The Left, Social Security and Neoliberalism in Finland since 1970’s
A Paper for the Joint NordWel and REASSESS International Summer School 2010 (State, Society & Citizen - Cross- and Multi-disciplinary Perspectives on Welfare State Development), Odense, 15–20.8.2010.
Outinen Sami Doctoral student (NordWel-network) Section of Social Science History Department of Political and Economic Studies University of Helsinki
Content
Finnish Welfare State 3
The Left 4
Challenge of Neoliberalism 5
Social Justice and the Terms of Livelihood 9
Idea of Decommodification 13
Socialism and Welfare State Universalism 18
Consensus of Korpilampi 19
References 23
2 Finnish Welfare State The paradigm shift from the Keynesian welfare state to the neoliberal competition society has been a major social change in capitalist countries since 1970‟s. This paper deals with this issue in the Finnish context taking especially into account the viewpoint of the Left in the area of social policy. The paper is theoretical in the sense that I will connect the Finnish development for example to the ideas of universalism and decommodification and empirical in a way that I make some preliminary remarks to the nature of social policy under the challenge of the world-wide economic crisis and neoliberal ideas in the late 1970‟s. The main agencies in my paper are major left-wing actors such as leading figures of Finnish Social Democratic Party (SDP) and The Central Organization of Finnish Trade Unions (SAK). I will also make some preliminary comparisons to Sweden.
Finland developed to the modern western welfare state since early 1960‟s as a result of rapid structural change from rural country to industrial- and service-intensive economy. The Finnish welfare state was built around the principles of economic growth, strong export industry, wage work and rational planning. The main tenants of Finnish welfare policy were earnings-related social benefits, widening public services and collective labour market agreements build on high union density since the late 1960‟s. State-owned companies possessed a strong role in the area of industrial production. Prices, wages, the movement of capital, interest rates, and rents were regulated by the state authorities and thus ultimately by the parliamentary political system partly in collaboration with labour market partners especially since the beginning of the “age of incomes policy” since 1968.1
There were many political reasons behind this development: The parliamentary majority of the Left in 1958–19622; consensus between employers and employees to make skilled factory workers as the most important group of Finnish economy by raising them to privileged role in labour markets and creating both income-related social security systems and active policy to support unemployed to find jobs; the victory of the Left in general election in 1966; the seizure of power of reform-minded trade union -bloc inside communist party in 1966; new co-operational relationship between the left- wing parties; the reunion of both social democratic party and blue-collar trade unions after the split which had lasted ten years and consensus-seeking in the Finnish society promoted by for instance president Urho Kekkonen. This development made possible the era of mainly centre-left governments from 1966 to mid 1980‟s, the creation of incomes policy -system which meant a collective bargaining about labour market questions, social security, social services, taxes and prices between employers, employees and the state since 1968. Also the power of trade unions increased after union density rose substantially and at the same time the Left gained rather strong political hegemony in Finland.3
1 See for example, Kalela, Jorma: Hyvinvointivaltion rakentaminen. In Pernaa, Ville–Niemi, Mari K. (ed.): Suomalaisen yhteiskunnan poliittinen historia. Edita 2005 (205–224) (Kalela 2005a), 205–221; Kettunen Pauli: Kirkuvan harmaa vuosikymmen. Työväentutkimus 2006
The Left All socialist groups have since the first formulations of the ideology 200 years ago shared similar principal ideas such as promoting the general happiness and well-being in the name of mutual social responsibility, fighting against the division of the people to the rich and the poor, opposing the idea of competitive struggle between men to satisfy their needs by demanding collective regulation of the economy and trying to guarantee everyone‟s livelihood through social and economic civil rights and education.5
The most influential socialist ideology in Finland and Western Europe in the 20th century was democratic socialism. Already early representatives of democratic socialism saw the state as a key organization of economic planning, urged the need to improve workers‟ condition by bargaining with the employers and favoured nationalization as a mean to pursue economic development. They believed in representative democracy resting in universal suffrage and were ready to make compromises with other parties to develop welfare services and to take part in the formulation of the legislation of the capitalist state.6
After the Russian Revolution in 1917 and in the aftermath of Finnish civil war in 1918 the radical part of the Finnish revolutionaries, who lost the civil war, established in Moscow in the autumn 1918 Finnish Communist Party. Their goal was to make a revolution and to establish the dictatorship of the proletariat in Finland. The social democratic party instead took a revisionist mode by refraining from the idea of violent revolution and highlighted parliamentary political action as a mean to promote the interests of workers.7 Political struggle between social democrats
4 Kalela 2005a, 216 and 219; Kettunen 2006b, 296–297; Kettunen, Pauli: Oliko hyvinvointivaltio projekti. Ennen ja nyt 4/2001
The ideas of democratic socialism were strongly supported by the governments in the Western Europe after the Second World War connected closely to the model of Keynesian welfare state and mixed economy. The main tenants of economic policy formulated by economist John Maynard Keynes were counter-cyclical policy to raise the demand to a level that ensured full employment also during the economic downturn, expansion of national production by increasing investments in men and machines, the primacy of the idea of economic growth, income redistribution, social security, participation of both workers and employers in industrial decision-making and even the nationalization of some sectors of economy.8
Income differences narrowed substantially in Finland from the late 1960‟s to mid 1970‟s.9 In the beginning of the 1970‟s seemed a while that Finland will become as a full-fledged Nordic welfare state. According to Kalevi Sorsa, the party secretary of SDP, this was social democrats‟ goal in the first half of 1970‟s. Even if Sorsa wanted to draw a strong line between social democratic vision and the existing Soviet model and communist utopias, the socialization of commercial banks and insurance companies included in Sorsa‟s model of future‟s socialism.10 All the representatives of the left-wing parties were in the 1970‟s some sort of socialists in Finland, because their goal was to connect state and society in one way or another.11
Challenge of Neoliberalism The goal of my whole doctoral thesis is to study whether the neoliberal ideas and practices challenged the traditional politics, values and ideologies of the Left in Finland since the late 1970‟s or not? The point of departure of my research is the notion that there is a discrepancy between various ideologies of the Left inherited from socialist thought and neoliberal ideas based on the virtues of economic liberalism. I‟ve found fruitful to use the term neoliberalism at the topic of my research despite the fact that it is a highly contested term in public discussion. This is because the term describes the new interpretation of classical liberalism formulated in the 20th century especially by Friedrich von Hayek and Milton Friedman and applied in practice for example Ronald Reagan and Margaret Thatcher. Another reason is that it gained wider support as the critics of welfare state which aroused from the recession of world economy since the 1970‟s. The main targets of the critics were Keynesian, socialist and social democratic ideas and policies, “an overextended role of the state” and also collective labour market arrangements.12
8 van der Wee, Herman: Prosperity and Upheaval. The World Economy 1945–1980. Penguin Books 1991, 32–36. 9 Jäntti, Markus: Income Distribution in the 20th Century. In Ojala, Jari and Jalava, Jukka (ed.): The Road to Prosperity. An Economic History of Finland. Suomalaisen Kirjallisuuden Seuran Toimituksia 1076. 2006 (285–313), 249. 10 Sorsa, Kalevi: Sisäänajo. Politiikan kuvioita 1969–72. Otava 1998, 69–70, 314–315, 317 and 321. 11 Kettunen 2006a. 12 This and the following definitions of neoliberalism are based on the article Mbone, Guy C. Z: Neoliberalism. In Cline Horowitz, Maryanne (ed.): New Dictionary of the History of Ideas. Volume 4. Machiavelism to Phrenelogy. Thomson Gale 2005 (1625–1628). 5 It is also a good reason to connect neoliberal ideas with the national and global political decisions made during preceding decades. This is because neoliberalism means market- and competition- oriented political ideas and practices and its adherents advocates the supremacy of the market competition between individuals, producers, consumers and countries over any alternative social arrangements in ensuring the efficient allocation and utilization of scare resources for the maximum satisfaction of relatively unlimited human wants.
A more detailed political agenda of Neoliberalism consists of public service and social benefit retrenchments; labour market flexibility; privatization; tight fiscal policy against budget deficits (also during cyclical downturn of economy); tight monetary policy against inflation (to stabilize the economy and keep interest rates positive); free exchange rates; free movement of goods, services, capital and labour within and across nations by abolishing the barriers and constraints of the trade (at the same time the state must provide an appropriate regulatory environment for the fluent functioning of the market and the protection of property rights and contracts) and the promotion of global economic exchange by being neutral in relation to export promotion and import substitution.
