The Transformation towards a Competition State in Finland

1. The Transformation towards a Competition State in Finland Dr. Antti Pelkonen Research Group for Comparative Sociology Helsinki Institute of Science and Technology Studies Department of Sociology University of Helsinki CHANGING DYNAMICS OF SCIENCE AND TECHNOLOGY – FINLAND IN A GLOBAL PERSPECTIVE 6.10.2008

2. Structure of the lecture • The Finnish Model? • Presentation of the competition state theses (Bob Jessop, Neil Brenner) • Some examples of the transformation in Finland • Increasing regional and social inequalities • Growing state orientation towards innovations • Changes in regional development and policy

3. The Finnish Model? • Manuel Castells & Pekka Himanen (2002): The Information Society and the Welfare State. The Finnish Model. Oxford University Press, Oxford. • Presented Finland as a kind of model country in terms of successful adaptation to globalisation as it has been able to combine • a highly competitive, knowledge-intensive economy and • Inclusive welfare structures and policies. • The concluded that the Finnish welfare model survived the cutbacks of the economic recession of the early 1990s “fundamentally unchanged”. • They refer to new inequalities, but consider them more a threat than as a reality. • Do not pay attention to the strengthening of economic objectives and growing market-orientation in state policies.  A Finnish model or a Finnish competition state?

4. Introducing the competition state debate • Broad, ongoing, and partly highly theoretical academic discussion • Started in the middle of 1990s, continuing and strengthening until today • The core of the discussion deals with how states are responding to the challenges of globalisation • the growing integration of markets and the internationalisation of the economy, growing capital mobility and accelerating technological change • these have often been seen to substantially limit states’ powers and lead to a ‘race to the bottom’ • Competition state theorists consider that states are themselves transforming as they adapt to globalisation • But states maintain a central role in governing economic and social development

5. Competition state theses: common core arguments • There is a shift from welfare states to competition states • Welfare states: strong emphasis on societal issues, such as equality and redistribution of resources at the national level • Competition states: • Increasing focus on economic policies: social objectives become largely “subordinated” to economic concerns • Promoting innovations and enhancing national and regional competitiveness become core goals of state policy • At the regional level, also many cities turn “entrepreneurial”: enhancing economic competitiveness becomes an increasingly central concern for urban policy-making

6. Bob Jessop: Schumpeterian Competition State • The main aim of the competition state is to secure economic growth in the country • Transformation of state policies along 4 key dimensions: economic policy, social policy, geographical scale and the mode of policy-making. • Jessop’s main reference countries are: the US, Canada, North-western Europe, Australia and New Zealand

7. Bob Jessop: Schumpeterian Competition State • Economic policy becomes schumpeterian : primary concern with technological change, innovation and enterprises. • Strengthening the competitiveness of the national economy and regional economies becomes increasingly important • The development of a knowledge-based economy as a central objective that shapes political strategies • Social policy becomes subordinated to economic policy • focus on increasing the flexibility in the labour market • shift from expanding the citizens’ social rights to providing welfare services that benefit business development • these policies lead to increase in inequality and uneven regional development

9. Neil Brenner: Rescaled competition state • During the last 30 years Western European welfare states have been transformed into competition states • Main reference countries: Germany, the Netherlands, the UK, Italy, France, Denmark • Competition state: the state’s prioritisation of the objective of economic competitiveness over welfare goals (such as equality and redistribution) • Instead of focusing on redistribution, the competition state strives to promote economic development and enhance the competitive advantages of its territory (firms, labour force, technological infrastructure and most important regions).

10. Neil Brenner: Rescaled competition state • Brenner focuses on the regional dimension of the competition state • Rescaled competition state: the promotion of global competitiveness of cities and regions becomes a primary goal of the state. • The rise of urban locational policies: states see the most globally integrated cities and regions as key motors of national economic growth and prioritise them in national policies

11. Neil Brenner: Rescaled competition state • Since the 1980s the focus of states’ regional policies have shifted from promoting national and regional redistribution to the enhancement of the global competitiveness of major cities and regions. • Has resulted in increasingly uneven regional development • The growth of regional differences is considered as a necessary consequence of economic growth rather than as a problem that should be tackled.

