The Rise and Fall of a Nordic Welfare State

On New Year’s Eve 1917, a Finnish delegation, seeking an audience with Russia’s new Bolshevik leadership, waited patiently in the ice-cold lobby of the Council of People’s Commissars in St Petersburg. The place was brimming with people: chain-smoking commissars, civil servants, typists, sailors, Red Army officers.

Shortly before midnight, the fur-coat-clad Finns were presented with a letter: their appeal for independence had been granted. Nominally, it was just a proposal addressed to the Central Executive Committee; in practice, it was an order, bearing the signatures of Lenin, Trotsky, and Stalin.

Lenin was reluctant to go and shake hands with the overjoyed delegation. “What,” he said, “am I supposed to say to those bourgeois?” Trotsky, too, refused to do the honors, joking: “I wouldn’t mind having the lot of them arrested.”

It wasn’t just “those bourgeois” whose sentiments were represented by the delegation visiting that New Year’s Eve, however. Despite the explosive class animosity simmering within Finnish society, on national sovereignty there existed an uneasy consensus with the Left. In fact, the Social Democratic Party (SDP) had sent their own delegation to Saint Petersburg just days before.

In the following decades, the SDP would play a central role in building the welfare state as we know it — and later, with the advent of neoliberalism, in beginning to dismantle it. It was the SDP whose “utopian” 1903 manifesto had called for universal suffrage, gender equality, free education, universal health care, child care, maternity leave, prohibition of child labor, and many other things that would form the basis of the Finnish welfare state.

But all this would happen only much later, after the deep class divisions had first come to a head. Soon after Soviet Russia recognized its former Grand Duchy as a sovereign state, a civil war broke out between the socialist Red Guards and the conservative White Guards. Over ten thousand German soldiers landed in southern Finland to fight alongside the Whites, while the Soviets supplied arms to the Reds.

Even as civil wars go, it was a brutal affair, killing off more than 1 percent of the entire population. The Reds suffered their greatest casualties in the aftermath of their crushing defeat, subjected to mass starvation in prison camps and unlawful executions.

In the 1930s, Finland briefly flirted with fascism. Reactionary nationalists held great sway in the armed forces, in government, and among business elites. The rightward shift culminated with the explicitly fascist Lapua Movement attempting a coup in 1932.

In 1939, the Soviet Union invaded Finland after the Finnish government refused to cede any territory. The incursion was a watershed, as the country united against a common enemy.

Emerging from the devastation, the agrarian society — plagued by high levels of inequality and poverty — began rapidly transforming into an industrialized and urbanized Nordic welfare state. Despite the failed Red Rebellion a couple decades earlier, there was still broad-based support for left-wing policies. The restructured SDP, now “social democratic” in the postwar sense — working within capitalism rather than trying to go beyond it — was again a major player in the political arena. The party pushed through important welfare policies such as social insurance, disability care, and maternity assistance.

But advances seldom happen top-down, and the story of the Finnish welfare state is no exception. Fear of a radical left-wing uprising, under the shadow of the USSR, was one impetus for the welfare state’s expansion. Another was a growing awareness that transfers of wealth could be seen as an investment rather than an expense. This conclusion — originating within the SDP’s ranks — was borne out in the economy, and made it possible for Finland to build public services rivaling those of the much wealthier Sweden, eventually giving birth to major corporations like Nokia.

In the 1950s, mass protests and strikes forced the government to abandon plans to slash hard-won rights like child benefits, and to compensate for the disappearing communal safety net in rural Finland by expanding unemployment benefits. As a governing party, the SDP often found itself at loggerheads with its base, as well as with the increasingly influential — and only recently decriminalized — communists.

To the Soviet leadership, however, Finland’s non-revolutionary social democrats were traitors, pure and simple. For decades, other “openly bourgeois” party leaders of the newly formed nation enjoyed much better diplomatic relations with their eastern neighbor — most notably, Finland’s centrist, semi-authoritarian president Urho Kekkonen, the self-styled commie whisperer, who managed to stay in power for nearly three decades, until 1982. Kekkonen, who as a teenager had led a firing squad executing Reds, is even believed to have been a KGB agent (code name: “Timo”).

In the lead-up to the Soviet Union’s dissolution, perspectives began to shift radically. It was now the Soviet leader Mikhail Gorbachev who looked to the Scandinavian states as a model for his reform efforts.

The 1980s were the peak years of the social-democratic welfare state in Finland, and it’s not surprising Gorbachev saw much to admire and emulate in his Nordic neighbors. Paradoxically, it was also the era of the “casino economy” — the newly deregulated banks doled out cheap loans to anyone who would ask, and markets soared. Finland’s liberalization of capital markets mirrored global trends, but the SDP’s concurrent change in direction was also ahead of its time, preceding similar “Third Way” shifts in the UK, Germany, and Sweden.