It is worth to remember that as well as there are different definitions of the term socialism or different political applications of the Left, there is hardly any country in the world where ”pure” neoliberalism has been practiced. More fruitful starting point of my research is to try to define different hybrids of thought and political action between different left-wing ideas and economic liberalism and possible ideological or practical transitions between them and discontinuities of the left-wing thought.
It is possible to analyse the relationship between neoliberalism and welfare state from a point of view of Michel Foucault‟s concept of Governmentality. According to Mitchell Dean the idea of Governmentality responded specifically to the “recession of the ideal of a welfare state and the revitalization of the claims of a form of economic liberalism in liberal democracies”. The governmentalization of the state refers to the idea of governing the state (and society) “through certain processes – whether economic, psychological, biological, demographic or social”.13
Mitchell Dean has the hypothesis “that just as early liberalism represented the first event in a series of the governmentalization of the state, so neo-liberalism represents the first event in a new series of the governmentalization of government”. This means “that government can occur without a centre or that the centre can be reduced to a set of indirect measures of surveillance.” Neoliberalism represents for Dean a set of thought “in which the responsibilities for risk minimization become a feature of the choices that are made by individual households and communities as consumers, clients and users of services. (…) One can identify an emergent division between active citizens (capable of managing their own risk) and targeted populations (disadvantaged groups, the „at risk‟, the high risk) who require intervention in the management of risks. (…) The access of welfare services “must take the form of a market so that the unemployed can learn to exercise their freedom on such a market as a consumer”. This means that the social insurance as a principle of social
13 Dean 1999, 1–2 and 6. 6 solidarity will be replaced by privatizing, desocializing and individualizing social risks onto individuals, communities and workplaces.14
The role of state is thus according to Jacques Donzelot to tie with citizens a contract which offers “individuals and collectivities ”active involvement in action to resolve the kind of issues hitherho held to be the responsibility of authorized governmental agencies”. This increases the responsibility of the people to earn their livings themselves along the lines of actions determined by bureaucrats and experts. Or in Nikolas Rose‟s words, citizens will be educated to the thinking of “calculating the future consequences of actions“ of everyday life.15 According to Colin Gordon “the state presents itself as the referee in an ongoing transaction in which one partner strives to enhance the value of his or her life, while another endeavours to economize on the cost of that life.”16
The paradoxical outcome of neoliberalism in the context of the history of economic liberalism is thus the task of government “to actively create the conditions within which entrepreneurial and competitive conduct is possible” deployed by “a whole array of organizational forms and technical methods in order to extend the field within which a certain kind of economic freedom might be practiced in the form of personal autonomy, enterprise and choice” governed for example by the rational techniques of competition, accountability, consumer demand, auditing, accounting, setting budget disciplines and marketisizing of public services (purchaser–provider -models, autonomization of public services to compete with customers or monetarization and budgetization of public bodies).17 Or “neo-liberalism does not abandon the „will to govern‟”18 but “appears to involve a shift of focus within liberalism itself”19. Whether this analysis is relevant also in Finland and/or Nordic countries especially in the context of “workfare state” is one of the integral questions of further research.
14 Dean 1999, 149, 166–167, 172, 174, 191 and 206; Rose, Nikolas: Governing “advanced” liberal democracies. In Barry, Andrew, Osborne, Thomas, Rose Nicholas (eds): Foucault and political reason. Liberalism, neo-liberalism and rationalities of government. UCL Press 1996 (37–64), 53–55 and 58. The latter refers also to an article Rose, Nikolas & Miller, Peter: Political power beyond the state. Problematics of government. British Journal of Sociology 43. 2/1992 (172–205), 183. 15 Burchell, Graham: Liberal government and techniques of the self. In Barry, Andrew, Osborne, Thomas, Rose Nicholas (eds): Foucault and political reason. Liberalism, neo-liberalism and rationalities of government. UCL Press 1996 (19–36), 29. A reference to a research Donzelot, Jacques: Face à l‟exclusion. Ed. Esprit 1991; Rose 1996, 58. 16 Gordon, Colin: Governmental rationality. An introduction. In Burchell, Graham, Gordon, Colin and Miller, Peter (eds): The Foucault Effect. Studies in Governmentality with two lectures by and an interview with Michel Foucault. The University of Chicago Press 1991 (1–51), 45. 17 Barry, Andrew, Osborne, Thomas, Rose Nicholas: Introduction. In Barry, Andrew, Osborne, Thomas, Rose Nicholas (eds): Foucault and political reason. Liberalism, neo-liberalism and rationalities of government. UCL Press 1996 (1– 17), 10 and 14; Rose 1996, 41 and 54–55. See also Gordon 1991, 43–44. Also for example Claus Offe stressed already in 1972, that “the continued dominance of the commodity form which is essential to reproduction comes increasingly to depend on the existence of political activities which are not themselves organized through the commodity form”. See, Kosonen, Pekka: Public Expenditure in the Nordic Nation-States – the Source of Prosperity or Crisis? In Alapuro, Risto–Alestalo, Matti–Haavio-Mannila, Elina–Väyrynen, Raimo (eds): Small states in comparative perspective. Essays for Erik Allardt. Norwegian University Press 1985 (108–123), 110–111. A reference to a book Offe, Claus: Strukturprobleme des kapitalistischen Staates. Suhrkamp 1972. 18 Rose 1996, 53. 19 Hindess, Barry: Liberalism, socialism and democracy. Variations on a governmental theme. In Barry, Andrew, Osborne, Thomas, Rose Nicholas (eds): Foucault and political reason. Liberalism, neo-liberalism and rationalities of government. UCL Press 1996 (65–80), 77–78. Also because according to Sakari Hänninen (Hänninen, Sakari: Politiikka hallinnan analytiikassa. In Kaisto, Jani & Pyykkönen, Miikka (eds): Hallintavalta. Sosiaalisen, politiikan ja talouden kysymyksiä. Gaudeamus 2010 (71–94), 88) neoliberalism provides market-based governance as an answer to every problem, it hardly opposes all kind of forms of excessive governance. This is because according to the Chicago school market-based governance is an ideal way of governance in every sector of society. 7
Bob Jessop has connected the term “neoliberalism” to the Anglo-American version of Schumpeterian workfare state in the mood of privatization, liberalization, commercialization of the state sector, creating market-friendly regulation of the society, promoting hire-and-fire, flexi-time and flexi-wage arrangements in the labour markets and a rejecting social partnership arrangements in favour of managerial prerogatives. Comparing to neoliberalism, neocorporatist arrangements reflect on increasing heterogeneity of the labour force and labour markets like giving more weight to core workers, stressing the importance of micro level negotiating processes between labour market partners, supporting the policies of innovation and structural competitiveness and enhancing the freedom of supply-side actors in economy. The role of state is to support corporatist decision- making process without taking actively part in it. Neostatism means that the state pursues “economic reorganization through intervention from outside and above market mechanisms” mixing decommodification, state-sponsored flexibility and active means “to secure the dynamic efficiency of an industrial core”. The competitiveness of the national economy and continuous innovation are important targets of neostatist model along with the promotion of an active labour market policy to reskill the labour force and ensuring a flexi-skill rather than flexi-price labour market.20
According to Jessop all these strategies may be used inside one state or has been used in the European Union.21 Because I‟m referring to the idea of marketization of society by referring to the term ”neoliberalism” and won‟t make comparisons between different national models and regimes as such, the term neoliberalism is a useful concept in my research. Yet, it is still possible to reassess the validity of the term comparing to other neo-terms during the dissertation-process in the future.
