Revista Economia n. 13.pmd - Faap

started to flow into the economy which did not have an adequate institutional
and regulatory structure to cope with the sudden influx of funds. The Helsinki
stock exchange boomed and the real estate prices went through the roof while
the real economy suffered. The situation became unsustainable and a depression,
that was as serious as the great slump in the early 1930s, set in. The depression of
the early 1990s had, however, also salutary effects. It eliminated the unproductive
and unprofitable companies, although with almost unbearable costs (and some
healthy companies went also belly up). The depression taught several lessons:
economic legislation and regulatory environment have to be strengthened, rising
productivity must be the key target of economic policy, and the globalization of
economic activities must be effectively pursued. The rationale for these lessons
is quite simple; a small economy, if it wants to prosper, is unable to compete
with the sale of raw materials or low labor costs, but it must try to climb up the
value chain to more innovative and technology-intensive products and processes.
The limited size of the domestic market means that strive for higher productivity
and innovation must be pursued also in the regional and global scales.
The success of Finland in transforming its economy from the peripheral
agricultural society to a modern industrial and even post-industrial society has
taken roughly one hundred years and has gone through several phases; from
raw-material based industrialization through its diversification to new industrial
branches to a knowledge-based society. By now, Finland is listed as one of the
most information-intensive societies and its globalization score were even higher
if there were more immigrants in the country. The demand for immigration is
growing, however, as the population in Finland is ageing rapidly. Today, Finland
has about 120,000 foreign-born inhabitants who account for 2.5% of the total
population (the biggest national groups of immigrants are Russians and
Estonians).
The most recent surge in economic development in Finland has been made
possible by a systematic science and technology policy that was started in the
1980s and was deepened further after the major depression of the early 1990s.
In fact, growing investment of public funds in science and technology was an
explicit response to the economic disaster both by the private and public sector.
This trend was strengthened by the rise of Nokia in a mere 15 years as the
leading cell phone maker in the world, now having 40% of the market for
handsets. Nokia invests close to 5 billion euros and over 10% of its turnover in
research and development (R&D). By these figures the company ranks among
the leading R&D companies in the world and accounts little over one-half of all
corporate R&D in Finland. Today, Finland invests 3.4% of its GDP in R&D,
the third highest percentage in the world after Sweden and Israel. In Finland,
the share of the public sector in R&D is about one-third that leaves two-thirds
for the private sector. The operations of the public and private sector in the field
of science and technology are well coordinated and universities also participate
actively in the innovation system. On the other hand, the small size of the country
means that the absolute amounts of money used for the promotion of science
and technology are always bound to be limited and cannot compete with the
Ninety years of Finland’s independence: transition from the periphery..., Raimo Väyrynen, p. 134-146
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