The eighties boom ended, as most do, with a bust: a banking crisis, bailouts at public expense, followed by the crippling depression of the 1990s. With the collapse of the Soviet Union, Finland saw its exports plummet.

Under Prime Minister Paavo Lipponen, the SDP began to remodel itself along the lines of Tony Blair’s New Labour and Bill Clinton’s New Democrats, and his government doubled down on the neoliberal nostrums that had helped bring about the crisis. With the abolition of progressive capital gains taxation and the implementation of increasingly harsh austerity measures, Finland was set onto its current trajectory: downhill, and to the right.

True Finns, True Finland

It seems the international media never got the memo. Current news stories are stuck in the Finland of our childhood, in the 1980s. Though Finland is now an even wealthier nation, this growth has been channeled, since the 1990s, into the pockets of the rich, while the poor become poorer and more numerous. Fiscal sustainability is constantly, and dramatically, invoked as the bogeyman to justify public service cuts.

That the Finnish government has its population’s best interests at heart seems to be mostly assumed as a given, which makes for incredibly lazy reporting. News stories about Finland’s “innovative school reform” fail to mention that they provide cover for a brutal gutting of its prided education system and mass layoffs at universities, all with the ultimate goal of eliminating free higher education altogether. Reports about Finland’s experiments with a universal basic income buy into the government’s narrative — intended, in part, to distract from shrinking public services, health care privatization, and cuts that hurt the most marginalized.

While many imagine a Nordic utopia, Finland is presently run by a thin-skinned millionaire businessman with secret assets stowed away in tax shelters, family ties to companies on government contracts, and an obsession with media criticism of himself. Sound familiar?

And although Prime Minister Juha Sipilä isn’t trying to build a literal border wall, Finland’s inhumane response to the refugee crisis — along with its arming of Saudi Arabia — makes a mockery of all the centennial self-congratulation.

Sipilä’s right-wing coalition government hasn’t shied away from capitalizing on the xenophobic sentiment sweeping Europe, welcoming the once-marginalized Finns Party — translated originally, and more literally, as “the True Finns” — into the fold. The current defense minister, Jussi Niinistö, has openly admired the fascism of the 1930s Lapua Movement.

The erosion of egalitarian norms has extended to the rule of law. As a concession to the anti-immigrant Finns Party, the government tightened Finland’s already strict refugee policies to the point of flouting international treaty obligations and ignoring the laws of the land. The Immigration Service has separated families, locked up children and pregnant mothers, and sent asylum seekers back to conflict zones while their cases were still pending. Meanwhile, the government’s aggressive attempts to overhaul the entire health and social care system have repeatedly been rejected as unconstitutional. If they succeed, the damage will be hard to undo.

With the working-class base of the Finns Party feeling betrayed by their representatives’ acquiescence to austerity, the party has seen its support plummet in recent months. At the beginning of a chaotic convention in June, the Finns Party elected a new leader: Jussi Halla-aho, a far-right hardliner and crypto-fascist. But the government still would not topple: in an unprecedented maneuver, ministers from the Finns Party splintered, mid-term, into a new parliamentary group and continued with business as usual. We now have a party in power that didn’t exist during the election, and whose support among voters is a laughable 0.7 percent.

Having survived yet another scandal, the government went into PR mode, sanctimoniously denouncing Halla-aho and his Nazi-saluting minions — the very people they had partnered and governed with for two years. “We do not share the same values,” Sipilä declared in a press briefing.

Such ostensibly hostile (while in fact symbiotic) relationships between neoliberals and ethno-nationalists are increasingly common across the advanced capitalist world, from Clinton and Trump in the US to Macron and Le Pen in France. While the establishment plays good cop/bad cop to a bewildered and deeply divided electorate, the self-described centrists creep ever further to the right. And the strongest bulwark against the Right — robust, universalist social welfare policies — fall by the wayside. So much for Nordic exceptionalism.

The Finnish welfare state will not be dismantled overnight. Its principles are deeply rooted in the populace, and even codified in the constitution. On a more prosaic level, the overlapping interests of the administrative class, the trade unions and their leaders, and many in the political establishment serve as another layer of protection: there are still a great number of influential people, mostly hailing from the baby-boomer generation, who would not be served by drastic changes to the status quo. But what will the coming generational shift bring?

In the US, the trend is clear: young people are leaning left and loudly demanding the same rights that are guaranteed to their peers in Nordic countries. But while American youth place their hopes in the likes of Bernie Sanders and Nina Turner, Finland’s future leaders, who came of age as social democracy was neoliberalized, are looking to the Right. A recent poll found that, among Finns under the age of fifty, and particularly those aged twenty-five to thirty-four, the number one choice for prime minister is none other than Jussi Halla-aho, the nation’s most prominent far-right demagogue.

Happy birthday, Finland.