A more fruitful approach determined by Bob Jessop with Ngai-Ling Sum is Cultural Economic Policy (CPE). Under this term it is possible to connect several kinds of processes which have challenged the ideas of the Left and promoted the interest of markets and capital since 1970‟s. Jessop and Sum examine hybridization and sedimentation of knowledge brands (e.g. Michael Porter‟s idea of competitive advantage of nations, Richard Florida‟s creative class, Bengt-Åke Lundvall‟s national innovation systems, OECD‟s neoliberal-oriented policy suggestions and also Joseph Schumpeter‟s creative destruction as a precondition of the flourishing of economy later conceptualized for example Bob Jessop) in mapping spaces of competitiveness-innovation- integration.22
Have the neoliberal ideas influenced in social policy practices in Finland and Nordic countries? According to Helena Blomberg and Christian Kroll the critics of subjective social rights (strong universalism) could be tracked back at the municipal level to the pre-welfare state system of municipal services, when only the „truly needy‟ had a legal right to municipal help in the extent determined by individual municipality. The municipal actors only want “to decide how much
20 Jessop, Bob: Post-Fordism and the State. In a book Amin, Ash (ed.): Post-Fordism. A Reader. Blackwell 1996 (reprinted version, originally published in 1994) (251–279), 266–268. 21 Jessop 1996, 268–269. 22 Sum, Ngai-Ling: A Cultural Political Economy of Knowledge Brands: Upgrading „Clusters‟ and Facilitating „Regional Innovation System‟. A presentation at a Workshop on Rhetoric of Innovation in Contemporary Society. University of Helsinki 8–9.2.2010. See also Sum, Ngai-Ling: Towards a Cultural Political Economy. Edward Elgar Publishing 2005. 8 should be spent on a service, who in practice should be considered in need of the service, the condition in terms of fees etc” (weak universalism).23 Blomberg and Kroll state that the “logic of deservingness as a basis for service provision, could stem from this tradition, rather than from fairly recent influences of from developments outside Norden based on various (neo)liberal notions of individual responsibility and „no right without obligations‟ – which have also been shown to be related to ideas of deservingness – and which seem to influence national policy-making in the Nordic countries today.”24
All in all, the question about the relation of neoliberalism and social transfers in national level is a relevant question even if in municipal and welfare service level this question is more problematic. It is also worth to note that the funding of municipal welfare services is dependent on the taxation and funding system decided in national level.
How about the relation of neoliberalsm and universal or earnings related social benefits? Is it possible to think that in a situation of strict fiscal policy and the existence of unemployment putting the level of universal benefits close or under the subsistence level or ordering the people to work in a salary under the poverty line is neoliberal politics? In this situation it is a proper hypothesis that the system of income related benefits (when substantially higher than corresponding universal benefits) are more compatible with the neoliberal ideas than the idea of universal benefits clearly above the subsistence level? From this point of view it is also interesting to investigate when in Finland were decided that universal unemployment benefits are not allowed to rise unless the earnings related unemployment benefits are raised as much. This leads to the situation of widening the gap between those benefits because the level of earnings rise faster than the level of universal unemployment benefit tied (at least at the moment) only to the price index.
For example according to Raija Julkunen in an era of full employment earnings related social security gets closer to the principle of universalism but after the depression of 1990‟s in Finland the poverty line has been drawn between basic and earnings related social benefits. Parts of the problem are also income assistance (which should be unknown concept in Nordic welfare states) and bureaucracy traps.25
Social Justice and the Terms of Livelihood My intention is to find during the whole PhD-process the political decisions (made not only by parliament and government but also labour market organizations and other public bodies) and the presentations of ideological debate during 20 years after the second half of 1970´s which have been vital by defining the relations between the politics of the Left and neoliberal reforms in Finland. I will especially study the question, whether or not the understanding of the meaning of the “social
23 Blomberg, Helena and Kroll, Christian: Universal welfare services and the municipal level –Municipal elites as political actors in Finland and Sweden. Seminar on universalism, Hotel Korpilampi, Espoo, 23–24 January 2009, 8–9. A reference to a book Jaakkola, Jouko & Pulma, Panu & Satka, Mirja & Urponen, Kyösti (eds.): Armeliaisuus, yhteisöapu, sosiaaliturva. Suomalaisen sosiaalisen turvan historia. [The history of social protection of the Finns]. Sosiaaliturvan keskusliitto 1994. See also Blomberg, Helena and Kroll, Christian: Different rights and duties regarding welfare services: a focus on the municipal level. SSKH Reports and Discussion Papers 2/2007. 24 Blomberg and Kroll 2009, 9–10. According to them cf. Larsen, C. A: The institutional logic of welfare attitudes. How welfare regimes influence public support. Ashgate 2006. 25 Julkunen, Raija: Sosiaalisen turvan institutionaalinen nujerrus. Sovitaan(ko) – Onnistuuko työmarkkinoiden ja sosiaalisen turvan järjestäminen ilman osapuolia? NordWel-seminar, Helsinki 26.2.2010. 9 justice”26, “equality”27, “social”, “solidarity”, “fairness” etc. of the left-wing parties has changed under the challenge of neoliberal ideas and practices. Or is it possible to find the explanations of the possible neoliberal turn and ideological changes among left-wing actors from the broad set of individual, structural, philosophical, power-related and economic path dependencies28, activities and actions?
Thematically this means that I‟ll concentrate special attention to the discussion and decision-making in the area of social policy from a point of view of the creating of the terms of livelihood in Finland from 1977 to 1998. I‟m mainly interested in laws and regulations which determine the ways how the people are supposed to earn their livings between childhood and old age.
Also economic policy (at least taxation and cyclical policy), privatization (especially from a point of view of traditional nationalization-demands of the Left) and the processes of European and global political and economic integration (EU‟s internal markets, GATT/WTO, international organizations‟ role as an example and idea-deliverer and the globalization of production) will be researched as critical processes from a point of view of the decision-making of the terms of livelihood. The importance of those themes and processes will be tested during the research process. This is because only the empirical research will reveal how the terms of livelihood and the meanings given to them have changed in Finland during the last decades of 20th Century.
There are two major divisions between neoliberal and left-wing thought: state versus markets and employees versus employers including different meanings of the concept of work. However, this is a mere analytical distinction because of in practice the relationship between the state and markets or employers and employees have been closely interconnected in corporatist decision making system in Finland. It is also good to remember that instead of a strict division between state and markets the reality of past and present societies around the world has shown that societies consists of a mixture of state- and market-based arrangements and the political question behind these hybrids is that what kind of regulation of society made by public and private actors in national, international and
26 For example according to the Commission of Social Justice “justice is thought to have something to do with equality. Sometimes it seems to relate to need (…) Yet again, justice relates to such notions as entitlement, merit and desert (on deserving something) (…) people‟s views about justice are also indeterminate. See, Commission on Social Justice: What is Social Justice? In Pierson, Christopher and Castles, Francis G. (toim.): The Welfare State. A Reader. Polity Press 2000 (51–62), 52. 27 According to Hilde Bojer (Bojer, Hilde: What does economic equality mean? A presentation at International conference on income distribution: Income inequality in the Nordic and other countries compared – the role of welfare states and the distribution of earning. Asker, Norway 27.–28.4.2010.) possible ways to analyze income equality are for example to take into account lifetime earnings, earnings of certain period of time or age, household‟s incomes, “household per adult” incomes, individual incomes or the nature of welfare system, availability of primary goods or people‟s capabilities to have access to food, shelter etc. I‟m particularly interested in the terms of every adult to earn themselves and their families with or without competitiveness in the (labour) markets taking into account the costs of basic commodities including a decent amount of money to be used at free time and for a reason of freedom to choose the family status, the costs will be calculated according to the costs of single person household. 28 For example according to Christopher Lloyd ”The historical approach must involve taking full account of contingencies, sudden eruptions, even catastrophes, as well as local powerful path dependencies and evolutionary tendencies.” See Lloyd, Christopher: Convergences and Divergences in Social Democratic Welfare Capitalism: A Comparative Historical-Structural Systems Research Program. Korpilampi Seminar Presentation, 23–24 January 2009, 4–5. 10 transnational level has been done and on whose terms. Pure (state) socialism or capitalism has applied hardly anywhere.29
It is possible to separate at least the following themes from the first mentioned division, which are vital to define the relationship between neoliberalism and the left: the nature of social benefits, the role of public services, the rules of regulation of the economy and the understanding of the concept of democracy. And at least four themes will be interesting from the viewpoint of labour market relations: the flexibility of labour markets, the distribution of incomes, the rising productivity of work and the contradictory meaning of the concept of work between different left-wing ideologies and neoliberalism.
My aim is also to research the question of the terms of livelihood by crossing the traditional sectors of politics and economy or social policy and economic policy if necessarily. This is because these distinctions are political as such. It is also possible that the politicians have used these distinctions as the political tools of political argumentation and decision-making.
