We must have cultural roots - but above all we need wings to bear us into the future.
The Parliament of Finland has wished to assume an active role in the discourse on the future of the nation. It has obliged the Government to submit a report on the future once each parliamentary term. In it, the Government defines its perception of the country's future and of the measures that will be needed over a time span of 5-15 years. Parliament has appointed the Committee for the Future to deliberate and reply to the Government's report. Parliament deliberates the Committee's report in session and adopts it with any amendments that have been made, whereupon it becomes a resolution of Parliament binding on the Government.
A further task of the Committee is to assess the social impacts of technological development on behalf of Parliament.
Parliament received the first report on the future in 1993. The Committee deliberated and replied to the report the following year. This time, the Government's report on the future is in two parts. The first, "Finland and the Future of Europe", was submitted to Parliament in autumn 1996 and the second, "Fair and Bold - A Finland of Responsibility and Expertise", which concentrates on our own country, in April 1997. This report by the Committee is its response to the first part of the Government's report.
The Committee has outlined the factors on which future success will be based and proposes measures, which Parliament approved during the session at which the Committee's report was deliberated, intended to enable us to grasp the helm of the future.
The Committee hopes its report will prompt an open and inspiring discourse on social models. We urge Finnish decision-makers to follow developments not only in Europe, but also in the rest of the world. By comparing present models with those looming on the horizon, Finland must choose and carve out the road to be followed. Passively waiting is dangerous.
It is useful to remember the past, to assess and analyse it, but the future must be made now.
Helsinki, 15 May 1997.
Riitta Uosukainen
Speaker of Parliament
Martti Tiuri
Chairperson of the Committee for the Future
Government and Parliament in Dialogue on the Future
As is the case all over the world, the basic tasks of the Finnish Parliament are to enact laws and approve the state budget. In spite of national difference, the division of labour between the governments that draft laws and budgets and the parliaments that approve them is approximately the same in all Western countries: governments submit proposals, which parliaments deliberate and adopt. The members of a parliament have the right to initiate legislation, but in practice the role of a parliament is to endorse initiatives or make minor amendments to them.
In periods of social transition, parliaments have far too often been left in the background relative to other actors. Quite many parliaments are engaged in a feverish search for ways of strengthening their status as representative institutions, to enable them to regain their position in the focal point of political discussion. That explains why so many attempts are being made to revise the ways that parliaments work and revitalise the discourse centred around them.
One method that has been developed in Finland is the presentation by the Government of reports to Parliament. Rather than introducing legislation in Parliament, the Government submits a report on some or other important social matter, such as rural development, energy policy (including the construction of nuclear power stations) and participation in EMU. This means that problems can be discussed within the context of bigger totalities than legislative proposals permit and above all in good time, when they are of topical relevance or can be pre-emptively influenced.
Dialogue between the Government and Parliament in the case of reports follows largely the same lines as with other legislative drafting. After a general debate in the chamber, the matter is referred to special committees for deliberation. The committees hear the views of experts and draft a report, which is presented in session. There it is either adopted or rejected, in addition to which riders or demands that the Government undertake certain measures can be attached either unanimously or following a vote. However, a report can not serve as a basis for a parliamentary vote of confidence in the Government.
Finnish parliamentary committees do not employ the rapporteur system with which we are familiar from the European Parliament. Instead, each committee has 17 members, all Deputies, who collectively draft the stance to be taken on each bill, budget, bulletin or Government report. All of a committee's reports are drafted as a result of cooperation between the 17 members. All members assume collective responsibility for them, unless a dissenting opinion on some part of a report or a proposal that it be rejected altogether has been recorded. This report by the Committee for the Future, a reply to the Government's report, was unanimous. It was also adopted in session without a vote.
The formation of the Committee for the Future is the latest means found to strengthen parliamentarism and political discourse in Finland. By replying to the Government's report on the future, arranging seminars and through other measures, the Committee can prompt a highest-level debate on general or special themes that would otherwise remain in too disadvantaged a position in political discussion or in relation to which the role of Parliament might be merely the passive one of waiting for a proposal from the Government.
TuVM 1/1997 vp - VNS 3/1996 vp/Eng
On 2 October 1996, Parliament sent the Council of State (Government) report part 1 VNS 3/1996 vp "Finland and the Future of Europe" to the Committee for the Future for deliberation and preparatory drafting.
The following persons have appeared before the Committee, which has heard their opinions: Minister Arja Alho, Project Director Paavo Löppönen, Docent Jan Otto Andersson, Professor Risto Eräsaari, Professor Eero Holopainen, Professor Antti Kasvio, Professor Eero Paloheimo, Professor Eino Tunkelo, Research Professor Jouko Tuomisto, Professor Osmo A. Wiio, Technology Director Markus Koskenlinna of the Technology Development Centre (TEKES), Research Director Matti Kärkkäinen of the Finnish Forest Research Institute, Doctor of Philosophy Hannu I. Miettinen, Doctor of Political Science Juha Siltala, Doctor of Political Science Osmo Tuomi, Licentiate of Political Science Jaana Venkula, Mayor Elina Lehto, Managing Director Asko Siukosaari of the Finnish Association of Advertising Agencies, Managing Director Kalevi Sihvonen of the advertising agency Brand Sellers DDB Oy, Managing Director Pekka Ylä-Anttila of Etlatieto (Research Institution of the Finnish Economy), Researcher Ilkka Tuomi, Editor-in-Chief Erik Wahlström, Editor Sari Kuvaja of the Green Cultural Association, Editor Johanna Karhunen, Special Researcher Teija Tiilikainen of the National Defence Academy, Consultant Counsellor Olli Saarela of the Ministry of Education and General-Secretary Reijo Viitanen of the Ministry of Education's advisory committee on youth affairs.
