An open letter to the Government of Finland
For the last few decades Finland has experienced a period of rapid growth. When we look at the situation today, we notice that there are a few major problems in the Finnish economy. The solutions are out there, but they require some courage and concrete actions to bring them into play.
One of the key problems is our declining competitiveness, which affects the international demand for Finnish products and services. In the past we simply devalued the Finnish currency when we needed to boost competitiveness. Decreasing costs through internal devaluation i.e. lowering salaries does not sound like a very realistic option in Finland today.
In my opinion the key solution to increased competitiveness is in growth companies. Innovative growth companies develop and sell new products and services and create relatively more jobs than companies than mature and non-growth companies. My point is that we have to stop whining about the loss of traditional industry sectors, and focus all of our energy on growth entrepreneurship.
The Finnish Government is using too much money on the hospice care for traditional industries. We need to accept that thos trains have left the station and well never return. Incentives should instead be aimed at growth companies for they will create the foundation for the next economic revival in Finland.
The main instrument should be tax incentives. Growth companies should be offered tax relief for their first five years and an Estonian style zero taxation model for undistributed profits. This would create an incentive to grow profitably. Also tax reductions should be directed at investors who take risks by investing their money in growth companies. Investments over a five year horizon in new companies should be exempt from taxation.
The budget deficit that has taken hold of Finland has two sides: revenues and expenses. We could lower expenses when large numbers of corporate subsidies would be abandoned and the increased employment rate would reduce the amount of unemployment benefit payments, and create an opportunity for more people to participate in workforce. This model would also benefit the revenue side as newly employed growth company professionals would pay income taxes and increasing in purchasing power would contribute to higher taxable income.
One problem is a typical Finnish “glass is half empty” –attitude. Politicians and the media paint an image of imminent Dooms Day but at the same time they overlook the incredible gift Nokia has given to Finnish society by building an excellent knowledge-base for the next generation of growth companies and by ending Finland’s dependence on itself. Instead of obituary speeches we need radical actions to stimulate the next wave of growth entrepreneurship. It only takes a little encouragement and it will lead to amazing results. To quote Ronald Reagan’s speech from 1981 (for the record I am a Liberal Democrat/fiscal conservative): “Government is not the solution to our problems. Government is the problem.”
Orginally published in Finnish in Oulun Lehti 25.1.2014