In the framework of the NordWel-network it will also be extremely interesting to compare the situation described above between different Nordic and European countries. Particularly Sweden has traditionally been an important role model when Finnish decision-makers have formulated economic, labour market and social policy legislation. In this context it is important to take into account Pauli Kettunen‟s notion about comparative method. He points out that national welfare institutions are not only shaped in the national context but “these institutions have been shaped and changed through processes and conflicts in which practical inter- and cross-national comparisons have played an important role in the political agenda setting and in the production and transmission of social knowledge”.30 International comparisons have played a particularly important role in Finland because of small size of the country and late industrialization in Nordic comparison.31
Furthermore, I am going to define the different influential ideological fractions of the left-wing camp (inside, between and around parties), including left-wing actors inside the trade union, and to define their ideological continuities and discontinuities in the areas of social- and labour market policies from the viewpoint of my research during the last decades of 20th century. What sort of socialism was the goal of different fractions of Finnish Left? How on earth the ideas of economic liberalism and Western economic integration gained support in a country politically and ideologically closely linked to Soviet Union? Were there among the left-wing actors any remarkable socialist thinking in a direction that the ideas of economic growth, rational social
29 It is also good to remember just like Pauli Kettunen (Kettunen, Pauli: Globalisaatio ja kansallinen me. Kansallisen katseen historiallinen kritiikki. Vastapaino 2008, 100) that even if action is politicized only in a some kind of relation to the state, the relationship between state and economy is not exactly the same that the relationship between political and non-political. The main character of politics is its nature as the battlefield between contradictonary choices and ideas in at the same time purposeful and contingent decision-making situations. Thus, drawing the line between state and markets is a very political act as such. 30 Kettunen, Pauli: The National Welfare State as a Cross-National Historical Construction. Paper presented in the conference of “Reform der Sozialpolitik. Zwischen Pfadabhängigkeit und transnationaler Konvergenz. Jahrestagung 2007 der Sektion Sozialpolitik in der Deutschen Gesellschaft für Soziologie”, Georg-August-Universität Göttingen, 6– 7.7.2007. 31 Kettunen 2006b, 288. 11 engineering or economic efficiency of capitalist society could be replaced and build some kind of socialist or communist society?
For me ideology doesn‟t only mean written party programs or public representations about short- and long-sighted goals of the future expressed by the representatives of different political camps. Instead, I understand ideology as the whole process of public decision-making from planning to implementation of decisions. I mean the whole process when the representatives of political organizations define their attitudes towards a broad set of political issues in the different levels of society‟s decision-making system by determining political agenda, expressing goals, creating new legislation or making other political decisions. Political actions are not always in a line with party programs or public statements of political representatives. And sometimes party programs will be redefined to be coherent with single decisions only after those possibly even far-reaching decisions have already been made.
I understand the concept of ideology as both pre- and post-argumentation of political decisions.32 This means in practice that I‟ll try to interpret the meanings that the political actors of the Left have given to political acts in the areas of social- and labour market policy from the point of view of the materializing of social justice.33 From this point of view also the methods of rhetorical research will be useful. It is for example good to remember such like Kari Palonen that the function of party programs is not only to set the norms that direct decision-making but also to do politics in the political context for example in relation to other party programs or as advertisements to voters. It is also important to remember that those who are able to determine the themes of political agenda or the meaning of political concepts are in a strong position in political competition.34
According to Quentin Skinner it is possible to treat any texts as speech acts in a way that from every text it is possible to find actors, theses and arguments and to research the overtime changes of them. The most important thing is to find the point, or meaning, of the certain speech act comparing to its context. The rhetorical transmission of the speaker or writer may pass unnoticed, but for a researcher this is a sign of the historical phenomenon that did not materialized even it could have been done so if getting more support. This is why it is also possible to overcome the hindsight or canonized interpretations of history and keep an eye the contingency of politicizing of the social issues.35
Public arguments may also differ from the unrevealed motives of political actors. A historian may in some cases find last mentioned motives from archival sources. However, the search for deepest motives of the actors is always difficult and in some cases impossible. But from the Skinnerian point of view this is not a serious problem. This is because Skinner points out that by researching the legitimation of ideologies (or decisions) a historian may better understand the essence of a point
32 Compare for example with Kettunen 1986, 262–263. 33 About the interpretation of the meanings see for example Hyrkkänen, Markku: Aatehistorian mieli. Vastapaino 2002, 57 and 175–190. 34 Palonen, Kari: Kootut retoriikat. Esimerkkejä politiikan luennasta. SoPhi, Yhteiskuntatieteiden, valtio-opin ja filosofian julkaisuja 11. Jyväskylän yliopisto 1997, 21 and 23–24. 35 Palonen 1997, 126, 131–132 and 135–136. 12 when the point is unclear.36 In latter cases the deconstruction of discussions and themes around pre- and post-argumentation of the theme of the research will be enough to bring new historical interpretations into public discussion.
From the point of view of the research of rhetoric it is also possible use the tools of conceptual history and discourse analysis. The main idea of the German conceptual history (Begriffsgeschichte) modified especially by Reinhart Koselleck is that different concepts may be interpreted differently depending on interpreter or an era of history.37 The conflicts about the meaning of certain concepts (political concepts like socialism, social justice and equality or the concepts of social sciences like rationality and effectiveness) between actors and changes of the meaning of these concepts under the last decades of 20th Century (changes of leftist thought) will be the core questions from this point of view.38 According to Koselleck both understanding and pure essence of certain phenomenon are prone to change or stay intact from time to time. The concepts must always be linked with the context of them.39
My aim is to catch the multidimensional reality of historicity of the society from the viewpoint of my research. This means the goal to find the different structural and empirical path dependencies, different political alternatives of the past and invisible elements of the present reality of my subject.40 All in all, it is possible to take three different perspectives to the topic: 1) the past, 2) the relation between the interpretation of the past and the goals of the future of the actors of my research and 3) present attitudes to my topic (my own interpretations, interpretations of other researchers and interpretations made in public discussion).