On 5.2.1997, arising from the Council of State's report on the future, the Committee arranged a public hearing for political parties at the Parliament Building. Those whose opinions were heard were: Sanna Vallinen, member of the executive committee of the Social Democratic Party, Esko Aho, Chairman of the Finnish Centre, Maija Perho, Party Secretary, and Juha Rintamäki, Deputy Chairman of the National Coalition Party, Satu Hassi, Member of Parliament, and Sirpa Kuronen, Party Secretary, of the Green Union, Kalevi Suomela, member of the working group on the future, of the Union of the Left-Wing Alliance, John Burstein, political secretary, of the Swedish People's Party of Finland, Milla Kalliomaa, Party Secretary, of the Christian League, Janne Jutila, managing director, of the Young Finnish Party, Urpo Leppänen, M. Pol. Sc., of the Basic Finns, and Olli Hunkuri, apprentice, of the Virtanen parliamentary group.
As part of its work of following the development of globalisation, the Committee has also arranged video seminars with countries or regions that are of major significance from the perspective of international development and/or represent those that seem set to enjoy success in the future (Success Models part 1: South-East and East Asia 1996). Further seminars will be arranged with at least China, Latin America and the state of Wisconsin, USA. With the latter, which resembles Finland in certain respects, a penetrating comparative study of sub-factors in success, such as employment, will be made.
Perspective, working method and remit
The report drafted by the Committee for the Future will create a basis for assessing the future of Finland. The matters afforded most attention in it are the trends, opportunities and threats affecting the future of the world and Europe.
The more comprehensively phenomena with a bearing on future developments can be brought into the political debate - and even occasionally expressed in extreme terms - the more fruitful will be the foundation created for an examination of Finland's future. For that reason, the Committee has striven for a presentation that includes views from many quarters and in part even prompts contradictory feelings.
It has been difficult to delineate the scope of the study. The Committee has consciously concentrated on economic issues and themes closely associated with them. The most demanding challenges facing us at the moment arise from the economy.
The scope set does not mean that the Committee regards such matters as the environmental challenges facing the world and population problems as being of lesser importance. Environmental matters and demographic developments were dealt with extensively in the Committee's previous report (1994), and it was decided to choose a different emphasis on this occasion.
Less attention has been devoted to security policy, because it has been the subject of a separate government report. Since Parliament has a separate committee for dealing with matters relating to the European Union, this aspect has likewise been given little attention in this report.
The Committee has chosen success - success on the part of Europe and consequently also Finland in the third millennium - as its leading theme. For purposes of comparison and to open up the discourse, the Committee has established links to research institutes abroad and to other individuals and bodies that are considered to have knowledge and insights of significance from the perspective of assessing the future of Finland.
A prerequisite for success is recognition of trends and the atmosphere in and threats to the economy and society more broadly - also of those features that can not be considered desirable from the perspective of welfare. They have been described as challenges, to which we must be able to produce an effective and timely response.
The report and the ensuing parliamentary debate on it create a good foundation for deliberating the state of our society and its development.
A successful dialogue between the Government and Parliament on the subject of the future will add further value to the fact that Finland is a pioneer in this segment of parliamentary work. Activity on the part of the Government in presenting initiatives will be a basic prerequisite for the success of the dialogue. The Committee emphasises the importance of developing new forms of parliamentarism.
Finland differs from other countries in having no "think tanks" - institutions devoted to political assessment and analysis - if one disregards those engaged in economic research. At its best, the future-related work associated with this report, and which assumes many forms and involves experimentation with new modes of work, will fill that gap.
In the view of the Committee, the Government's report is in part too narrow with respect to the premises on which it is based. First of all, Europe is understood mainly as being the European Union only. Secondly, world-wide problems, which Europe and Finland share in a globalising world, have not really been dealt with. Globalisation has been analysed well as a concept, but its significance has not been adequately internalised.
On the basis of what has been outlined above, the Committee has considered it most appropriate to take the discourse forward in those areas that have either not been touched on at all or else are dealt with too narrowly in the Government's report.
Prediction, preparation and taking matters in hand are virtuous things. But they are not enough on their own to ensure success, that the preconditions for a good life are satisfied. In order to be able to sustain development and build up welfare on a basis of equity, we must strive to be in the vanguard of development in the fields in which our expertise is strong. We must grasp the helm of the future. That is a condition that must be met, by both Europe and Finland, by states and peoples, to ensure success in the coming millennium.
Although in many respects governance of the future means sensible adaptation and wise adjustment, the starting point must be an initiative-generating endeavour to guide and direct future development in a way that enables ethical and ecological goals to be implemented.
As part of Europe and as part of a globalising world, we Finns must make choices on a daily basis. It is to be hoped that the best possible knowledge of what is being chosen and on what grounds, and of what kinds of consequences can result will form the background to the choices made. Only in that way will those who make decisions in companies, various bodies in society and families be able to bear their genuine responsibility for ethically and morally sustainable development.
