Grandpa Lake’s Weblog

In January, 2006, I moved from America, my home for over six decades, to Finland.  The reason was to marry the woman I love.  I link to that story here, but this story is to describe my impression of Finland’s economic system.  I think of it as “socialist”, but a Finnish friend took umbrage to my description of it as such.

Regardless of what it might be called, the economic policies of Finland’s government results in a different life experience for those who live under it.  Whether that’s good or bad depends upon one’s point of view.  America’s politics has moved her economic policies far from those established by our founding creationists in the Constitution.  This move is in the same direction as that in which Finland has gone.  An American friend has asked me what it’s like.  Here’s my answer.

I think that Finland is poorer than the U.S.A. in natural resources, so it’s understandable that the job that pays $5,000 a month in the States will pay only 2,000€ in Finland.  That’s 60% less.  Consider that the shelf price of most goods here is about the same number of euros as the same item is in dollars in the States.  Enough items cost more that a recent American visitor noticed it right away.  Consider the pay difference and things cost about twice as much per hour worked.

It isn’t obvious that the higher prices are partially due to high taxes, for the sales tax is included in the price, although the total sales taxes on purchases are listed on receipts.  The base sales tax rate is 22%.  Food has a sales tax of “only” 17%.  A trip to the barber, only 8%.  (Haircuts are more necessary than food, aren’t they?)  Fuel taxes are charged by the liter, just as American fuel taxes are by the gallon. There are different taxes for different fuels and different grades of fuel.  Finland was the first country to impose a carbon tax. I buy gasoline, so I’m taxed 0.627€ on every liter, which is 2.37€ of tax per gallon.  Gas prices fluctuate here, just as they do in the States.  Currently, in my city, the cheapest gas sells for 1.469€ per liter or 5.56€ per gallon.  Depending on emissions, new car taxes range from 10% to 40%.  A 2007 Ford Galaxie 1.6 liter, 110 hp sedan costs 26,122€ including the tax.  You might say that this isn’t too bad, but keep in mind that the person buying it is making less than half of his American counterpart.

Finland has a significant income tax, too.  The poorest pay 13.5%.  A person with a salary of 2,000€ a month will pay about 25% in income tax.  A salary of 3,000€ a month will be taxed at 35%.  The government estimates how much they think you should pay.  If you disagree, you have to prove that you should pay less according to the law.  There are some deductions available.  As in America, if you spend the money you work for the way the government wants you to, they won’t take it from you (and vice versa).

I don’t know what the church tax rate is.  Church tax?  Uh, huh.  If you’re a member of a church, the government will tax you and give the money to your church.  Some churches are opposed to this tax, so their members aren’t taxed, but 81% of all Finns are members of the Finnish Evangelical Lutheran Church, so the church does well, considering that most members seldom “bother” the church with their presence.

The cost of living here is affected by other things, too.  In Finland, if one attends a commercial driving school to get his first license and can pass his driving test the first time, this will cost a minimum of 1,510€.  Sure, parents can teach their kid to drive, but the cost of being trained as a driving teacher and the cost of equipping the family car with dual controls discourages most.

One thing that the newcomer to Finland notices are the block houses, the apartment buildings.  I could be wrong, but it appears that most Finns live in these apartments.  Many own their apartments, so they could be thought of as condominiums.  Finnish apartments are considerably smaller than what one would expect to find in America.  An nice apartment for two people in central Finland (Jyväskylä) is about 500 sq. feet and costs less than 600€ a month.  The same apartment in Helsinki would cost more.  One such apartment building (ours) has refrigerators the size that one would expect to find in a camper.  But, it has a walk-in refrigerator at the floor level.  The apartment complex also has a sauna and small swimming pool, as well as laundry room.  (The swimming pool is a rarity among block houses.) There’s no extra charge for the washer in our building, but water bills here are 22€ per person per month where the normal charge would be 15€.  The spin dryer is separate from the washing machine, so the equipment is not as automatic as an American might assume.  The dryer is a room with clothes lines in it.  It has a heater on a timer to keep the air moving.  It can take two to three hours to dry your clothes.

If a Finnish family “moves up” economically, it’s likely to buy a row house.  Just as in America, row houses have a common wall between dwellings.  In a land with snow up to six months of the year, this is probably just an economic measure to save on heating costs.  Why aren’t there more single-family homes?  I suppose that the price of gas discourages commuting.  Single family homes are more expensive, too.  Property rights as Americans used to know them, and as the Constitution defines them,  are unknown here.  If the government thinks that you have too much land and wants to use it for something other than what you had in mind, they will offer to buy it from you.  You will accept.  This fact of life is a part of the mindset that the government provides what you need.

Parking in Jyväskylä discourages driving.  Street parking here costs 1.50€ to 2.00€ per hour.  Bicycle parking is free.  The city prides itself in being a “walking city”.  Yeah.  You can’t afford to use your car.  One could explain the popularity of bicycles here by the presence of the University, but that wouldn’t explain why you will see the elderly riding bicycles in the countryside.