Idea of Decommodification From a point of view of the relationship between state and markets the main questions concerning the terms of livelihood are the rules of social benefits. According to Gøsta Esping-Andersen the Scandinavian welfare states have the most strongly adapted the principle of de-commodification which means that the social rights “are granted on the basis of citizenship rather than performance, they will entail a de-commodification of the status of individuals vis-à-vis the market (…) De- commodification occurs when a service is rendered as a matter of right, and when a person can
36 Palonen, Kari: Retorinen käänne poliittisen ajattelun tutkimuksessa. Quentin Skinner, retoriikka ja käsitehistoria. In Palonen, Kari and Summa Hilkka (toim.): Pelkkää retoriikkaa. Tutkimuksen ja politiikan retoriikat. Vastapaino 1996 (137–159), 149–150. A reference to presentations Skinner, Quentin: Some problems in the analysis of political thought and action. In Tully, James (ed.): Meaning and context. Polity 1988 (first published in 1974) (97–118), 101 and 108– 112; Skinner, Quentin: Meaning and understanding in the history of ideas. In Tully, James (ed.): Meaning and context. Polity 1988 (first published in 1969) (29–67), 56; Skinner, Quentin: Foundations of modern political thought 1. Cambridge University Press 1978, xiii and Skinner, Quentin: History and ideology in the English Revolution. The Historical Journal 8/1965 (151–178), 153 and 160. 37 Mikkeli Heikki: Aatevirtauksista käsitehistoriaan. Aatehistorian teoriaa ja tavoitteita sodanjälkeisessä Suomessa. In Ahtiainen, Pekka–Kuisma, Markku–Kurki, Hannele–Manninen, Pauli–Mustakallio, Katariina–Peltonen, Matti– Tervonen, Jukka–Turunen Ilkka (ed.): Historia nyt. Näkemyksiä suomalaisesta historiantutkimuksesta. Historiallisen yhdistyksen julkaisuja N:o 5. Historiallisen Yhdistyksen 100-vuotisjuhlajulkaisu. WSOY 1990 (252–280), 259. See also for example Koselleck, Reinhart: Futures past. On the semantics of historical time. Columbia University Press, cop. 2004 (Vergangene Zukunft. Zur Semantik geschichtlichen Zeiten. Suhrkamp 1979.). 38 Hyvärinen, Matti–Kurunmäki, Jussi–Palonen, Kari, Pulkkinen, Tuija–Stenius, Henrik (ed.): Käsitteet liikkeessä. Suomen poliittisen kulttuurin käsitehistoria. Vastapaino 2003, 10–11. 39 Hyrkkänen 2002, 121–122. 40 Kettunen 1986, 18; Kalela, Jorma: Historiallisen prosessin käsitteellistäminen ja historiallinen aika. In Kalela, Jorma: Aika, historia ja yleisö. Kirjoituksia historiantutkimuksen lähtökohdista. Poliittisen historian laitos, Turun yliopisto 1993, 12; Kettunen 2008, 20 and 130. 13 maintain a livelihood without reliance on the market.” This means that the pure existence of social benefits does not mean the de-commodification of individuals if the level and conditions of them do not substantially emancipate individuals from market dependence. “A minimal definition must entail that citizens can freely, and without potential loss of job, income or general welfare, opt out of work when they themselves consider it necessary.”41
The degree of decommodification is also possible to classify as narrow or broad depending on the stage of welfare state and social policy. Scandinavian welfare states are classified by Esping- Andersen as the system of strong universalism based on universal solidarity and are “aimed at a maximization of capabilities for individual independence”. The high-level of solidaristic welfare systems is possible because of maintaining the goal of full employment. Both revolutionary and reformist socialists supported the idea of decommodification, i. e. “the necessity and desirability of struggling for the right to a social income outside of wage labor”. Only strategy divided them from each others.42
These Scandinavian „social democratic‟43 regime types (the Social Democracy was supposed to be the dominant force behind social reform) wanted to crush the dualism between both state and market and between working class and middle class promoting „an equality of the highest standards, not an equality of minimal needs as was pursued elsewhere‟, „a peculiar fusion of liberalism and socialism‟.44
It is still worth to note that even if the principle of granting the social rights by virtue of membership in a particular community is usually called „universal‟, in practice everyone is covered as a member of a specific population category, not as citizens as such because of pure basic income -model have never been existed. Also user fees weaken the pure principle of universalism.45 This has been noted already by Richard Titmuss in 1960‟s. Titmuss stressed that by considering the nature of universal social services and transfers the following questions are important: “What is the nature of entitlement to use? Is it legal, contractual or contributory, financial, discretionary or
41 Esping-Andersen, Gøsta: Three Worlds of Welfare Capitalism. In Pierson, Christopher and Castles, Francis G. (ed.): The Welfare State Reader. Polity Press 2000 (154–169), 157–158. Originally published in a book Esping-Andersen, Gøsta: The Three Worlds of Welfare Capitalism. Polity Press 1990 (18–34). According to Esping-Andersen “The problem of commodification lay at the heart of Marx‟s analysis of class development in the accumulation process: the transformation of independent producers into propertyless wage-earners. The commodification of labor power implied, for Marx, alienation.” See Esping-Andersen 1990, 35. 42 Esping-Andersen 1990, 44 and 46. 43 From this point of view it is worth to note that for example Peter Baldwin‟s historical view reveals “that the middle classes and the liberal and conservative parties had played a major role not only in the formative decades, but also in the „Golden Age‟ of the Nordic welfare states”. See, Christiansen, Niels Finn & Markkola, Pirjo: Introduction. In Christiansen, Niels Finn–Petersen, Klaus–Edling, Nils–Haave, Per (ed.): The Nordic Model of Welfare–a Historical Reappraisal. Museum Tusculanum Press, University of Copenhagen 2006 (9–30), 14. A reference to a book Baldwin, Peter: The Politics of Social Solidarity. Class Bases of the European Welfare State 1875–1975. Cambridge University Press 1990; Petersen & Åmark 2006, 185–186. Reference to the researches of Baldwin, Peter: The Scandinavian Origins of the Social Interpretation of the Welfare State. Comparative Studies in Society and History 31. 1989; Baldwin 1990 and Orloff, Ann Shola: The Politics of Pensions. A Comparative Analysis of Britain, Canada, and the United States, 1880–1940. The University of Wisconsin Press 1993, 66–72. 44 Christiansen, Niels Finn & Markkola, Pirjo: Introduction. In Christiansen, Niels Finn–Petersen, Klaus–Edling, Nils– Haave, Per (ed.): The Nordic Model of Welfare–a Historical Reappraisal. Museum Tusculanum Press, University of Copenhagen 2006 (9–30), 12–13. A Reference to a book Esping-Andersen 1990, 26–29. 45 Kildal, Nanna & Kuhnle, Stein: The Nordic welfare model and the idea of universalism. In Kildal, Nanna & Kuhnle, Stein (ed.): Normative Foundations of the Welfare State – The Nordic Experience. Routledge 2005 (13–33), 14–15. 14 professionally determined entitlement? Who is entitled and on what conditions? (…) What functions do benefits in cash, amenity or in kind, aim to fulfil?”.46
According to Esping-Andersen the analysis of decommodification presuppose taking into account various rules and standards of actual welfare programs. “A program can be seen to harbor greater de-commodification potential if access is easy, and if rights to an adequate standard of living are guaranteed regardless of previous employment record, performance, needs-test, or financial contribution. (…) If programs provide benefits for only limited duration, clearly their capacity to de-commodify is diminished. A second set of dimensions has to do with income replacement, for it benefit levels fall substantially below normal earnings or the standard of living considered adequate and acceptable in the society, the likely result is to drive the recipient back to work as soon as possible. (…) Thirdly, the range of entitlements provided for is of utmost importance. (…) A highly advanced case would be where a social wage is paid to citizens regardless of cause.47
From this viewpoint it is interesting to research the attitudes of the left-wing parties to the principle of decommodification and the politics they practiced in the questions of the terms and the level of universal social benefits based on citizenship. This is an extremely interesting question because according to Pauli Kettunen the transformation of decommodification in Nordic countries could be better interpreted “as a process in which the normalcy of wage work was reinforced at the same time as it was made compatible with the universalist principle of social citizenship.” This meant that „the work performance model‟ with income-related benefits linked to the social rights inherent in citizenship.48
The idea of decommodification is thus in a contrast with the neoliberal idea of the competition in the markets between individuals but also with the work performance model because of latter‟s feature to combine the social security with the necessity of each individual to earn their livings from the markets. It is still worth to note that a strong welfare state must be funded according to Esping- Andersen through a high degree of population making salaried work. Thus, by measuring the development of universal, citizen-based social security and researching struggles concerning them from the point of view of the left-wing actors it is possible to find changes of the strength of decommodification in Finland also in a comparison at least to Sweden. This is fruitful because Esping-Andersen‟s typology has been criticized for example on the basis that only Sweden fulfils the criteria of the Scandinavian/Nordic model.49
46 Titmuss, Richard: Universalism versus Selection. In Pierson, Christopher & Castles, Francis G. (eds): The Welfare State. A Reader. Polity Press 2000 (42–49), 44. 47 Esping-Andersen 1990, 47–48. 48 Kettunen, Pauli: The Power of International Comparison – A Perspective on the Making and Challenging of the Nordic Welfare State. In Christiansen, Niels Finn–Petersen, Klaus–Edling, Nils–Haave, Per (ed.): The Nordic Model of Welfare–a Historical Reappraisal. Museum Tusculanum Press, University of Copenhagen 2006 (31–65) (Kettunen 2006c), 60–61. 49 Christiansen & Markkola 2006, 14. For example Herbert Obinger and Uwe Wagschal classified Finland as a European welfare state regime unlike Social-Democratic Sweden, Denmark and Norway by using Esping-Andersen‟s classification. Also Charles C. Ragin classified Finland as “corporatist” welfare state when Sweden, Norway and Denmark were “social-democratic” countries by examining pension systems through cluster analysis and “Boolean” comparative analysis. See, Arts, Wil and Gelissen, John: Three Worlds of Welfare Capitalism or More? In Pierson, Christopher & Castles, Francis G. (eds): The Welfare State Reader. Second Edition. Polity Press 2006 (175–197), 187– 191. References to the research Obinger, Herbert and Wagschal, Uwe: Drei Welten des Wohlfahrtstaates? Das Stratifizierungskonzept in der Clusteranalytischen Überprüfung. In Lessnich, Stephan and Ostner, Ilona (eds): Welten des Wohlfahrtskapitalismus. Der Sozialstaat in vergleichender Perspective. Campus (109–135) and Ragin, Charles C: A 15
But how to measure the degree of decommodification? Because of my research concentrates to the question of funding everyone‟s livelihood since 1970‟s, Gøsta Esping-Andersen‟s composite index is useful in a way that it takes into account the value of minimum earnings-related pensions comparing to average wages; individual‟s share of pension financing and replacement rate, entry rules and duration of sickness and unemployment benefits.50 Also “market distribution is likely to be more egalitarian where trade unionism is centralized and coverage comprehensive” and “where also the welfare state is strongly universalistic, the distribution of resources and life chances should be additionally egalitarian, creating homogeneity not only within the working class, but also between the social classes”.51 From this point of view one should take a sharper look at the real value of universal benefits comparing to earnings-related benefits and wages and also on the funding (fees, costs and taxes) of welfare benefits and services.52 Also the terms of scoring of different welfare variables are always debatable.
