Athens Meeting 18-20 November 2005, Contribution of CP of
Finland
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From: SolidNet, Monday, November 28, 2005
http://www.skp.fi , mailto:skp@skp.fi
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International Meeting of Communist and Workers' Parties
"Current Trends In Capitalism: Economic, Social And
Political Impact. The Communists' Alternative"
Athens, 18-20 November, 2005

Teuvo Junka, member of the CC, Communist Party of Finland

CURRENT TRENDS IN CAPITALISM: Economic, social and
political impacts in Finland

Depression

Over the last 15 years the neo-liberal economic policy has
been applied to Finland and the first serious consequences
became obvious already in the very beginning, during the
years 19901993: The Gross Domestic Product GDP decreased by
almost 14 percent. At the same time 450 000 jobs were lost
and the number of unemployed increased by 325 000. These
are big figures in a small country of 5 million
inhabitants. The unemployment rate went up from 3 percent
in 1989 to 17 percent in 1993. (At present the unemployment
rate remains high in Finland, around 9 percent).

In terms of losses in production and jobs, this depression
in the beginning of the 19990ies was worse than the
depression during the 1930ies.

The background of the depression was the deregulation of
the financial markets inspired by neo-liberal ideologies
starting from the midst of the 1980ies. This lead to the
overheating of the economy at the end of the decade
followed by the implosion of the stock exchange bubble,
which plunged Finland's bank system into a deep crisis. The
banks were saved from bankruptcy by means of billions of
State aid, which did not help thousands of small
entrepreneurs from falling into bankruptcy. As a
consequence, the unemployment rate skyrocketed in an
unprecedented way.

Cuts in public spending

One of the reasons of the economic depression or at least
one of the aggravating factors was Finland's preparation to
adhere to the EMU (Economic and Monetary Union). In order
to meet the convergence criteria Finland started
deliberately to reduce the public sector as from 1992. The
EU even gave direct orders to reduce government and
municipal expenditures if Finland wanted to be eligible for
the EMU. During that period public spending at State and
municipal level was reduced to the extent that today they
are 10 billions lower than they would have been without
those cost cuts. This amounts to 7 percent of the GDP.

In Finland public welfare services such as social and
health services as well as education are basically the
responsibility of local authorities. In order to provide
those services public authorities used to receive funds by
means of municipal taxation and State subsidies. During the
last 15 years the State heavily reduced state subsidies for
municipalities to the extent that today the municipalities
receive yearly five billions Euros less than they would
receive without the implementation of those neo-liberal
cuts. As a result those community services were
substantially weakened creating immense difficulties for
the unemployed, the people with low income, ill people,
students and retired persons.

To justify those cuts in public spending the authorities
referred to the economic depression saying that available
funds were not sufficient to provide all services. However
in Finland the depression ended already in 1994, but those
cuts have not been been cancelled.

Increased income differentials

During the post-depression period income differentials have
drastically grown in Finland. This is true both at the
level of the functional income distribution and the
distribution of income among households.

Prior to the recession in 1989, private enterprise profit
amounted o 24 percent of the gross added value and manpower
cost amounted to 57 percent. In 2004 profits represented 33
percent and labour costs 49 percent of the gross added
value of the private sector. In 1994 the share of the
decile of households with the lowest income amounted to 4,9
percent, in 2003 it was only 4,2 percent. And
correspondingly, the share of the decile of households with
the highest income represented 19,1 percent in 1994 and
22,3 percent in 2003. This is a significant change because
in the past those shares had remained unchanged. This
income differential is particularly due to the increase of
dividend income and other forms of capital income. As a
consequence of the cuts in public expenditures, the
compensating impact of the transfers of income diminished
from 48 percent before the depression to 44 percent today.

The substantial increase of profits and capital income is
first and foremost due to the fact that in Finland wage
increases have been modest compared to the rise of
productivity of labour. But there is also a clear link with
neo-liberalism and EMU ambitions. It was known that the
adhesion to the EMU would reduce the margin for national
economic policymaking. To compensate for this loss the
trade union movement was made to accept "salary restraint",
in order to strengthen corporate profits and balance sheet
values. All this was accompanied by the argument that it
would help safeguarding jobs in Finland.

But the opposite happened. Profits went up, but they were
not used to create additional jobs in Finland. They were
distributed as dividends to the shareholders, among them a
significant number of foreign investors and speculators. If
profits were invested, then they were to a growing extent
exported abroad as capital movements.