Rapid technological development in the industrial countries has led to a situation comparable to the Industrial Revolution. The industrial society that has been in existence for a couple of hundred years is in transformation into a knowledge society. What is that? It is above all a society in which knowledge and skills have become raw materials and their importance as success factors surpasses the other factors of production. Knowledge is systematically applied in the functions of the society. New knowledge is acquired by means of scientific and applied research.
Knowledge itself is not what matters most, but rather the way in which it is used. Like any other instrument, it can be abused. The ongoing transition from an industrial to a knowledge society means a society of expertise, insights and understanding.
A society, a company or any other player is efficient and dynamic if, in a swelling flood of information, it is able to refine and exploit data. Analysing information is becoming increasingly important.
The problems of the transitional period are complex. From the perspective of the whole planet, a vital problem awaiting a solution is the state of our environment. In industrial societies, a rising standard of living has been regarded as a more important goal than sustainable development, even though there has been an awareness of the extent and gravity of environmental problems for a long time. Advancing climate change and associated problems like a weakening of the Gulf Stream and dwindling biodiversity, acid precipitation that is harming the environment and emissions of fine particulate matter that are endangering people's health, are global in scope. We have not made much progress beyond a beginning in solving them. The advance of the knowledge society and intensifying international cooperation provide new means of finding solutions. Nonetheless, solving problems will require changes in attitudes and structures, enormous inputs of financial and other resources as well as agreements that are observed.
Global development-related questions await resolution. We are consuming natural resources at an accelerating rate beyond their capacity for renewal. Production and consumption structures as well as the economic systems that regulate them, and which do not take account of environmental costs, are, together with population growth, accelerating depletion of natural resources and at the same time exacerbating local environmental problems. The disappearance of forests, desertification, erosion, water pollution and soil chemicalisation are consequences of unsustainable development. In the future, incorporating the environmental perspective in economic activity will steer development in the right direction.
Growth of the global population and increasing consumption have demanded that an ever greater share of the original natural environment be diverted to the use of humankind. This has led to the threat of a loss of biodiversity. Population growth has begun clearly slowing down in recent decades, but it is probable that the global population will reach nearly double its present level before growth ceases. A reduction in levels of poverty both globally and locally is a prerequisite for bringing population growth under control. Because population growth is fastest in the developing countries, the main focus of attention must be on helping and supporting them.
In the industrial countries, the development of information technology and automation has led to the number of workers in the industrial sector falling rapidly at the same time as output is growing strongly. Structural mass-unemployment has afflicted many countries. However, as old jobs have disappeared, new ones have constantly emerged to replace them. The problem is that the supply of labour and demand for it do not meet each other.
The globalisation of the economy has already reduced the opportunities available to nation-states to assume responsibility for their citizens' wellbeing. More and more important decisions are being taken on an international level beyond the reach of nation-states, mainly within the circles of economic players. The governments and parliaments of individual countries can feel that they have been relegated to the role of mere yea-sayers and accommodators, even though in fact they still have opportunities to act. In the final analysis, responsibility for the course chosen always resides with the political decision-makers. Democracy and the political system can not be kept healthy for long unless, alongside a globalising economy, we can develop on an equivalent level a democratic system of control and monitoring that guarantees ecologically and socially sustainable rules of operation for markets and leads to a more equitable distribution of resources globally. The credibility of political action is weakening - the legitimacy of decision-making is declining to too low a level - in relation to the problems that need to be solved.
Globalisation in all of its extent is challenging nation-states to revitalise themselves. Many important matters, such as environmental protection or the ground rules of the international economy, require decisions on the level where the problems appear. Therefore there is a need to develop decision-making in global and large-region contexts. The national political system must be developed in a way that enables us to steer the formulation of decisions in the direction we wish, even if those decisions are taken outside our own country. As globalisation advances, care must also be taken to ensure that national democracy is strengthened to enable it to function in the knowledge society.
The more difficult the problems that Europe and Finland have to face in the future, the more important the effectiveness of the political system and its capacity to function will become. Without people, their contributions and support, we shall not be able to cope with the transition phase in a manner that respects our European heritage.
Always present when the future is being assessed are the menacing images to which powerful change gives rise. The present decade has seen books that describe the end of history, the end of nation-states, the end of work and the end of democracy achieve global success. Presenting future threats is often essential in order to get a serious discussion started, but it must not be an impediment to active action and will in efforts to bring about change. Future changes will not happen on their own; people will make them happen. Hope and trying - to the end, time and time again - are the foundations of human existence and the sparks and accelerators of change. Values that incorporate responsibility for people and the environment and wise governance of affairs will keep change on the right course from the perspective of people, even if that change does not happen in the way that we would wish or have predicted.
2.1 Four permeating success factors: globalisation, knowledge and technology, the human aspect in innovation, and governance of matters and of life
In its deliberation of the Government's report on the future, the Committee for the Future underscores the importance of the prerequisites for success that Europe and Finland must satisfy. If the continent and its peoples are to be prosperous, all will have to contribute their work and there must be a more even division of labour. Only with the aid of work will it be possible to utilise all of the resources available and thereby ensure the future prosperity of us all.