Esping-Andersen also takes into account the feminist critics of his first composite index admitting that “the concept of de-commodification has relevance only for individuals already fully and irreversibly inserted in the wage relationship. In practice, this means that it increasingly does speak to women, too. Yet, it remains a fact that a large proportion of women (and some men) is institutionally „pre-commodified‟; their welfare derives from being in a family. The functional equivalent of market dependency for many women is family dependency. In other words, female independence necessitates „de-familializing‟ welfare obligations.”53
Thus, he formulated in 1999 the “de-familialization index” capturing non-health family service expenditure as a percentage of GDP), the combined value of family allowances and tax-deductions, the diffusion of public daycare for children less than 3 years, the supply of care to the aged (percentage of aged 65+ receiving home-help services), child benefits as a percentage of average production worker income, percentage benefit loss to unemployed if spouse works, percentage extra marginal tax if both parents work and the net cost as a percentage of average family income in Sweden in a family of two children under 3 year. “It is also worth to note that “the child poverty rate in single-earner families is 3–4 times higher than among dual-earner families”.54 For me this means that at least different family benefits are also important from a point of view of the livelihood of men and women and the costs of children must also take into account by defining the state of the decommodification of the people from a point of view the means of livelihood.
Qualitative Comparative Analysis of Pension Systems. In Janoski, Thomas and Hicks, Alexander M. (eds): The Comparative Political Economy of the Welfare State. Cambridge University Press 1994 (320–345). 50 Esping-Andersen 1990, 26–27, 49–54 and 128. 51 Esping-Andersen, Gøsta: Social Foundations of Post-Industrial Economies. Oxford University Press 1999, 16–17. 52 The assessment of real value of social benefits, minimum wages and other factors defining the economic terms of livelihood of the poorest people of the society in the context of the idea of decommodification requires taking into account both absolute and relative poverty because of the prices of market commodities are determined according to the average supply and demand. Cf. Sen, Amartya: Inequality Reexamined. Oxford University Press 1992, 9. 53 Esping-Andersen 1999, 45. 54 Esping-Andersen 1999, 61–67 and 70–72. Statistics from Literacy, the Economy and Society. OECD 1996 (detailed country tables) (1), Anttonen, Anneli and Sipilä, Jorma: European Social Care Services. Is it Possible to Identify Models? Journal of European Social Policy 6/1996 (87–100) (Table 1) and Gornick, J, Meyers, M. and Ross, K. E: Supporting the Employment of Mothers. Journal of European Social Policy. 7/1997 (45–70) (2), Employment Outlook. OECD 1996 (Table 3.6) (3), Gauthier, Anne Hélène: The State and the Family. Clarendon Press 1996 (Table 10) and Employment Outlook. OECD 1995 (Part I) (4), Employment Outlook. OECD 1995 (Table 8.1) (5) and Employment Outlook OECD 1995 (6). 16
It will also be worth to take into account the idea of Bruno Palier and Guiliano Bonoli (who draw from Maurizio Ferrera) that following four institutional variables are helpful in describing social protection systems: Mode of access to benefits (citizenship, need, work, the payment of contributions, or a private contract), benefit structure (service- or cash-based – latter may be means tested, flat-rate, earnings related, or contribution related), financing mechanisms (from general taxation to employment-related contributions or premiums) and actors who manage the system ( state administration –central and local–, representatives of employers and employees and the private sector).55
The previous notion is partly compatible with the idea of redistribution paradigm which means the need to take into account the whole income formation process of households to measure the redistribution effect of welfare state. The redistribution paradigm is possible to conceptualize as follows: Wages and salaries (+income from self-employment and property), original income (including received transfers), gross income (including direct taxes and social security fees) and disposal income (includes indirect taxes and public sector services).56
Olli Kangas has explored the validity of theoretical “Scandinaviness” of Finland comparing to Sweden, Germany, United Kingdom and USA from 1950/1960 to 1990/1992. He uses the following criteria: 1. the size of the public sector (public transfers vs. services) 2. the relation between public services and income transfers, 3. the share of social expenditure of the gross national product, 4. the share of taxes in financing the social expenditure, 5. the financing responsibility of the insured and employers, 6. the coverage of the social security (insured/population), 7. the high level of the social security (benefits/wage) and 8. the minor role of private welfare arrangements. In terms of the share of social expenditure of GDP Finland rose to the Scandinavian level only in the early 1990‟s (mainly because of the depression). In Finland also the state and municipal taxes have financed all the time a half of social expenditure, a share which is much less than Sweden, less than UK, but more than in Germany. The difference has remained even if also convergence happened after Sweden‟s development of employment related pension system. In Finland also workers have paid more social security payments than in Sweden where the share of employers have also been higher. Also the average level and coverage of old-age pension and sickness, unemployment and employment accident insurances have been higher in Sweden than in Finland and both countries have been generous in these terms since 1970‟s in a comparative view. And lastly, tendencies from the strong role of public sector to the increasing role of market and another non-governmental solutions and from statutory benefits towards occupational welfare were perceived. 57
55 Palier, Bruno: Beyond Retrenchment. Four Problems in Current Welfare State Research and One Suggestion on How to Overcome Them. In Pierson, Christopher & Castles, Francis G. (eds): The Welfare State Reader. Second Edition. Polity Press 2006 (358–374), 364. References to the following researchs: Bonoli, Giuliano and Palier, Bruno: Changing the Politics of Social Programmes. innovative Change in British and French Welfare Reforms. Journal of European Social Policy 8. 4/1998 (317–330) and Ferrera, Maurizio: Modèles de solidarité, divergences, convergences. Perspectives pour l‟Europe. Swiss Political Science Review 2. 1/1996 (55–72), 59. 56 Uusitalo, Hannu: Redistribution and equality in the welfare state. An effort to interpret the major findings of research on the redistributive effects of the welfare state. European Sociological Review, Vol. 1. 2/1985 (163–176), 163–164. 57 Kangas, Olli: The Finnish welfare state – A Scandinavian welfare state? In Kosonen, Pekka (ed.): The Nordic Welfare State as a Myth and as Reality. Renvall Institute Publications 5. Renvall Institute, University of Helsinki 1993 (67–80), 68–79. 17 All in all, the focal point between state and markets as a decent source of livelihood of the people is situated in a line between income related and universal social benefits. By studying how the different left-wing actors in and between the parties of the Left and trade unions have stressed the different curves of the social benefit -line by defining their attitudes to the terms of social benefits it is also possible to find possible changes of the politics and thoughts of them. It is also good to remember that especially the level of (long-term) unemployment and the nature of salary work (full- time, part-time, short-time work or a mixture of them) determine how widely the income related social security ease the situation of unemployed and their future employment pension. Also the level and terms of social benefits determine the terms of livelihood as well as the profits of pension funds in financial markets and the costs of unemployment, sickness and pension insurances.
This means that from different kind of income transfers I‟ll take into account the terms of unemployment, sickness and disability benefits, pensions, study grants and income support. Public welfare services will be analyzed from the point of view of the costs (possible user fees and medicine costs, pure tax-funding or private pricing) and availability (universal services for all citizens or the role of private companies in public services through for example occupational and private health care). Also the possibility of public sector to increase working staff when there are unemployed in private sector and the role of state as the producer of welfare services are important questions in my research. The housing policy is also a significant theme because of housing‟s remarkable share of citizen‟s basic costs.
