparations
accounted for 7% of Finland’s GDP. The mainstay of the Finnish economy
continued, however, to be the paper and pulp industry, the markets for which
were overwhelmingly in the West. Forestry products and their refining were the
most important material link of Finland with the Western market economies,
while metal industry was the main linkage group with the planned economies.
As any raw material economy knows from practical experience, the global
market can be volatile and the prices can fluctuate rather wildly. In Finland, this
meant that the decline in the paper and pulp prices and the worsening of the
terms of trade forced the country to periodic devaluations of the currency. In
the postwar period, the Finnish economy was growing on an average more quickly
than in the OECD countries. Finland joined the OECD in 1968. The average
growth rate in 1950-1974 was 4.8% which more than tripled the volume index
of GDP from 267 to almost 800 points.
The economic performance of Finland was uneven, however. In addition
to a total of seven devaluations since 1945, there were periods of high inflation
and interest rates, debasement of the currency, deep budget deficits, and high
levels of unemployment, especially structural unemployment. Obviously, the
economic and political situation was never as distressed as, for instance, in several
Latin American countries. Despite occasional and sometimes severe problems,
the Finnish economy, polity, and society matured significantly during its
independence and especially after the 1980s.
Ninety years of Finland’s independence: transition from the periphery..., Raimo Väyrynen, p. 134-146
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