Capital drain from Finland

In the spirit of neo-liberal policies capital movements
were deregulated in the beginning of the 1990ies, even
before Finland joined the EU. The population was told that
this would attract large flows of foreign capital to
Finland and generate jobs in Finland. This never happened.
What really happened was a growing amount of capital being
invested out of Finland and Finnish companies moved jobs
abroad. This is the main reason why unemployment remains a
mass phenomenon in Finland today.

Privatisation

Following the neo-liberal doctrine state-owned companies
were privatised at increased pace, State and municipal
institutions were corporatized and then sold to private
investors, Sate and community tasks were outsourced, in
other words they were given to the private sector, which
becomes the provider of those services to the public
authorities. Of course, those measures provoked resistance.
But labour union campaigns have been hampered by the fact
that the Social-Democratic party is part of the
governmental coalition implementing neo-liberal policies.
The Left-wing Alliance participated in this policy in the
previous two governments and is aspiring to enter
government again, practically without any real
precondition, even together with the Right Wing.

The Communist Party of Finland considers that a clear
alternative to the neo-liberal model is needed. The
capitalistic logic of development must be questioned. This
means also an alternative to the aims pursued by the
Bolkenstein Directive and the WTO GATS-agreement to
privatise public services. The government of Finland, which
will assume the EU presidency next fall, continues to
support the approval of the EU Constitution. Safeguarding
Finland's military nonalignment and rejecting Finland's
adhesion to NATO demanded for by the political Right are
among the burning questions of the upcoming presidential
elections next January.

This alternative has been developed and put forward by the
CPF in the main policy document of its Congress in 2004
entitled "Another kind if globalisation and the prospects
for socialism" (see www.skp.fi/english): Here some of the
main theses:

1. The Communist Party of Finland works towards a more just
distribution of the fruits of new technology and new work.
We want to eliminate poverty, unemployment and social
exclusion.

Workers and the unemployed cannot defend their interests by
competing against the workers of other countries by
offering to do the same job cheaper. In each country there
has to be a struggle against the power of capital; the
power of labour has to be united internationally. Defending
and developing job security, public services and social
security is an important part of the international struggle
for a more just world. This is especially important in the
liberation of women from subordinate positions. The
increase in the productivity of labour has created a
possibility of shortening general working hours without
reducing wages. This would also help decrease unemployment.

2. The Communist Party of Finland works towards the
sustainable reconciliation of economic development with the
capacities and diversity of nature.

We oppose the economic model of global capitalism, which
wastes energy and natural resources, destroys local means
of livelihood and transfers products needlessly around the
world. From an economy of wasteful expendability we have to
move to an economy based on recycling and principally
renewable sources of energy, the development of which is
more and more dependent on a proportional increase in
information-related, service-related and other non-manual
work.

Climate change is an alarming sign of the urgency of
structural change in the ecology. The implementation of the
Kyoto Protocol and even more extensive treaties is not to
be delayed because of the reactionary stance of the United
States and of big business. We have to help give developing
countries a chance to improve the conditions of living of
their peoples in a way that simultaneously takes the road
of ecologically sustainable development.

3. The Communist Party of Finland is part of the wide
movement against war, militarism and racism. We are opposed
to NATO and the militarization of the EU. To us, security
is co-operation towards a more just world and towards the
guaranteeing of human rights for all.

We demand that the Finnish government disassociates itself
from the "war against terrorism" declared by the United
States, from the European army and from NATO projects, and
that it returns to a non-aligned stance. By military
non-alignment, Finland can keep away from wars, avoid the
threats of international terrorism and decrease military
spending.

4. The Communist Party of Finland wants to open a road to
another kind of Europe by rejecting the constitutional
agreement of the EU and by withdrawing from the EU.

We are against the adoption of the constitution and are
working on behalf of a democratic, peaceful

Europe based on equality between citizens and peoples.
Europe is larger than the EU, and the well-being of human
beings and nature is more important than the freedom of
capital and competition. We don't want a fortress-Europe.

We oppose the subordination of employment, public services
and social security to the power of the EU and the World
Trade Organization. We want to build an Europe which is a
forerunner in the development of public services and which
adopts measures such as the Tobin tax, which rein in
speculation and direct funds for use in furthering
employment and the general welfare and in helping
developing countries.

This campaign requires still closer cooperation of
Communist and other Left-Wing parties not only in the
framework of the EU but on all-European and global levels.
Likewise, it requires broadening cooperation between
Left-Wing forces, the trade union movement and social
movements against neo-liberalism and imperialism.