Socialism and Welfare State Universalism By analyzing the relationship between welfare state ideology and the different traditions of the Left it is good to remember that different left-wing actors have supported different welfare state models and some traditions have opposed the idea of the state as an ideal vehicle of guaranteeing solidarity or workers interests. Also the relationship between individual and collective and the nature of work have been stressed in various ways which have mirrored also to social policy for example by stressing either universal or earnings-related benefits and services.
For example Donald Sassoon stresses that the universal welfare principle does not fulfil the criteria of socialism in the meaning of “end-state”, because it co-exists with a dominant capitalist production system. But if “socialism denotes a social relation, then the universal welfare principle whereby access to a service of a good is available to all members of the collectivity, irrespective of their incomes, signals the presence of an element of socialism co-existing with elements of capitalism”. Thus the continuum between liberalism and socialism is possible to find in a process where “a specifically socialist justification for social reforms is that they empower ordinary people, by conferring upon them new rights of a social and economic nature. In so doing, socialism can present itself as the continuation of and development of an older liberal-democratic process through which ordinary people had acquired the political rights which were once the prerogative of the few. Socialism would provide the majority with hitherho unattainable social rights.” This means that “the cost of welfare is such that it can be financed only by transfer of incomes within the middle- and
18 lower-income groups, rather than from the rich to the poor”.58 “The socialization of risk does not seek to undermine capitalist inequality (…) it is a means of treating the effects of that inequality.”59
Especially social democrats have sought throughout the history several “third roads” between the ideas of socialism and the reality of markets or between various extreme positions. One example is the balancing between the neoliberal supply economy and Keynesian demand policy of Swedish Social Democrats in the early 1980‟s.60
Consensus of Korpilampi According to previous researches critical moment in Finland between the building of welfare state and more market-oriented reforms seemed to happen in 1977 under the pressure of international economic crisis. A new left-centre coalition government including both social democrats and communists headed by social democratic party leader Kalevi Sorsa started to resuscitate the economy by supporting private industry instead of regulating the economy for example in a Keynesian way, promoting only moderate wage rises (even some agreed wage rises were postponed), abandoning the plans to nationalize some sectors of industry and giving up the goal to raise significantly the tax level.61 A part of the package was not to expand the welfare state during following years.62
Also the tax ceilings were promised in 1977: the gross tax burden should not rise above the 1evel of 40 percent of Gross Domestic Product (GDP). In the late 1970‟s the tax level was indeed reduced and the share of public expenditure of GDP decreased. This goal seemed unchangeable also during the 1980‟s. The public expenditure/GDP ratio was still 42 percent in Finland in 1989.63 Despite of this and because of the high economic growth comparing to Western Europe the total amount of taxes rose in Finland in the 1980‟s, which guaranteed the possibility to improve moderately social services and benefits. Also working hours were moderately shortened.64 Even if the social
58 Sassoon, Donald: One Hundred Years of Socialism. The West European Left in the Twentieth Century. Fontana Press 1997 (paperback edition), 147 and 149. 59 Dean 1999, 186. 60 Giddens, Anthony: The Third Way. The Renewal of Social Democracy. Polity Press 1998; Pierson, Christopher: Hard Choices. Social Democracy in the 21st Century. Polity Press 2001; Przeworski, Adam: How Many Ways Can Be Third. In Glyn, Andrew (ed.): Social Democracy in Neoliberal Times. The Left and Economic Policy since 1980. Oxford University Press 2001; Feldt, Kjell-Olof: Alla dessa dagar… I regeringen 1982–1990. Norstedts 1991. 61 See for example, Vahtola, Jouko: Suomen historia. Jääkaudesta Euroopan unioniin. Second edition. Otava 2004, 407 and 414; Pekkarinen, Jukka - Vartiainen, Juhana: Suomen talouspolitiikan pitkä linja. WSOY 1993, 125–126 (see also Pekkarinen, Jukka: Keynesianism and the Scandinavian Models of Economic Policy. In Hall P (ed.): The Political Power of Economic Ideas. Keynesianism across Nations. Princeton University Press 1989); Meinander, Henrik: Tasavallan tiellä. Suomi kansalaissodasta 2000-luvulle. Schildts 1999, 440; Klinge, Matti: Konsensus. An article in Meinander, Henrik: Tasavallan tiellä. Suomi kansalaissodasta 2000-luvulle. Schildts 1999 (451–452); Kettunen 2006a; Jakobson, Max: Tilinpäätös. Otava 2003, 159–161. 62 Lipponen Paavo: Muistelmat I. WSOY 2009, 472–474. 63 Kosonen, Pekka: Flexibilization and the Alternatives of the Nordic Welfare States. In Jessop, Bob–Kastendiek, Hans– Nielsen, Klaus–Pedersen, Ove K (ed.): The Politics of Flexibility. Restructuring State and Industry in Britain, Germany and Scandinavia. Edward Elgar 1991 (263–281), 273. A comparison to Sweden at the same period is remarkable. At least the share of the whole public expenditure as a percentage of the GDP shows following figures (Finland/Sweden): 1975 37,1/49,4 and 1980 38,4/62,1. See, Kosonen 1985, 110. Figures from Heald, David: Public Expenditure. Its Defence and Reform. Martin Robertson 1983; OECD: Economic Outlook July 1984, Table R8. By reading the figures one must take into account at least the fact that increasing private sector pensions in Finland hasn‟t been included, see Kosonen, Pekka: Hyvinvointivaltion haasteet ja pohjoismaiset mallit. Sosiaalipoliittisen yhdistyksen tutkimuksia 48. Vastapaino 1987, 30. 64 Kosonen 1991, 274–275; Meinander 1999, 483–484. 19 expenditure/GDP ratio rose in 1982–1986 from 22.5 percent to 25.5 percent, the obvious tax ceiling set limits to public expenditure.65
But to be more accurate, the paradigm shift inside the social democratic party under the challenge of economic downturn happened already in the beginning of 1976 in spite of the fact that the party congress of SDP in Jyväskylä in the summer of 1975 urged to regulate effectively capital movements, widen strongly the production of state companies (especially in energy sector), regulate and encourage private companies to act according to the interest of the whole society, develop the production of co-operatives, practice active employment and regional policy and regulate foreign trade. According to Paavo Lipponen, at that time led political planning in the SDP‟s party office, party leader Kalevi Sorsa sketched a social democratic reform program which consisted of just taxing, lowering the housing costs to a reasonable level, improving working place safety against accidents and illnesses, shortening working hours, improving industrial democracy, raising pensions at a level of minimum wages, guaranteeing communal child care for all in need, widening housing transfers and child benefits, guaranteeing the universal access to the last resort social services, realizing the free of charge health and dentist services and improving primary education.66 And the election program of 1975, called the Decalogue, consisted for example of taxing “superfluous” export surpluses of export companies, supervising more strictly banks, aspiring full employment, sharing the burden of economic downturn more equally between citizens and continuing to implement social reforms.67
And even if the left-wing parties blocked the goal of especially the Centre Party to increase the purchase tax, the government drafted an extra budget for maintaining the employment and a price freeze for five months accepted, unemployment rose in the spring68 and SDP matured to change their preferences in economic policy during the emergency government. They decided to support in January the strategy formulated by the former director of the Bank of Finland, Klaus Waris, which meant to stabilize the value of the currency (Finnish mark) by strict budget and incomes policy. The aim was to tame inflation and high unemployment had to be tolerated until the economy was recovered. Also investments were decided to encourage according to the planning of the central bank, but housing production had to be diminished due to decreasing inflation.69
It seems that Finnish Left didn‟t want to follow countercyclical Keynesian economic policy. The consensus of Korpilampi was in line with the traditional Finnish way not to fight employment during economic downturn and to support the competitiveness of export industry.70 According to