That explanation, whatever other factors are involved, includes the fact that the elderly have a lower income and a higher tax rate.  Aren’t there buses here, you ask?  There sure are.  Tax subsidized, too.  A pensioner can’t afford to ride them.  In my city, a bus ride starts at 3.20€.  Out of my league, that’s for sure.  When we lived in a small village, it was common to see elderly people riding bicycles while empty buses went past them.  I suppose that the government bureaucrats congratulate themselves because they have made sure that there is plenty of public transportation.  I’ll have to admit that it bugs me to think that these elderly folks riding bicycles in the rain are paying some of the taxes that keep the empty buses on the road, but I’m a reactionary.

One thing that Finland has in common with the U.S. is that it’s cheaper for a person to drive his car somewhere than it is to take the train.  That shouldn’t be surprising though, considering that Finland has a state owned railroad and America’s railroads, although private, are government regulated up the ying-yang.

Regulation.  Finland has a highly regulated economy.  Most businesses are private, but are highly regulated by government bureaucrats that have no stake in the success of the business.  This will sound familiar to most Americans, even though there’s no authorization for it in the Constitution.  One thing I’ve noticed is that most “small” business is owned by a few large corporations.  Some individuals are able to start their own businesses, but many are discouraged by the regulations.  It often takes some time after a business is established before it becomes profitable, but there is no start-up wiggle room in a regulated economy.  Rules are rules.  Service people, such as barbers, beauticians, electricians and plumbers are often small businesses.

Finland has few motels.  I think I saw one on a hundred mile trip.  Cities will usually have one or more hotels, depending on their size, but these are used mostly by business travellers and tourists.  With the vast open spaces in this country and the price of gas, few are going to take a motoring vacation.  It’s the same with flying.  Our city of 120,000 people has an airport with one runway.  Finns like to travel, but they usually do so out of the country.

On the flip side, there are far more government benefits here in Finland than there are in the States.  We can start this part of the discussion with universal health care.

Unlike Canada, private health care is legal here, but it’s so expensive that only the very rich can afford it.  Most people use the public system.  Each resident is assigned to a local health center.  Mine is only a few blocks away.  Each doctor is assigned a certain geographic area.  No choices.  No second opinions.  But, I’m not complaining.  The first four visits to my doctor cost 11€ each.  After that, visits are free.  My specialist has his office at the hospital.  It costs me 26€ to visit him.  If I get hospitalized, I pay 9€ a day for the food.  That’s all.  (I asked the specialist about his training.  It is what I’d expect a U.S. doctor to have.)

About a year ago, the nurses in Finland decided to strike for higher pay, among other things.  Because most nurses work for the government, the government simply forbade them to strike.  Not to be outdone, the nurses organized a plan of mass resignation.  The government’s power play was to recruit replacement nurses from other countries.  Most folks in other countries don’t study Finnish.  Can you imagine what it would have been like to be cared for by a nurse who couldn’t speak your language?  It turned out that the pay the nurses were getting was so low that the government couldn’t recruit foreign nurses.  I’m not sure what resolved this crisis, but I think it had something to do with the fact that the Prime Minister got sick and needed nursing care while the negotiations were in progress.

Finland is heavily unionized.  Labor is organized, but so is business.  When labor and business work out their differences, the government enters into the agreement and passes laws requiring the same wages and benefits across the country.  What this means is that there is no job hopping for better pay or benefits, for it’s the same everywhere.  If the agreement isn’t realistic, the whole economy suffers.  The down side of this arrangement is that people are questioning why they should join the unions.  So, the unions are offering benefits that go beyond collective bargaining.  I can’t tell you what they are.

One group that isn’t unionized are the retirees, the pensioners.  Laws have the effect of requiring retirement at around 65.  (If you’re a truck driver and your license to drive trucks is revoked when you turn 65, what are you going to do?)  When a person retires, his income goes down and his taxes go up.  I was 64 when I arrived here.  The state employment office wouldn’t help me find work because I was so close to retirement age.

Finns get a lot of paid vacation, compared to Americans.  This cynical old boy has the idea that people don’t want to earn more, because that would just put them in a higher income tax bracket.  They want more time off with no reduction in pay.  Holiday (including vacation) time is not taxed.  Makes sense to me.

Education, whether it be university, technical school or trade school, is paid for by the Finnish taxpayer.  A student even receives a subsidy to study.  It’s very small, so students rent an apartment together, live at home or work while they study.  The government encourages students to take out educational loans so they can graduate more quickly.  Finns don’t graduate from school with as much debt as American students.  Unemployment rates are fairly high, so most students are afraid to go into debt, for fear that they may not get the jobs to pay the debt back.

Unemployment insurance is more in Finland compared to America and is available for a longer term.  Some Finns have adjusted their living expenses for their unemployment insurance and remain unemployed for a very long time.

Companies here pay sick leave, just as they do in America.  The difference here is that when your company sick leave runs out, the government (the taxpayer) will pick up the tab.  All you have to do to stay on the dole is to get a doctor to say that you’re too sick to work.  One would think that doctors, being on the government payroll, would hesitate to give someone who was not really sick a free ride, but 40,000 young men (0.8% of the population) are on government sick leave.  The government realizes that there is a problem here, but, as far as I know, they haven’t figured out what to do about it.

