Sustainable growth replaced the welfare state

In the future the years 2013-2015 will most likely be referred to as a turning point in Finnish political history. Before this time, the crux of the political consensus was in maintaining the welfare state, whereas after this point it will been seen as building sustainable growth.

Demos Helsinki has analysed the recent political discourse and recognised a clear and very recently appeared sustainable growth rhetoric.

This text gives suggestions and proposals as to how sustainable growth policy is brought to centre around concrete initiatives instead of remaining a short term political phrase like controlled structural change in the 1980s or responsible economic management in the early 2000s in Finland.

What is sustainable growth?

The Government’s priorities are reducing poverty, inequality and social exclusion, consolidating public finances and promoting sustainable economic growth, employment and competitiveness.

The government programme of the new Prime Minister Alexander Stubb thus describes the missions that unite all governing parties. Along with more traditional themes, sustainable economic growth has found its way onto the list of the government’s missions.

The government program was not the first instance where sustainable growth was brought to the fore. The Sustainable Growth department of the parliamentary Committee for the Future working group has operated since 2012, with the opposition lead Juha Sipilä as its chairman. The previous government led by Prime Minister Jyrki Katainen published a government report on the future called Well-being through Sustainable Growth in the autumn of 2013. Sustainable growth has raised discussion in other contexts as well.

Why talk about sustainable growth right now? For two reasons:

  1. Finland has reached a period of slow growth
  2. The scarcity of natural resources transforms societal structures and economic life

The political means to support long term (i.e. sustainable) growth are few and far between when macroeconomic preconditions change. Throughout the second half of the 20th century, Finland experienced relatively fast paced economic growth, thanks to which we became one of the world’s wealthiest and most wellbeing societies – The Finnish Miracle, like the name of André Chaker’s book published a couple of years back. Today, however, further growth is impeded by trends such as Finland’s demographic structure, the shift in the global economic centre of gravity, and changes in the crucial export industries. While politicians and officials continue to hail the importance of growth for the society, growth has become an increasingly elusive phenomenon.

In a highly developed country like Finland with an educated population, growth cannot be pursued at all costs, and limitations related to human wellbeing and the physical capacity of the planet need to be taken seriously. This is also on the wish list of the Finns themselves: the fourth Finnish attitude survey published by the Finnish Business and Policy Forum (EVA) in 2014 reveals that three fourths of Finnish people considers the welfare state worthy of its cost, and over two thirds believes that current style economic growth is detrimental to both nature and the human kind in the long run.

The idea of sustainable growth comes very close to sustainable development, which has been on the table since the 1980s. Its definition originates from the Brundtland Commission report Our Common Future. Its guiding principle is increasing the living standards of the poorest section of world population without infringing upon the opportunities of future generations.

Sustainable growth introduces a new attitude towards long-term thinking into politics. As the world around us changes, we are forced to evaluate the long-term impact of our actions more than before. As an example, due to climate and resource challenges, infrastructure development has to be resource smart. Economic opportunities no longer only entail mastering new technologies, but rather necessitate making use of the business opportunities that the demand for solutions to global problems presents.

Are sustainable growth and the welfare state incompatible?

Since the 1970s, all political parties have unanimously agreed that the Nordic welfare model is one of the strengths of the Finnish society, and that its protection and enhancement may justify certain political reforms. The Finnish welfare state is traditionally synonymous with a strong interventionist state that levels the inequalities of welfare between citizens and smooths out risks related to different phases of life. Although differing views on the means (and to some extent ends) exist, no party has questioned the value base and principles of the welfare state.

Political parties are unanimous in thinking that strong economic growth and the welfare state are interdependent. According to many a politician maintaining growth is a crucial part of welfare policy: wealth has to be created before it can be dealt. In this way the turn from prioritising the welfare state to prioritising sustainable growth may seem like a small shift in the focus of the related wording.

Yet for the internal dynamics of politics, the shift is more substantial. It is a matter of opening up a new trail in the political discourse: while the importance of sustainable growth is acknowledged by all political actors, there are differing views on how to bring it about.

These differing views on how to realise sustainable growth may generate new coalitions. Compared to the welfare state discourse, in the sustainable growth discussion there is a lot more leeway for different perspectives, and less focus on technical detail. In this way this kind of a shift in political wording is an appealing option for key party figures: letting go of the old and concentrating efforts on an equally important issue.

