Helsinki (01.06.2003 - Juhana Vartiainen**) Before the March parliamentary elections in Finland political parties described their goals and presented their promises. Civil servants, researchers and central banks are often of the opinion that election promises are too generous and that "we cannot afford them". Yet it is striking to notice how much more grudging both promises and programmes have become in the last 10 to 15 years.
Until the 1980s the enlargement and construction of the welfare state was in full swing. New services were created, social security was expanded, pensions were increased and child allowances grew. Compared with these old good days, the entire welfare policy now looks rather anaemic and tight-fisted - and the political parties may seem quite similar as the differences between their reform demands are ultimately rather marginal.
What reasons lie behind this change towards a less generous policy? Many people believe that this is due to a process of "globalisation" that forces Finnish enterprises to compete in an international market so that "we can no longer afford" the welfare state that we used to have. However, it is self-deception to lay the blame on globalisation in this way. There is nothing new in globalisation: for a century welfare in Finland has been based on the country’s participation in the international division of labour.
Behind the change there is another, much more significant trend that has received too little attention: the fall in fertility. Finnish women now have fewer children than before, as is visible in population projections. Although the Finnish population is forecast to continue growing for the next two decades, it will then begin to decrease. The proportion of the working age population will also fall, so that by 2030-2050 there will be about two old people or children (mainly the former) for every three people of working age.
Although this change is still some way off, few people understand how dramatically it is already influencing freedom of choice in economic and welfare policy. Public authorities must preserve their liquidity, meaning that welfare expenditure must continue to be covered by tax revenues. The unfavourable change in population profile, with fewer taxpayers and more welfare dependants, thus leads to a gloomy scenario with little scope for expanding the welfare state.
Things would be different if we lived in an ever-expanding economy where each working age generation was larger than its predecessor. If coming generations of taxpayers were larger than those at present, then pension finance could never become a problem and there would be no need to worry about growing State debt. It should be noted in passing that the courage shown by the USA in increasing its overseas debt at the present rapid rate is based on the fairly rapid rate of population growth in that country.
All of this suggests that many problems would simply go away if we could make the Finns give birth to more children. Women in Finland currently have an average of 1.7 children, which is not yet sufficient to prevent a declining population. It is small comfort that the situation is even worse in Southern Europe. In Italy, for example, women have an average of no more than 1.2 children. The maternity benefits paid in Southern Europe are also very small, which may indirectly suggest that public family policy functions fairly well in the Nordic countries, even though even this does not seem to suffice.
How can we persuade both voters and politicians that an increase in the birth rate would not only increase the number of happy events, but would also resolve our central economic problems?
*This article was originally published in Toimikas 3-2003, the magazine of the Textile and Garment Workers’ Union.
**Juhana Vartiainen Ph.D. works at the Trade Union Institute for Economic Research – FIEF in Stockholm