The Committee takes the view that the future of Europe and Finland will be determined by the general development of the whole world. The lines chosen by the Finns and the Europeans will influence the global development. Thus we also bear moral responsibility for the effects of our choices on the rest of the world around us. Already discernible in this world of internationalism are factors that appear to transcend the others and that are presumably so powerful that they influence all other factors. They are:
1) globalisation
2) information and technology
3) the human aspect in innovation and
4) governance of matters and of life
Each and every one of those all-permeating factors with an influence on success in the future has a background assumption of tough - downright merciless - work and competition. However, success must be seen as a concept that is considerably broader in compass than economic success. Success on the part of an individual or of a community is the achievement of the goals that they themselves have consciously, and in part unconsciously, set. Success by a society means providing the preconditions for a good life for citizens. Improving opportunities for citizens to participate and increasing equality, environmental sustainability and fairness are characteristic features of a successful society.
If the assumption that globalisation together with knowledge and technology will be of decisive importance for the development of third-millennium Europe is along the right lines, the successful will be those peoples, companies and individuals that prepare for them best. And if the assumption that internationalism and technology based mainly on new knowledge and skills will permeate other sectors of production and determine the other conditions of communities' and individuals' success is correct, we ought then to be able to prepare by means of research, training, investment and attitude changes on all levels and in all quarters in society. Unlike in the past, it will not be enough in the future for an economic or political elite to be aware of the course being followed. As many citizens as possible will have to be able to take part in determining and making change in the fields of the economy, science, politics and civic activities.
Change will be difficult, because it will not be limited with respect to extent, depth, geographical scope, time or other factor in the same way as, for example, during the period of industrialisation in the 19th century. Industrialisation advanced fairly slowly in time and place. National governments and leading figures in economic life were able to steer it. Distortions and mistakes could be corrected by means of national economic, tax and social policies. Globalisation, guiding and monitoring new technology and the other major factors of transformation, is problematic also because the traditional instruments are no longer at our disposal. The significance of the guidance and decision-making mechanisms developed by nation-states in the course of the past hundred years to regulate the economy, production and implement, for example, social equality has declined and new means are not yet sufficiently developed. The new players are not always physically identifiable, they are not linked to any state, they have neither homeland nor domicile, nor do they necessarily embrace the same moral and ethical values as today's players. Rather than goods, exchange - and with it prosperity - are founded on expertise, knowledge and skill. Of course, these are often transformed through a complex process into physical production of everything right down to everyday consumer goods.
The prosperity of Europe is more and more clearly dependent on how the rest of the world develops. In the view of the Committee, global development factors should have been examined in the Government's report rather than merely focusing on Europe.
Wisely adapting to globalisation and technological upheaval will be enough to ensure that Europe survives. Success will demand more. There will be a need for new ideas, inventions, models of thought and above all their implementation, i.e. innovations. A renewal of society must be carried through. That process of renewal must apply to both individuals and communities. Europe has the special moral responsibility and privilege to be the birthplace and developer of a humanely and ecologically functioning society and economy. Europe is also the cradle of the Industrial Revolution and globalisation. That is why we are the first to encounter the employment, welfare, environmental, economic and other structural problems that are now afflicting the industrial society.
Keeping a society innovative is not an easy task. The degree of innovation can dwindle imperceptibly also in societies where economic indicators and other criteria of wellbeing have always been among the best. In many respects, Sweden has been regarded as one of the more successful states in the 20th century and a pioneer in several fields - including social innovation. When the World Bank and the OECD published GDP per capita statistics at the end of 1996, they showed that in only a few years Sweden had slipped down the scale from being the world's sixth-wealthiest to 20th, placing it among the poorest states in Europe. All who have visited Sweden can see with their own eyes that GDP per capita figures do not tell the whole truth about the country's level of prosperity. Nonetheless, the statistics sparked off an extensive self-critical debate in Sweden. The causes of the problem were pondered in the editorials in the country's main newspapers. The main argument presented was simply that Sweden has become a society where ideas fail to take wing and get nowhere.
Although the success of Europe and Finland was chosen as the point of departure for the Committee's report, that does not amount to adopting the position that the future is to be examined only in the light of economic success. There must be a continuing discourse on what kind of success, growth and progress the people of Europe should strive for in their economic and political actions. For what purposes should science and technology be harnessed? How can economic growth be increasingly immaterial rather than material?
Satisfaction of people's basic needs must be guaranteed for present and future generations on a basis of sustainability. That means that 1) the pace at which renewable natural resources are used must not exceed the rate at which they are replenished; 2) the rate at which non-renewable resources are used must not outstrip the rate at which sustainability-based substitute materials and products are developed; 3) the level of emissions must not exceed the capacity of the environment to absorb and neutralise them; and 4) humans must not through their own actions accelerate reduction of biodiversity.
A development of the kind described in the foregoing prompts us to assess the fourth basic factor on the basis of which success will be determined in the future. If globalisation and technology can be described as being (looked at from the perspective of the individual) development features that apply rather like a natural law, and which we in Finland can influence to only a limited degree, the unifying factor in them, and one that is based on the activities of people, must be highlighted as being governance of matters and of development.
Governance is a combination of the many means by which individuals and communities, private and public, arrange their common affairs. It means constant effort, in which conflicts and different objectives are reconciled and resolved. Governance includes official institutions that have been given the power to arrange matters, if necessary using coercion as a final resort. It also includes unofficial arrangements, by means of which people and their institutions independently pursue their causes and organise cooperation between themselves.
