Innovation Gives Finland A Firm Grasp on Its Future

Jura-Pekka Tolbanen uses his cell phone to take a picture from the top floor of the Jyvaskyla Science Park. Such research and development projects have helped remake Finland's economy.
Jura-Pekka Tolbanen uses his cell phone to take a picture from the top floor of the Jyvaskyla Science Park. Such research and development projects have helped remake Finland's economy. (Photos By Lucian Perkins -- The Washington Post)
By Robert G. Kaiser
Washington Post Staff Writer
Thursday, July 14, 2005

HELSINKI -- The political and economic malaise that afflicts so much of Europe this summer has not infected this northernmost outpost of the European Union. The contrast between Finland's optimism about the future and Old Europe's gloom is striking.

While France, the Netherlands, Italy, Germany and others are stumbling, Finland prospers, both economically and psychologically. The recent "no" votes in France and the Netherlands that undermined, perhaps fatally, the E.U.'s proposed constitution have produced a pervasive despair in much of Europe that did not turn up in recent interviews with scores of Finns.

"The Finnish model could offer some elements of a way out of the European crisis," said Pekka Himanen, a 31-year-old philosopher and co-author of a much-discussed book about Finland's successes.

Not that Finns have all the answers. Like all Europeans, they are producing too few babies to pay the promised welfare-state benefits to an ever-growing contingent of senior citizens. The new jobs created by their high-tech successes have been matched by losses from low-tech plant closures, so unemployment remains high -- about 10 percent.

Nevertheless, the Finns know they are much better placed now than many of their Old Europe neighbors to the south. Exploiting their small size (5.2 million people) and ethnic homogeneity, the Finns have proven themselves successful experimenters and innovators.

Fifteen years ago, Finland faced a full-scale depression, brought on by the loss of the country's most important markets as the Soviet Union disintegrated. Unemployment soared to 20 percent. But the Finns took control of their future, made painful adjustments and came out of the crisis with an economy that the World Economic Forum in Davos, Switzerland, ranks as the most competitive in the world.

The major economies of the E.U. are growing too slowly -- and their elderly populations are growing too quickly -- to preserve the traditional welfare state and provide adequate jobs today, or to offer the prospect of genuine competitiveness in the global economy tomorrow, many Europeans agree. In this view, the countries invest too little in education, research and development and do too little innovating. But there is no consensus on a course of action to fix these problems. Many people worry about preserving a social system that is rich in benefits for all.

"Right now," said Himanen, the young Finnish intellectual, "Europe is like a once-fit top athlete who has fallen out of shape. Instead of taking action, the athlete keeps writing new strategic plans on how to get back into shape: 'I could go running, I could go swimming,' and so on. Sometimes it feels that the European logic is: 'When I'm in better shape, I will start exercising.' "

But "it was actions and not words that created the Finnish model," Himanen added.

Those actions reflected a pragmatic spirit typical of Finland in its brief history as an independent country (Russian control ended in 1917). A relatively backward agricultural country became a high-tech powerhouse with labor productivity as good or better than that in the United States, but also a welfare state as generous as any in Europe.

Perhaps the most revealing statistic behind this transformation is Finland's commitment to research and development. The Finns put 3.5 percent of their domestic product into R&D last year, second in the world to Sweden (about 4.3 percent) and far ahead of the United States (about 2.6 percent) or the E.U. as a whole (less than 2 percent).

R&D expenditures symbolize the Finnish resolve to preserve a comfortable place in a globalized world for an underpopulated nation with thousands of lakes and billions of trees. Typically, the decision to spend so much on scientific research and the adaptation of its results to commercial purposes was the result of a broad political consensus. Finland steadily increased government spending on R&D throughout the 1990s, when all other spending was either cut or frozen.

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