12. Examples of the competition state in Finland (1): Increasing inequality • Both Jessop and Brenner emphasise that the policies of the competition state tend to increase regional and social inequality • Growth of regional differences and inequalities was strong in Finland in the 1990s • High tech growth concentrated in a few localities: Helsinki, Oulu, Tampere • Clear changes in the priorities of regional policy • Similarly, growth of social inequality took place in the latter part of the 1990s • Changes in the welfare system, but not dramatic transformation • Income differences have grown due to high level of unemployment and reforms in the tax system • Unemployment went up to 16 % during the recession in the early 1990s and remained relatively high (around 6-7 %) • Relative poverty has grown substantially and poverty has become increasingly severe

13. Examples of the competition state in Finland (1): Increasing inequality • In international comparison the rise of inequality has been particularly rapid in Finland • When OECD countries are ranked according to increase in household in equality between 1980-2000, Finland ranks 5th • In terms of social cohesion (health, income distribution, employment and gender equality) Finland ranks well below Sweden, Denmark and the Netherlands (Technology barometer 2007) • Yet, Finland still succeeds well in various comparisons of welfare and standard of living • UN human development index 2007: Finland ranked 11th

14. Examples of the competition state in Finland (2): Growing importance of innovations • Jessop: competition state focuses on promoting innovation, innovation systems and enhancing competitiveness. • The knowledge-based economy as key goal: prioritisation of high technology sectors and aim to increase the knowledge-intensity of the whole economy • In Finland, there has been a clear shift from science policy to technology policy and innovation policy • Currently Finland an international “model country” of innovation policy

15. Examples of the competition state in Finland (2): Growing importance of innovations • Science policy • aims at generating new scientific knowledge (basic research) • focuses on funding science and research in universities, promoting scientific education and needed infrastructure • Technology Policy • since the 1970s, but particularly throughout the 1980s in Finland • emphases the industrial application of knowledge and promoting technological development • focus on technology transfer from universities to industry, commercialisation of research, development of strategic industries and the most promising technological fields

16. Examples of the competition state in Finland (2): Growing importance of innovations • Innovation Policy • since the 1990s • focus from the development of technologies to their application and diffusion in the society • innovation seen as increasingly complex and interactive process, not similarly linear as in technology policy • broader view on the factors that affect technological development and innovation (e.g. institutional, organisational factors) • strengthening the commercial perspective • Broader scope: “the integral of all state initiatives regarding science, education, research, technology policy and industrial modernisation, overlapping also with industrial, environmental, labour and social policies” (Kuhlmann 2001).

17. Two major shifts towards increasingly innovation-oriented policies in Finland • Political decision to move from low-cost energy intensive production towards to knowledge intensive production in the late 1970s and early 1980s • Knowledge and knowhow were set to the core of the “national strategy” • Background: Finland was seen as a backward country in technological development, economic recession, increased international competition  Competitiveness through high quality products and technological upgrading • Strongly resourced technology policy was started • Landmarks: the establishment of Tekes (1983) and the Science and Technology Policy Council (1987) • Information technology, biotechnology and material technology were identified as key future technology sectors in 1980

18. Two major shifts towards increasingly innovation-oriented policies in Finland • Adoption of the “innovation paradigm” in the 1990s • The development of a national innovation system (NIS) was adopted as the central concept and objective of science and technology policy in 1990 • NIS: “all the factors that influence the development and utilisation of new knowledge and knowhow” • The production of knowledge and its utilisation became to be considered as a system • in which the interactions and networks between different actors are increasingly important and • whose main goal is to produce innovations • Provided a common framework for all policies that deal with knowledge production and diffusion • Has reinforced economic and commercial aspects of science and technology policy • E.g. universities’ increasing pressure to commercialise research results (universities having problems in filling up this task)

19. Current developments • Towards a broad-based innovation policy • Both at the supranational level (OECD, EU) and national level in different countries • Finland: National innovation strategy (June 2008) • Focus from the development of technologies and innovations to their introduction and application in all sectors of society • Innovations are increasingly seen as solutions to far-reaching societal and environmental problems, and not only as a source of economic growth • The scope of innovation policy expands and such issues as the production of public services, functioning of health care systems and human wellbeing become its targets. • The promotion of innovations is becoming a central objective across state policy sectors.