Governance of matters is important both in people's lives and in the activities of all of the different kinds of communities that they form. The more complex and confused the world grows, the more important governance of life and purposeful management of change become. To resist feelings of uncertainty and the marginalisation and despair that result from them, individuals, families, states and other communities must recognise changes in society and find their own survival strategies. We must be able to live amid change, learn new things and build trust between people.
Governance is a more demanding success factor in relation to our future than globalisation and new technology, because one cannot adapt to it in the same way as with globalisation, nor can it be bought or at least easily learned from others, as is to some degree the case with technology. Governance is a phenomenon that includes many levels. At the highest level, it means taking care of the central development factors relevant to the entire globe, such as sustainable development of the relationship between humankind and nature. On the level of states it is more closely bound to time and place than on the global level. Within states, on the regional and local level, it is a skill that leans heavily on its social and cultural background and is the result of a collective will.
No clear practices to be followed have emerged for global-level governance. Nation-states cling to their sovereignty. Various ideas about creating a world government have been put forward from time to time, but they have not gained sufficient support. At the moment, the procedures of governance are best and most effectively organised on the levels of states and families, which represent the extremes of large- and small-scale administration.
Since the collapse of real socialism and the end of the Cold War, the players in world politics and the ground rules of governance have partially changed. The economic sector and globally-operating large companies have acquired a completely new position. They do not constitute a coherent organisation nor even a network, but a certain kind of value community is built around them. This value community represents, in the final analysis, economic values. Owing to the dominant power position of the economy, other values have been left in the background.
With the value of the market economy dominating, it is actually within the economic sector itself that consciousness of a need to ponder moral and ethical responsibility for the development of the world has awakened. Some corporate executives have realised that large companies cannot because of their dominant position thrust responsibility for the environment, poverty and unemployment onto others. An example of this new acceptance of responsibility by the economic sector is the World Business Academy, the governing body of which contains representatives of industry, business and the academic world. The organisation publishes a journal entitled Perspectives. George Soros has published an extensive series of articles in newspapers, including a Swedish one, in which he predicts capitalism will destroy itself unless it takes account of democracy and values other than merely those internal to the economy.
When governance of change is examined from the highest to the lowest decision-maker and player, group of people and citizen, the significance of learning must be emphasised. The practices of governance must be learnt over and over again and knowledge and skills transferred to the next generation. Examples of a lack of governance are, on the family level, young couples (called the new helpless), who do not know how to boil potatoes, but also 50-year-old men who have been operating complicated machinery all their lives, but claim to be unable to switch on a computer at work without a secretary's assistance, or housewives who are versatile in the use of food processors, but seem unable to get a videorecorder switched on. An example of a lack of governance on the macro administrative level is the paralysis to the point of inaction that the EU and nation-states demonstrated when war erupted in Bosnia in the heart of Europe.
2.2 Rapid change in fundamental premises makes the future difficult to predict
The starting point in governance of the development of society is knowledge of the state of the Finnish economy and society and of the development trends that they are following, in addition to an assessment of the equivalent phenomena in the international system that influence the situation and development in Finland. The various alternatives for the future must be raked over extensively. A reality that globalisation has brought into sharp focus is that states must divert their gaze from the present to the future and develop a better ability to assess the long-term impacts of decisions. This has long been the everyday reality of companies operating in open markets.
The onward march of globalisation and the rapid breakthrough of new technology are being reflected in society, in all of its sectors and on every level. It is no longer a special matter for futurologists.
Predicting the future, also forecasting economic and political developments in Europe, is becoming more difficult as many of the assumptions, also central ones, concerning the economy and society, have to be abandoned. In place of permanence has come constant change. New assumptions on which activities are based become outmoded within a few years. There is an inability to react to change early enough. Countries that enjoy strong economic growth and prosperity can be quickly plunged into a downward spiral of recession, states can fall into debt, banking collapse, companies' competitiveness weaken and people's standard of living fall. Environmental catastrophes, uncontrolled migration, internal disintegration of societies, violence, nationalism, international crime and epidemics are confronting societies with unpredictable problems. And all that in quite a short time. In earlier times, the cause of sudden major changes was always war, rebellion or some other profound upheaval in the power system. Now the causes are often economic and everyday in character, for which reason they are not so easy to notice. As long ago as the 1970s, the Oil Crisis was one of the earliest harbingers of this kind of change.
Europe and Finland have been regarded as regions of stable social development. Yet the banking crisis in the early 1990s, the financial difficulties of the public sector and high, structural unemployment came like thieves in the night. Similar phenomena are today everyday realities in many European countries, also large ones, that had strong economies (e.g. Germany and France). Fortunately, the safety nets that the Nordic welfare society provides cushioned the effects of the recession on the everyday lives of citizens. Finding and implementing functioning structural solutions is a difficult task.
Forecasting economic development is an uncertain art. The effect of economic growth on job-creation has come in for strong criticism. Our structural unemployment is at such a high level that economic growth on its own will not be enough to eliminate the unemployment problem. Also other measures will be needed and the content of economic growth must be focused so that it supports employment.
