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The Evolving Finnish Economic Model

The Evolving Finnish Economic Model

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Published by Minnesota 2020

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Published by: Minnesota 2020 on May 24, 2010
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01/17/2012

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The Evolving Finnish Economic Model:How Cooperatives Serve as “Globalization Insurance”
Samuli Skurnik 
**
Lee Egerstrom*May 29, 2007A paper presented at the joint conference of The Canadian Association for the Study of Co-operation (CASC)The International Co-operative Alliance Research Committee (ICA)The Association of Cooperative Educators (ACE)University of SaskatchewanSaskatoon, Saskatchewan* Authors:Samuli Skurnik, D.Sc. (Econ. & Bus. Adm.) and Licensed EconomistHelsinki School of Economics (HSE), Skurnik Consulting and former chief executiveof Pellervo, the Confederation of Finnish CooperativesTelephone: +358 400 502 426Email:samuli@skurnik.fi Lee EgerstromU.S. researcher and writer, author of books on cooperative development, and economicdevelopment fellow, Minnesota 2020, St. Paul, Minnesota (USA).Telephone: +651 770 1206Email:EgerstromLL@msn.com 
**
The writing and presentation of this document to the international cooperative research community wasmade possible by grants from the Finnish Cultural Foundation and The Cooperative Foundation (US).Their support is greatly appreciated.
 
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Abstract.
Major errors in economic policy in the 1980s and the collapse of the Soviet Unionin the early 1990s threw Finland’s economy into severe recession and caused, along with joiningthe European Union in 1995, a dramatic economic transformation. The Soviet Union had beenFinland’s largest trading partner. That economy activity crashed. This preceded Finland’s deci-sion to join the European Union that required lowering national economic protections to gain en-trance into a more liberalized trading community. Finland’s shift towards a liberal market econ-omy (LME) produced severe economic and sociological “shocks” across Finnish society. Do-mestic safeguards in place from Finland’s previous coordinated market economy (CME) weredismantled.While major parts of the Finnish economy liberalized and globalized, the people of Finlandalso turned inward and built on the national tradition of cooperative enterprise, finding new le-gitimacy for the cooperative movement. They began modifying, or adjusting business plans forexisting cooperatives. Also, more than 2,900 new cooperatives have been created in response tothe changing economic and political climates. What has emerged is a bipolar economy heavilyinfluenced by cooperative enterprise.This paper returns to a central argument in Skunik’s Ph.D. dissertation,
The Transformationof the Finnish Business System – From a Closed Regulated Economy into a Bipolar Globalised  Economy
(HSE 2005). That point is that the bipolar economic structure now evolving serves as“globalization insurance” for the small and open Finnish economy. One pole is the silicon andforestry export-oriented pole that must compete in global markets. The other pole is the Finnishhome market-oriented pole in which cooperatives, mutuals and customer-owned industries pro-vide quality and reliability of services near the member-owners that outweigh low-cost produc-tion pricing,The authors of this paper believe the new Finnish model, different from the New GenerationCooperatives (NGCs) model from North America, represents a blend of both defensive and of-fensive strategies to gain entrance to markets. Even though successful cooperatives elsewhereemploy similar business strategies and practices in response to competition, the Finns have de-veloped a strategic model coexisting with global markets. As such, the authors believe the Fin-nish model merits study and adaptation for cooperative development in remote areas of NorthAmerica, the Third World, and Eastern Europe, as well as by employee cooperative groups, in-cluding the “
 fabrica recuperada
” movement in South America.
 
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The Transformationof the Finnish Business System
 –From a closed regulated economy into a bipolar globalized economy
COORDINATEDMARKET ECONOMY(CME)LIBERAL MARKETECONOMY(LME)
NordicMixedModelFinnPoleGlobalPole
OldNew/Present
The new bipolar Finnishbusiness modelfor national cooperationand global competition1980’sand 1990’s

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