65 Kosonen 1991, 274–275. This remark does not necessarily contradict with the notion of Pauli Kettunen that ”the great expansion of social security benefits and public services occurred after the welfare state had been declared to be in crisis, i.e. after the early 1970s” in Finland because of the strong economic growth in 1980‟s. See, Kettunen, Pauli: The Nordic Welfare State in Finland. Scandinavian Journal of History, Vol. 26, 3/2001 (225–247) (Kettunen 2001b), 226. In terms of the share of the public expenditure of the GDP it is worth to note according to David Heald (Heald 1983, 12– 13) that from the public expenditures mainly social transfers does not create new GDP but redeliver it. See, Kosonen 1987, 27. 66 Lipponen 2009, 419. 67 Ibid, 432–433. 68 Paastela, Jukka: The Finnish Communist Party in the Finnish Political System 1963–1982. University of Tampere, Department of Political Science and International Relations. Research Reports 111. 1991, 199–201. 69 Lipponen 2009, 455–456. See also Sorsa 2003, 395–397. 70 See for example, Fellman Susanna–Lindholm, Christian: Tillväxt, omvandling och kris. Finlands ekonomi efter 1945. Söderströms 1996, 232–240. 20 this view the task of economic policy is to concentrate on competitiveness more than on employment problems. This kind of economic policy has according to Pekka Kosonen restricted the expansion of the welfare state in Finland. Public expenditure is allowed to increase within the limits of economic growth, but this increase must not endanger the competitiveness of export sector.71
But this does not explain why the Left-lead government did not fight unemployment by increasing demand and public spending during the worst unemployment and economic crisis after the Second World War. It is an interesting question from the viewpoint of the aim to build a Nordic welfare state. This is because according to Fritz Scharpf maintaining full employment had been the centerpiece of social democratic programmes since the 1930‟s because of the possibility to redistribution of incomes and expansion of public services seemed after the Great Depression in 1930‟s possible only in the realm of full employment. ”The Nordic model” connected the principles of high employment and low wage dispersion which meant solidarity in the area of wage policy. And all this was possible because of levying the tax rates necessary to cover demands for public spending through the whole economic cycle, which meant budget surpluses during the economic upturn.72 In the Nordic comparison “full employment was given the top priority in the postwar period in two Nordic countries, Norway and Sweden. Also under pressures and constraints after the mid 1970s governments have maintained low unemployment in these countries. In Denmark and Finland, a commitment to full employment was never really institutionalized, and during recession other targets have been more important than full employment”.73
But why was this the case in the late 1970‟s? According to Prime Minister Sorsa‟s speech in the congress of Korpilampi 5.9.1977 Finland had to accept the truth that maintaining the recent development of society and economy meant hard working and competition in the integrated world (economy). The goal of Finnish government was to get closer to the full employment in the beginning of 1980‟s. Putting inflation lower than in the countries which competed with Finland harshest, like Sweden, was more important goal than immediate fulfilling of full employment.74 One problem was according to the Governor of Finlands Bank, Mauno Koivisto (SDP), also possible devaluations of the currencies of competing countries and fluctuations in international monetary markets.75 The last mentioned problem were actualized after the collapse of fixed currency exchange rate system (Bretton Woods) in 197076, the corner stone of the post war Welfare State -system in Western liberal democracies,77 followed by another neoliberal reforms.
71 Kosonen 1991, 265–266. 72 Glyn, Andrew: Aspirations, Constraints, and Outcomes. In Glyn, Andrew (ed.): Social Democracy in Neoliberal Times. The Left and Economic Policy since 1980. Oxford University Press 2001, 3–5. A reference to a book Scharpf, Fritz: Crisis and Choice in European Social Democracy. Cornell University Press 1991, 22. 73 Kosonen 1991, 272. A reference to a book Therborn, Göran: Why Some People Are More Unemployed Than Other. The Strange Paradox Of Growth And Unemployment. Verso 1986, 101–148. In the late 1970‟s the differences in employment rate between Finland and Sweden seems to be explained by the share of public sector employment. In 1977 “the welfare sector in Sweden accounts for almost one-quarter of all public employment, whereas in Norway and Finland it accounts for only one-tenth”. And more specifically, public employment as a percentage of total employment was in 1979 in Sweden 29.8 % and in Finland 18.1 %. See, Kosonen 1985, 118–119. 74 Elvytyksen linjat. Talouspoliittinen konferenssi 5–6.9.1977. Valtion painatuskeskus 1977, 11–13. 75 Ibid, 62. 76 van der Wee 1991, 478–479. 77 Blyth, Mark: Great Transformations. Economic Ideas and Institutional Change in the Twentieth Century. Cambridge University Press 2002, 5–6 and 128. 21 Finance minister Paul Paavela (SDP) represented the core of the new politics by stressing the importance to guarantee productive investments to stabilize the economy. The increasing of income transfers hadn‟t according to Paavela promoted to attain the goals of economic policy and there weren‟t good reasons to fund those transfers by taking foreign debt, diminishing public services or increasing taxes. Because of the tax rate rose in 1976 4.7 percentage (even partly due to lowering of the growth), tax rises weren‟t according to Paavela possible in the following years. The overall tax rate was decided to froze until the year 1982. This was not the problem according to Paavela, because of the “rather high” average welfare in Finland.78 Only poorest pensioners represented the exception of this rule. Paavela framed the future in a way that ensuring a decent growth (and the possibility to fund the welfare state) in the future meant the necessity to guarantee the competitiveness of export sector and it was only possible by taming inflation below the level of other countries connected to the more effective research and innovation policy. Paavela rejected the idea of “escaping to protectionism” because it would mean the lowering of universal welfare of Finland. The goal of government to raise real wages had to be subordinated to the goal to raise employment. The pressure of increasing expenditure of municipalities and Social Insurance Institution (Kansaneläkelaitos, KELA) and the realizing the legislative reforms already approved meant that increasing state expenditures or new tax cuts had to be funded according to Paavela by increasing another fees or taxes or by cutting other expenditures. He also thought that it was too expensive and even futile to try to resuscitate the economy by increasing the public demand apart from a strictly restricted targets for example in an area of structural taxing policy. The (private) production itself was the most effective vehicle to maintain employment.79
All in all, the Consensus of Korpilampi, guaranteed by, even if with covert or partly open criticism of communists, socialists and some social democrats and trade union representatives80, the whole Finnish political and economic elite, seems to be at least a partial paradigm shift in the politics of the Left comparing also to the situation in the late 1960‟s when centre-left coalition governments (including all three left-wing parties) both supported strongly export industry and at the same time improved social security in many ways during the previous economic downturn81.
78 It is still worth to remember in Nordic comparison, that in 1981 Finland lagged behind another Nordic Countries in Welfare politics despite the similar terms of coverage and eligibility of welfare instruments partly because of the Finns had in some respects smaller access and use of social services than in Denmark, Norway and Sweden and, interestingly to my research, “quite considerable” lower levels of all cash benefits compared to the three other countries. For example, the cash benefits as percentage of net income lagged behind Sweden as follows: parental allowance 48 % (Finland)/96 % (Sweden); sickness benefits 39–48/95–97; cash unemployment benefit 47–62/95 and personal pension for industrial injury 84–99/100, even if taxation and tax credits are not taken properly into account in these figures. Also “the proportion of social security expenditure for income maintenance schemes such as maternity and sickness benefits is lower in Finland than in other Scandinavian countries”. See Alestalo, Matti, Flora, Peter & Uusitalo, Hannu: Structure and Politics in the Making of the Welfare State. Finland in Comparative Perspective. In Alapuro, Risto– Alestalo, Matti–Haavio-Mannila, Elina–Väyrynen, Raimo (eds): Small states in comparative perspective. Essays for Erik Allardt. Norwegian University Press 1985 (188–210), 194–202. The source of data is Social Security in the Nordic Countries. Statistical Reports of the Nordic Countries No. 44. Helsinki 1984 and about the critics they refer to a report Søndergaard, Jørgen & Sørensen, Henning: Sammenligning af udgifter til sociale kontantydelser i Norden. En undersøkelse af beskatningens betydning for tvaernationale sammenligninger af sociale udgifter. Nordisk statistisk sekretariat. Tekniske rapporter No. 33. København 1984. 79 Elvytyksen linjat 1977, 46–57. 80 Ibid. I‟ll concentrate next to the more detailed analysis of the possible struggle over the economic and social policies inside the left-wing camp. 81 See for example Haikara, Kalevi: Isänmaan vasen laita – Suomen kansan demokraattinen liitto 30 vuotta piikkinä kansakunnan lihassa. Otava 1975, 283–284, 286 and 293–301. 22 References Alestalo, Matti, Flora, Peter & Uusitalo, Hannu: Structure and Politics in the Making of the Welfare State. Finland in Comparative Perspective. In Alapuro, Risto–Alestalo, Matti–Haavio-Mannila, Elina–Väyrynen, Raimo (eds): Small states in comparative perspective. Essays for Erik Allardt. Norwegian University Press 1985 (188–210).
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