In Finland, the inadequacy of economic growth as a means of solving unemployment can be clearly seen. Our economic growth rate is close to the head of the European league table, but our unemployment figure is likewise one of the highest. The possibilities available to a national government to remedy unemployment through the means that national economic policies provide are losing their credibility. A good example is the Pekkanen working party appointed by President Ahtisaari. At that time, the belief in most quarters was that growth would solve the unemployment problem. The only uncertainty related to the amount of growth. It has taken only a few years for confidence in this assumption to disappear. The same makers and interpreters of economic forecasts who saw economic growth as the solution only a couple of years ago now point to what they see as a self-evident fact: that the economic growth of 4-5% forecast for 1997 will have hardly any impact at all on mass-unemployment.
A belief that has been firmly held in Finland throughout the 20th century is that economic and social development features a succession of recessions and booms, and that each boom redresses the damage that the preceding recession has caused. Hardly any reforms of structures have been effected. Politically, the importance of structural reforms is recognised, but carrying them out is difficult. Opinions differ on what kinds of structural reforms are needed. In the light of many economic indicators, the recession of the 1990s gave way to an upswing already over a year ago. The GDP reached its highest-ever level in 1996. Industrial output is high compared with the EU and OECD countries. Yet half a million people are without work and the State's financial problems remain unresolved. In the background are the structural problems of economic activity and of society as a whole.
(Kuvio)
INDUSTRIAL OUTPUT
1990=100
Finland
OECD
OECD
Europe
Figures seasonally adjusted
The assessment is that the unemployment problem may not be solved until the large age-cohorts born in the post-war "baby boom" years retire. That way of thinking merely changes the label that has been applied to the problem. A dwindling active population will have to take care of financing pensions. At the same time, however, Finland will have to be an enticing country for companies to locate in, Finnish companies will have to be competitive, export earnings will have to be at an adequate level and in general society will have to be on the road to progress and innovative.
Examples show that when the laws that have been traditionally assumed to guide affairs have lost their validity, they must be openly questioned and new ways forward looked for. Some European countries have been actively seeking new means. A difficult and complex fundamental question is to what extent lowering unemployment is a matter that is within the ability of the state to take care of. An answer must be found to the question of how to manage the unemployment problem in this new situation. How can the human resources of retiring people be brought into active use?
Assessment of the fundamental assumptions on which economic and social actions are based and questioning them will require new methods and procedures also in politics and running the state. At regular intervals, we must review the lines that actions should follow and ask what is to be done and whether what is being done now is essential. We must take a stance on the tasks of the state and put them in order of priority. The idea is the same as what some countries meant in the 1970s when they adopted zero-budgeting. For there to be room and resources for new actions that strengthen the success factors of the future, something of the old that is of lesser importance will have to be given up. For that purpose, the situation will have to be set to zero from time to time.
An argument recently put forward on the basis of Britain's experience is that the welfare of societies can no longer be gauged using GDP criteria at all. Things can be going well for an economy, but badly for citizens. In the future, the welfare of nations should be measured using the concept of wealth, which is broader than gross domestic product. Wealth is the sum of those matters that citizens esteem. In addition to the economy, it includes also the social and political spheres. A nation that makes some rich but throws others out into the cold has failed in the creation of general wellbeing and wealth.
As a counterweight to GDP-based measurement of welfare, wealth- auditing methods and indicators that measure wellbeing and development have been devised. An annual wealth balance sheet takes account of not only gross domestic product, but also includes a natural resources audit, an estimate of the environmental costs that have been caused and of the state of the living habitat and an evaluation of labour use. The development and welfare indicators further reflect various dimensions even more broadly; these include income distribution, basic security of livelihood, educational level as well as life expectancy and state of health. Those indicators provide a better way of describing the real standard of living, citizens' social opportunities and the state of the nation.
2.3 Taking the helm of the future - a step ahead
Europe has been described in various horror scenarios as an old sick continent, which in clinging to its glorious past is incapable of self-renewal. A counter-argument presented is that Europe does not necessarily always have to be in the vanguard of economic growth, science and other success, because the position from which we started out is so strong. When the latter argument is presented, the comparison made is with countries and continents that are only taking the initial steps on the road to prosperity. It will take a long time before they achieve Europe's standard of living and also in those countries rapid growth will sooner or later encounter the same structural barriers as in Europe. A further counter-argument presented in the same context is that there is enough prosperity, even in times of slower growth and recession, at least over the long term, especially if one compares it with social conditions in Europe in the early years of the century or in wartime.
However, Europe is not by any means merely an adapter to international economic competition. It also has opportunities to build lasting prosperity for its citizens, succeed in international competition and solve its environmental problems.
Unless it sets itself the goal of socially and ecologically sustainable economic growth and access to knowledge, and through that reaching the vanguard of success that improves human life in other respects, Europe will presumably be making a grave mistake. Wise globalisation means assuming a pioneering role. A society of trust founded on a high level of prosperity on the part of its citizens together with constantly developing education and culture will be deliberately elevated to the status of competitive trumps. In ecologically sustainable production, natural resources will be used sparingly and success factors will be created by means of environmentally-friendly products founded on advanced expertise. Constant reform will be supported by changing the structures of the economy, for example shifting the emphasis in taxation from work to consumption of natural resources. That will also support job-creation. That is the way that long-term real competitiveness will be created. It will be possible for Europe to enjoy lasting success in the global economy whilst at the same time innovatively reforming the structures of the economy.