There’s a joke in Finland that says that if you see a man on a sidewalk smiling, you know that he is crazy, drunk, American or all of the above.  Another one says that you can identify a Finnish extrovert by the fact that he’s looking at your shoes instead of his own.  Humor has its roots in reality.  Jokes like these would go nowhere in America, but in Finland, they are funny.  But, humor aside, you get the common picture of an unsmiling Finnish male walking down the street with downcast eyes greeting no one along the way.  Why is this?  I don’t presume to know, but I can guess.  Male nature is innovative and risk taking.  The nanny state emphasizes safety and security.  In Finnish, safety and security are the same word.  You do what you’re told, obey the rules, don’t think outside the box and the government will take care of you.

Are all Finns like that?  No.  But those Finns usually move to America.  Two cases in point.  Eero Saarinen designed the Gateway Arch in St. Louis, MO.  Linus Torvalds organized the creation of a free computer operating system (Linux) that leaves Microsoft Windows (any version) in the dust, in the humble opinion of this computer professional.  The father of Nokia cellphones is one who didn’t leave.

But there is a difference between Finns and Americans.  Finland has never been free.  (Read the rest of this paragraph before you object.)  The original settlers were the Sami, who settled the northernmost regions of Finland, Sweden and Norway.  But most of Finnish society was settled about 1000 years ago by migrants from eastern Europe.  (The Finnish language is similar to only a few other languages, such as Hungarian.)  For 800 years, Finland was ruled by Sweden.  For another hundred years, she was ruled by Imperial Russia.  When Lenin led the Bolsheviks to victory, he set the Finns free to decide for themselves whether they wanted to be communist or not.  A year later, a civil war was fought over that issue.  The non-communists (Whites) won.  That’s a technicality.  Because Finland has so much of a collective nature in her government, it would be legitimate to think that the Reds won.  Finland is independent of foreign domination, but that doesn’t mean that she’s free.  When you’re free to do only what the government tells you to do, that’s not freedom.

When regulation of the details of one’s life becomes government policy, the mindset seeps down into all levels of government and private authority as well.  I have the sense that many Finns approach life with “What rules cover this activity?”

When you have a lot of regulation, you have a lot of bureaucracy and a lot of paperwork to help administer it.  When I wanted to marry here in Finland, the government wanted paper certification from my government that I was free to marry.  I had marriage licenses, divorce decrees and a death certificate, but this wasn’t enough.  I had to get a letter from the American Embassy stating that America doesn’t issue the document that the Finnish government wanted.  Privacy, American style, is unknown here.  How can the government regulate your life and provide for you in a “fair” system without knowing the details of your life?  A paperwork trail dodges the day-to-day life of the Finnish people.  The tragedy of this, in my opinion, is that Finns think that this is normal!

When there is so much regulation and paperwork, somebody has to administer it. There are many Finns who contribute absolutely nothing to the Finnish economy. These are the bureaucrats who shuffle papers, make certain that regulations are followed and who make sure that the tax money is “fairly” distributed among the Finnish people. My experience is that their prime concern is to make certain that there is enough in the treasury for the pay and benefits that the bureaucrats receive. It’s a shock when a Finnish taxpayer, who has paid high taxes for many years thinking that he’s helped to provide for poorer Finns, needs help. He then finds himself disqualified for that help on a technicality.

Americans, on the other hand have a legacy of small government, personal responsiblity and maximum freedom, but they are getting more and more accustomed to supporting more and more bureaucrats. In America, though, there is no Constitutional authority for most of these “workers”.  There are many who don’t want the nanny state in America and they are resisting collectivist efforts that will take their privacy and freedom.  Perhaps a solution would be to move those Americans who want the nanny state to Europe and to relocate freedom loving Europeans to America.

If a Finn says to himself, “Enough already!”, he must leave his country.  It’s easier to do these days, for the last several generations of Finns have studied English in school.  In America, if a state’s taxes and regulations become oppressive, the people can move to another state without much hassle.

California is so overtaxed and so over-regulated that businesses are leaving.  People are leaving, too.  So, the wisdom of the California legislature is to raise taxes and increase regulation.  Some Californians are not leaving, but are fighting.  But the U.S. Supreme Court’s “one man, one vote” decision made fighting the left coast a losing proposition.  This one-man, one-vote decision did away with the functional bicameral legislature where the House (or Assembly) seats were allocated by population and the Senate seats were allocated by county, thereby giving people in more rural areas a voice in their government.

When the over taxation and over regulation of Americans is done by the Federal Government, there is no country more free that most Americans can move to.  The only options are submission, political fighting, revolution or secession.

The Bible says that (the quality of) a man’s life does not consist of the abundance of the things that he possesses.  This means that you can be poor and happy.  You can also be rich and miserable.  There are happy Finns.  As an older man, I have some comfort in the government services that are available here in Finland.  But the fires of freedom still burn in this old chest.  I respect Finland and like the Finnish people.  I love one particular Finn with my whole heart, but my blood still runs red, white and blue.

Note: This article has been approved by my Finnish wife.