The nanny state of Finland

First Published: 2016-04-08

On a recent visit to Finland, I had some exposure to the current state of the culture and politics of my native country. Sad, if not surprising, was the ever-present state interference with the freedom of the Finns that many of them quietly accept and even take for granted. Of course, the state control and regulation not only limit the citizens’ freedom but also their prosperity: state interference with individual rights has a high cost that the aging population of this Nordic welfare state can ill afford. Let me count some of the ways the Finnish state controls its citizens, explain why they are costly and unjust—and suggest a solution to increase the freedom and prosperity of the Finns.

While I was there, some depressing stories about Finland made the news. Finland scored the most points in a European-wide “nanny state” comparison. The country has the highest level of state regulation of cigarettes (including e-cigarettes), alcohol and food, by a wide margin above the second and third place Sweden and the UK. Both tobacco and alcohol are taxed heavily and their sale controlled. (Alcohol, including wine and beer, are sold only by state-owned stores; only very light beer can be bought in grocery stores). Food production and sales are also heavily regulated.

Another study revealed that Finland also has the highest social security costs per capita in Europe, partly reflecting the aging population but also the mentality that the state is the nanny that looks after its “children”-citizens from cradle to grave—all funded by the Finnish taxpayers. In an effort to streamline the social security costs, the government has introduced a ‘brilliant’ new measure: a “basic income” that will be paid to everyone in need: the poor, the unemployed, students, the homeless, single parents, senior citizens, etc. The intent of the basic income is to replace all other social subsidies and thus make the administration of social security presumably less costly and more efficient. A two-year pilot project of the basic income accounts is about to start.

The Finnish nanny state is both unjust and costly. Based on the egalitarian ideal of minimizing inequality of income and wealth, the nanny state is unjust because it penalizes those who are productive and entrepreneurial to reward those who are not. Highly progressive income taxation and heavy regulation of business encourages the most productive to leave the country and take their productivity and investment capital elsewhere.

This has a negative impact on economic growth, evidenced by one of the slowest GDP growth rates in Europe due to the brain drain and the struggle to recover from the 2008 global economic crisis. (Trade with Russia, previously a large trading partner, has shrunk significantly due to its own economic troubles. Besides the heavy regulation of business, the high Finnish labor costs, due to the strong unions oblivious to global competition, have chased investment elsewhere and increased unemployment.)

The cost of the state nannying is high, not just because of the bureaucracy, but because it discourages productivity and entrepreneurship and increases unemployment—which further increases the social security costs. There is an acute awareness among many Finns that the situation is unsustainable. Polls show that the majority agrees that public expenses must be cut, and the government has introduced a plan to make at least some cuts.

I argue that a more fundamental—but simple in principle—change is required to change the economic future of the Finns. The government must recognize the individual rights of its citizens, and guided by that principle, start dismantling all its various regulations that violate those rights, including to liberty and property. This would mean liberalization of markets, including the labor markets, and removing the political power of the entrenched labor unions.

Such changes cannot made overnight, but restoring individual rights must start now. (There are some positive signs, such as the recent deregulation of the opening hours of all stores). With increased freedom and ending the government interference with the economy, more prosperity would follow.

First published at How to be Profitable and Moral: A Rational Egoist Approach to Business and posted here with the kind permission of the author.

Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada. Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

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