20. Challenges of the broad-based innovation policy • Balancing of the goals of innovation policy – such as productivity, efficiency, and creating new markets and business opportunities – and the various goals of other policy sectors which may be in conflict with these objectives • To what degree the development of a broad-based innovation policy implies a transfer of its goals to new sectors to which they may not be adaptable? • To what degree can other policy sectors be reasonably adapted to the promotion of innovation? • The need for coordination and collaboration between different policy sectors increases.

21. Examples of the competition state in Finland (3): Changing Finnish regional policy • Brenner: In terms of regional development, competition state starts to promote the global competitiveness of major cities and regions (instead of national and regional redistribution) • Leads to intensification of uneven regional development • Similar development clearly visible in Finland • There has been a shift from the goal of balanced regional development towards prioritisation of competitiveness and increasing regional differences. • Major shift took place in the 1990s

22. Examples of the competition state in Finland (3): Changing Finnish regional policy • Traditionally, Finnish regional policy has been closely linked to the aim of industrialising the whole country (public investments, state-owned companies etc) • The promotion of underdeveloped regions has been particularly important • Aim at balanced development of the whole country • Economic activities should not be concentrated in Southern Finland, but rather spread around the country • Regional policy priorities in Cabinet Programmes in 1980s and 1990s • 1983 and 1987: Promotion of balanced regional development, supporting the weakest and most problematic regions • 1991: less-developed regions were mentioned, but also increasingly the promotion of competitive centres of expertise • 1995: emphasis on the promotion of “strong growth poles that are competitive in the international markets”; less-favoured regions were not mentioned at all • 1990s: Efficiency, regional differentiation and competitiveness were prioritised over equality and equal treatment of regions • Success in the global economy became a criterion for regional development

23. Examples of the competition state in Finland (3): Changing Finnish regional policy The new policy includes the view that regional differences will inevitably grow and that balanced regional development is no longer such an important goal in itself (cf. Brenner) Regional differences and polarisation increased particularly during the 1990s Compared to other Nordic countries, Finland has an exceptionally pronounced regional polarisation (e.g. in terms of differences in regional unemployment rates) Yet, there has not been a very strong promotion of the competitiveness of major cities There has not been a clear prioritisation of a few major urban regions Rather than focusing on a few growth regions, regional policy has concentrated on developing a relatively large number of urban regions in the country In particular: the state stand towards the Helsinki region has been negative and there has been a confrontation between the state and the Helsinki region

25. Conclusion • Many policy changes that have taken place in Finland support the core arguments of the competition state thesis • There has been a substantial accentuation of economic goals with respect to state science, technology, regional and university policies • this rise of market-orientation is not limited to these areas but also a much broader phenomenon • Clear increases in both regional and social differences and inequalities • the question of the level of inequality that is tolerated by the Finnish society will be a crucial one • the issue of striking a balance between the economic goals and broader societal aims will be of central importance

26. Further reading • Pelkonen, Antti (2008) The Finnish Competition State and Entrepreneurial Policies in the Helsinki Region. Research Reports No. 254, Department of Sociology, University of Helsinki. • Brenner, Neil (2004) New State Spaces. Urban Governance and the Rescaling of Statehood. Oxford University Press, Oxford. • Jessop, Bob (2002) The Future of the Capitalist State. Polity Press, Cambridge. • Benner, Mats (2003) The Scandinavian Challenge: The Future of Advanced Welfare States in the Knowledge Economy. Acta Sociologica 46:2, 132-149. • Castells, Manuel & Pekka Himanen (2002) The Information Society and the Welfare State. The Finnish Model. Oxford University Press, Oxford. • Patomäki, Heikki (2003) An Optical Illusion: The Finnish Model for the Information Age. Theory, Culture & Society 20:3, 139-145.