Economic growth, expertise, innovation and other success factors are accumulating more strongly than in the past. Exploitation of some invention or other, taking over an entire sector of industry, creating a top-level unit in science or founding a modern city with all of its infrastructure does not take nearly as much time as a few decades ago. Global markets facilitate large-scale production, profits and capital for new investment. In a decade of growth at 5-10% per annum, the Asian Tigers achieved nearly the same level of wealth as many European countries had done in a century. The present and the future differ from the past in that the borders are open for world trade and consequently Europe now has a greater responsibility for influencing the shape of the ground rules under which that trade takes place. Opportunities to do so are likewise greater.
In the knowledge society, time and place no longer impede interaction and cooperation between people to the extent that they did in the past, nor do they prevent the decentralisation of research and development to many parts of the world. Manufacturing can be located wherever it is most advantageous to do so. Research and development can be done wherever it is likely to receive the inputs most conducive to creating products that will enjoy success in the future.
There is also a substantial difference between Europe and the rest of the world in the demographic sense. The populations of competitor countries and regions are young and several times bigger. This aspect has obvious effects on economic life, production and markets as well as on the innovation base.
The world has become one big marketplace for not only goods, but also expertise and innovations. Researchers into corporate management speak of modern legal industrial espionage when they describe efficient acquisition of new know-how. The companies at the top must always stay a step ahead of the others. With the speed at which new products emerge having increased, products and expertise become obsolete earlier than in the past. Lagging or falling behind are also cumulative in their effects. If a region, country or continent does not offer good training of a high standard or if its technology is outdated, investors will not consider it an attractive location for production or design operations. As investment dwindles, other players in the economic, financial, production or research sectors likewise gradually lose interest.
Globalised companies have become detached from homelands. They do not feel bound to any national common good. They disperse their operations to different countries. Production is decentralised in the most advantageous manner from the perspective of profitability. Product development is conducted in strong centres of expertise in various parts of the world. Possible new profits and penetration into new sectors and markets are the factors that determine locational decisions.
To prevent the problems stemming from a globalised economy, there have been demands for minimum social and environmental obligations and for guidance mechanisms by means of which ethically and ecologically responsible corporate activities can be promoted.
Successful companies have adopted a clearly more future-oriented way of thinking. Even a company that is at the top in its sector can not afford to rest on its laurels for even a moment. It must, on the one hand, estimate future markets and anticipate technological development and, on the other, predict people's new needs, life values and consumption habits. Product development must be a step ahead of the competitors, but that is not enough: a new product has to be on sale before the others. Through Nokia we in Finland have seen how this thinking model functions globally in a company that is the leader in its sector. The company's own operations are constantly developed by means of bench-marking, i.e. analytically comparing them with the best in their sector. Achieving a position of leadership is emphasised in the strategy. That could be described as a broader phenomenon in economic life with respect to taking the helm of the future.
On the global level, companies base their success on an unrelenting endeavour to be the trail-blazers, market conquerors and front-runners in know-how. The same spirit of constant competition is spreading to states, universities and research institutions, art and ideologies.
To a certain degree, state finances and the rest of society must function along parallel lines. Companies do not operate in a vacuum. On the one hand, in the background to successful companies are a high level of development in other areas of expertise with a bearing on their products or sectors and, among other things, a well-functioning political system. On the other hand, the ability of a society to function well does not remain strong alone through success on the part of companies.
From the political perspective, probably the most important area of application - and at the same time the most difficult question - in the thinking model in relation to grasping control of the future and continuing competition concerns the European welfare state. It has been suspected that the state may be safeguarding the life of the citizen, with all its attendant risks, too strongly. How extensively the state, rather than individuals, should bear responsibility for illness, ageing, loss of employment, divorce, bankruptcy, misinvestment of capital or other situations that mean difficulties for people has begun to be pondered in a new way.
This risk-free future thinking model manifests itself in demands relating to "achieved rights". The argument put forward is that making the security cover provided by society excessively comprehensive unjustifiably feeds the belief that people need not strive for the best possible result in their work, studies, looking after their families, bringing up their children or developing themselves. It is enough to make a moderate effort. In the educational system for example, that model of thinking would imply abandoning the practice of evaluating students and ranking them in order of merit.
On the level of the state and the EU, a model of thinking fixated on the achievements of the past channels resources into solving the problems of today in order to satisfy the needs that people have today. Thus, in industrial policy for example, old sectors of production in which Europe is no longer competitive are artificially supported. The sectors of the future remain undeveloped, because there are not enough resources to devote to them.
However, a change in thinking has begun in many respects and a new way of predicting the future has become an everyday reality in both working life and education. Lifelong learning is part of this change. A point that has begun to be emphasised is that training in one occupation is not enough. Even employees in good occupations and with jobs that are permanent in character must constantly acquire new knowledge in their field. Often, not even this is enough; instead, they have to change occupation and sector, perhaps even several times. The future is taken in hand, preparation is made for it and the premise that it is society that bears the risks is not adopted.
In the business world, learning new things and skills and embracing new work methods are already a recognised success factor. More and more clearly, good companies are changing their business cultures and devoting resources to purposeful personnel development. One of the hallmarks of a learning organisation is awareness of its own value base. A clear and open definition of values is the foundation on which both individuals and communities base their actions in learning, creating new things and thereby strengthening competitiveness.
