Finland: Battle over pensions as economic crisis deepens

For a new workers’ party!

Finland’s economy is rapidly tumbling downwards. The conservative government, led by the Centre party, is trying to use the economic crisis as an excuse for new attacks on workers. In February, the government announced a plan to raise the age of retirement, which provoked opposition and the threat of a general strike. There are signs of increasing class tensions, confirmed by the strike by Telia Sonera workers, in March, against the “rude personnel policy of the company” and lay offs.

Finland’s economic outlook is getting gloomier by the day. “The export and construction industries and those industries that directly [rely]…on services nosedived in October/November 2008. The recession has deepened during the past few months and the industries’ orders are only half of what they were last year. Exports for 2008 stayed at the same level as the previous year and this year the value of exports will decrease by approximately 15-20 %. GNP is predicted to fall by 3-4 % for the country as a whole. Compared to the beginning of the 21st century, the situation is now much more difficult, since the change is faster and more far-reaching. During the third quarter of the year, the economy will officially be in depression”, wrote the state-owned Employment and Economic Development Institute, a few weeks ago, in a report entitled ‘Risk that the Economic Recession will Develop into Depression in Summer 2009’.

But this gloomy prognosis has already been replaced by a new more dismal one. The think-tank Etla’s (The Research Institute of the Finnish Economy) latest forecast from 25 March warns that GDP may decline by 6.5% this year and that unemployment will rise to 9%. The construction industry (6% of Finland’s GDP) has collapsed, with private construction companies not building at all, for the moment.

During the years 1991-1993, Finland was ravished by its deepest economic crisis ever. GNP fell by 10.5 % during those years and unemployment rose from 3.5% to 20%. The crisis of the 90s was worse for Finland than that of the 30’s. The extent of the crisis in Finland was partly due to the collapse of the Soviet Union (1990-1991). The USSR had, until 1990, accounted for a fifth of Finland’s exports. In 1991, the Soviet market ceased to exist and besides the loss of markets, Finnish capitalism had to wrestle with the many financial bubbles that burst in the beginning of the 90s, huge indebtedness, and belt-tightening policies that worsened the crisis. It was not until 1996 that consumption reached the same level as it was before the crisis set in, and even during the boom that followed unemployment was, at best, just under 7%. The poverty resulting from the crisis of 1991-1993 has remained ever since.

Gap between poor and rich widest in industrial nations

Furthermore, in Finland the “gap between the poor and the rich has widened [since 1995] more than in other developed industrial nations, according to a new OECD report”, stated Helsingin Sanomats (International edition, 13 November 2008).

Finland is, once again, on its way to an economic depression. Today’s crisis is happening with the global crisis as a backdrop, making it impossible for Finnish capitalism to replace, as it did during the 1990’s crisis, lost markets with exports to other countries. Neither is it likely that Nokia can continue its expansion. Recently, Nokia laid off 1700 people, 700 of whom worked in Finland. There is already widespread mass unemployment among construction workers and a quarter of the Construction Association’s (Finnish construction workers’ union) members were jobless at the end of March. There is an imminent risk that unemployment in the sector, which accounts for 180,000 Finns, will rise to 50 %

The forestry and paper industry, one of the keystones of Finnish capitalism and accounting for a fifth of all exports “is approaching a structural collapse. Forestry is now producing a third less paper, pulp and sawmill products than in the beginning of 2008”. (Helsingin Sanomats International edition, 11 March)

Forestry giants, like Stora Enso and UPM Kymmenä have, despite profits, laid off workers and closed entire factories in Finland, during the last few years. Between 2005 and 2008, almost every third job was shed at both companies.

Last year, Stora Enso, which is partly owned by the Finnish state, shutdown its cellulose factory in Kemijärvi, in Northern Finland, despite protests, including an occupation of the factory and the municipal council’s demand that the government expropriate the factory. But Stora Enso closed its factory last year, and, with that, Kemijärvi was sentenced to being a ‘ghost town’.

Before the closure, official reports pointed to a potential rise in unemployment to 42 %, if the factory were to shut. But the government was not concerned with this, instead citing that “the free-market forces must prevail and an industry that cannot stand on its own two feet is on borrowed time” (Prime Minister Matti Vanhanen)

The very same Vanhanen also suggested in the beginning of the year that the retirement age should be raised from 63 to 65 from 2011. “I was out skiing and got this idea, so I called the Minister for Finance”, recounted Vanhanen, explaining why he wanted to raise the retirement age in an economy where unemployment is rising, particularly amongst those over the age of 56. Unemployment is rising faster for older people now than during the crisis of the 90s. The crisis has also lowered the average age of retirement, which stands at just over 59 today.

Government miscalculates on pensions

According to Vanhanen and the government, the change in the retirement age was a “question of principle” and they hoped to railroad it past the unions. But they had made a miscalculation. In the fight against the pension reforms, all trade union organisations united, demands were made for protest strikes and even the usually tame political opposition threatened to call a general strike. In one week, the unions gathered 172,000 signatures on a petition against the proposal

The government was forced in the end to back down, to avoid strikes and a potentially deep political crisis that could have meant the end for Vanhanen. Instead of an increase in the age of retirement from 2011, the ‘social partners’ and the government will together work out a new timetable for a future increase – by 2025 – of the retirement age by 3 years. That the unions brought the government to its knees was embarrassing according to one despondent Centre party member afterwards.

The trade union leadership, pressed into action on the pensions question, wanted to remind Vanhanen & Co that dialogue with the unions is necessary before such proposals can be considered. The union’s leaders did not, however, want to topple the government, but are still aiming for ‘consensus’ with the employers and the government, as well as a new social contract with the workers. At the same time, the parliamentary opposition is happy to merely ask for a little more economic stimulus.

The campaign against the pension reforms shows the strength the unions still have and what can be achieved through struggle. It is now necessary to move on and organise a similar campaign for jobs, against the constant stream of lay-offs and redundancies, cutbacks and wage deflation.

Workers in Finland lack a political party of their own that is prepared to fight against the economic and political elite. Trade unionists, together with other activists in various campaigns and grassroots movements, need to come together to take the first steps towards building a workers’ party with socialist policies that is prepared to fight against the government’s right-wing agenda and the increasingly aggressive stance of the employers.

The CWI in Finland fights for:

  • Trade unions must organise a mass campaign to save jobs and against cuts and right-wing policies
  • Shorter working hours – without a reduction in wages
  • No cutbacks – a one billion euro package for local authorities
  • Immediate increases in child benefit, unemployment benefit, social welfare payments and pensions. For a living student grant
  • Fight for a new socialist workers’ party
  • Nationalisation of big industry and banks under democratic working-class control and management
  • For a socialist plan of production – For a socialist society and economy run to meet the needs of all, whilst protecting our environment.
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