Revista Economia n. 13.pmd - Faap

cooperation and climate change policy, the EU has already scored some successes,
though in foreign and security policy a lot remains to be done. The new Lisbon
Treaty of the Union contains security assurances and a solidarity clause but even
then the EU cannot be regarded as a military alliance in the way Nato is. It has
established, though, so-called battle groups that are organized and equipped for
a rapid response in the case a military crisis erupts (Finland participates in two
of these multinational groups).
It is often said that the security position of Finland has never been as safe
and stable as it is today, and this is true. The threat of a major war has receded to
the background, not only in Europe but in the entire world. There are bad
neighborhoods in many parts of the world and the risks of regional conflicts are
for real, but none of these conflicts threatens seriously the security of Northern
Europe. True, there is a rising competition for the strategic resources and positions
in the Arctic, but even there the military contestation is limited and does not
directly affect Finland. It is quite conceivable, however, that political and military
tensions in the Arctic are growing and there will be more shows of force, though
outright confrontations.
In the economic sphere, Finland has become thoroughly integrated in the
world market. Foreign trade accounts for over 40% of the Gross Domestic
Product (GDP) and direct investment flows across borders have increased
significantly (more capital moves out of Finland than into the country). For the
first time in its history, Finland has major international companies in several
branches of the industry; in particular in paper, metal, and electronics industries.
However, as in all other industrialized countries, the share of industry in GDP
has declined – in Finland to 17% – and services account for close to 70% of it.
The share of agriculture has declined from 48% in 1903 and 24% in 1953 to the
present 3%. Compared with the dominance of forest industry in the early phases
of industrialization, which made the economy vulnerable to demand and price
fluctuations in the world market, and the rise of the metal industry after World
War II, which was dependent on the Soviet demand, the present situation is
much more favorable. The continued strength of the paper and metal industries
– although the viability of the paper industry is now under considerable pressure
– has been accompanied with the phenomenal rise of the electronics cluster led
by Nokia. The growing strength and diversity of the industrial structure, together
with the membership in the euro zone, makes Finland much less vulnerable to
global economic downturns and financial crises than in the past. In particular
the monetary stability, due to the membership in the euro currency zone, is
positive when recalling the deep financial crisis in the early 1990s.
Indeed, economic crises in Finland are in recent national memory because
the economy witnessed a disaster in the early 1990s when the GDP declined in
three years by 13% and the unemployment rose at its worst to 18%. Reasons for
this depression included the sudden end of the trade with the Soviet Union and
the simultaneous recessions in Britain and the United States. Even more important
was, however, the unsustainable bubble economy that developed in the late
1980s. In Finland, capital flows were liberalized in 1986 and international money
144
Revista de Economia & Relações Internacionais, vol.6(13), 2008