At this point, however, it is important to reflect upon the previous period of change in Finnish politics, and remember that the welfare state policy started off as new growth policy. The socio-political initiatives that now comprise the welfare state improved the living conditions and capability of the population, which meant a healthier and more able labour force, and thus better productivity. The “welfare generates growth” line of thought was popularised in the 1960s by Pekka Kuusi, now often considered the main ideologist behind the Finnish welfare model. The spread of this idea signified a great change in political thought: whereas before the aim of social policy had been to prevent conflicts arising from neighbourly love as well as from inequality, thereafter it was labelled as investment policy that builds the future of the nation.

Can the rise of welfare policy be used as an example in developing sustainable growth policy?

The political discourse on sustainable growth is embodied in the thought that we need to invest in that which creates growth and develop the society. This definition, however, remains too narrow in that it leaves unmentioned the concrete things that we need to invest in to generate growth.

Looking at global megatrends it is clear that sustainable growth needs to be based on a resource smart economy and on developing people’s capabilities. These together form the foundation of societal development. Digitalisation has rid us of a large chunk of the barriers between people’s learning and cooperation. The successful sectors of the future are ones that know how to motivate people to become curious about the future and about new possibilities for cooperation.

The most secure way to generate growth in times of global competition is to develop and commercialise solutions for the wicked problems of the human kind, such as climate change or lifestyle diseases. Turning wicked problems and their solutions into business opportunities requires a certain set of skills, as do application of technology and international trade.

Welfare policy first developed as a series of political initiatives that were, in essence, slowly accumulating investments into human wellbeing and growth. Similar cutting edge initiatives are now needed for sustainable growth policy. We suggest that in the coming months, as part of their electoral programmes and in the subsequent government negotiations, Finnish politicians start building concrete initiatives for sustainable growth upon the following key areas:

  1. Investments for sustainable growth

Generating sustainable growth requires new investments into resource smart infrastructure, people’s abilities and new businesses. Merely directing public funds into these areas is not enough. The focus of the investments made by other institutions and private individuals must also change.
The susceptibility of pension funds and other institutions to the carbon bubble, or their dependency on oil, coal and gas companies must be reduced. Moreover the focus of investments has to shift towards impact investment: into initiatives and companies that alongside economic profit provide new solutions to social and healthcare services and resource intelligence.

  1. New measures to promote consumer cleantech

The cutting edge sector of the Finnish innovation and economic policy has in recent years been cleantech. Its focus has been in industrial solutions based on innovations in companies of the process industries. Cleantech is based upon the idea of resolving global wicked problems, and demand is likely to abound in the future as well. As the importance of traditional heavy export industries diminishes, it is important to extend the ground of Finnish cleantech towards consumer services – towards consumer cleantech. Municipalities, construction companies and property owners can bring about experimental markets for new consumer cleantech companies. Furthermore venture capital must be made available for consumer cleantech startups.

  1. A broader perspective on work

The general line of thought in Finland has been that jobs are created through investments by large companies. However, the ability of old companies to generate new jobs is unlikely to improve in the coming years. In the future, more and more jobs are created in small businesses and organisations or through self-employment. A paid job or self-employment can increasingly often be found through a hobby or voluntary work – the boundaries between different types of activity fade. The entire field of employment policy must be re-evaluated and extended to make use of opportunities that arise from voluntary work and a new kind of entrepreneurship.

  1. Education built upon curiosity

We have reached a turning point in the development of capability: the role of traditional educational institutions in this development diminishes, and the old methods to maintain high performance in education lose effectiveness. The major challenge at all levels of education is strengthening the enthusiasm, motivation and curiosity of students. Without a curious and enthusiastic attitude a portion of the students finish their studies too early, and the ability to apply that learnt school in the working life is left wanting. Education policy has to gain courage to renew the various forms of education.

  1. From caring of the sick to promoting health

The hottest political debate in recent years is that of developing the social service and healthcare system. The central aim has been to increase the productivity of the healthcare sector. Hence, the focus has been on the most expensive areas of the service system: caring of the sick and social services. The greatest potential impact, however, lies in preventative measures. A lot less attention has been lent to this side of healthcare. The focus has to shift into developing the resources of communities and promoting healthcare broadly in the different areas of policy.

Why is Demos Helsinki interested in sustainable growth?

Sustainable growth has a lot in common with the main themes that Demos Helsinki works on: the resource smart economy and democracy of capabilities. Sustainable growth necessitates search for a new direction for social and economic activity, and sets the boundaries and preconditions for development.