Europe can make a grave mistake by setting its goals too low in economic or any other kind of competition. It could also have fateful consequences to participate uncritically in global competition that spans all spheres of life. According to some predictions, the whole globe will be destroyed because it cannot stand the wear caused by economic growth. In drawing up a policy for sustainable development, we shall more or less have to call into question the whole ideology that is based on growth and competition as well as the present way of life in the market economy. From the human perspective, the model is seen to lead to an inhumane life and growing inequality.
Taking the helm of the future and striving for the best results and the position of pioneer are a neutral success factor. Its content has not been defined in advance and in principle it can be freely focused. However, the reality is that goals other than economic growth and the prosperity that comes with it are in an underdog role. They have to struggle to defend their point of view and achieve a position for themselves among the other models.
3.1 Wisely influencing globalisation
A broad phenomenon. In the Government's report, globalisation is seen as applying to capital and financial markets, goods markets and competition strategies, technology, research and development and the acquisition of knowledge, lifestyles and consumption habits, new instruments of regulation and governance, thinking, modes of perception and awareness as well as the environment.
Globalisation as a phenomenon entered the public awareness already in the latter half of the 1980s, but it was understood more narrowly than today as something relating to the environment and changes in it. In the 1990s it has begun to mean mainly globalisation of the economy, i.e. world-wide economic competition, transnationalisation of companies, free flows of money, international markets for capital and goods and a narrowing of nation-states' economic and political self-determination. Knowledge, goods, capital, services and people move freely from one country and continent to another. Science, which in most sectors has traditionally been international, is more and more integrally linked to globalisation of the economy.
Economic globalisation affects political life in many ways. The economic boundaries between states are disappearing. Transnational corporations are rising to the level of nation-states as players and international investors can cause swings in currency exchange rates, the price and availability of capital and interest rates. The frameworks within which states operate internationally are determined at summit meetings of organisations like the UN, the WHO, the IMF, the World Bank, the OECD and the G7 group of countries. Regional organisations that have emerged on an economic basis, like the EU, NAFTA, APEC and MERCOSUR are becoming major actors in their respective parts of the world.
Globalisation is linked to a revolution in information technology that has eliminated physical boundaries, made world-wide telecommunications possible and shrunk distances. Free movement of information is affecting not only the economy and public life, but also, and decisively, the lives of citizens.
Globalisation received a new impetus in the early 1990s when the communist system collapsed. An economic and social system that operated without and even contrary to markets proved to be a utopia and incapable as an investor and distributor of resources. The failure of central economic planning has affected world politics and societies on many levels. The disappearance of the model in Europe eliminated political tensions, lowered mental barriers between individuals and nations and increased people's sense of being part of the same global community. As central planning is abandoned, more and more people are coming within the compass of markets and a market economy. Now the market economy itself is coming under pressure for change with respect to both environmental questions and the stability and social dimension of its operations.
Among the great changes accompanying globalisation are the development of new technology. Competition between companies for markets has forced them to seek means of reducing production costs. Thanks to automation, it has been able to replace expensive labour with inexpensive machines in the Western countries. Automation has been essential for companies in their efforts to preserve competitiveness. In the context of the world economy, automation of production technology has confronted governments with nearly insurmountable problems in their efforts to deal with structural unemployment.
The social effects of globalisation are still only dimly discernible. It is requiring political systems to meet considerable challenges, because governments must react and respond to external pressures more often than in the past. More and more of the matters that national governments have to decide on are determined by international agreements. Despite their active participation, governments have noticed that through their national decisions alone they can no longer to the same extent as formerly safeguard the prosperity and security of their citizens nor ensure that their companies have the prerequisites for successful operation. Nor, without cooperation and alliances, can they do so even on the international level.
States and their governments are expected to be active and conscious partners in the international system. They are supposed to defend national interests in negotiations for international agreements and in international organisations. States are expected to create a national policy for exercising influence. They have to be able to represent and defend national views in those international contexts where the real decisions are made and where the matters that will be the subject of decision-making are selected. Otherwise politics will remain in the shadow of the economy and ground rules for international markets will not be laid down.
Civic organisations, political parties, the trade-union movement and various interest groups must likewise prepare for globalisation. If the entity that one is trying to influence internationalises, the cutting edge of activities must likewise be shifted to the same level. The problem is how citizens of Europe and Finland can get their ideas incorporated in the thinking of bodies that operate on a global or EU level. Europe lacks a democratic basic structure, because parties, civic organisations, the trade-union movement and the media operate on the national level. At present, public opinion can be reliably measured only on the national level. Distances, fragmentation of matters, a lack of clarity with regard to the division of labour and language difficulties are strong impediments to a civic discourse in any context other than within states. Communications technology does not solve any more than a small part of the problems.
Advancing globalisation will also affect the position of both states and citizens in the world of the future through integration of communications. We have seen the advantages of opening up the world. We must also see that as large, globally-operating communications companies capture markets and merge with each other, we shall be heading towards a new concentration. At its worst, we could soon be in a situation where there are hundreds of television channels and they are accessible to everyone, but programme production is in the hands of a few large media companies. Volumes of information too great for the human mind to comprehend flow along the information superhighway via the Internet, but news or the agenda and focus of the social discourse are determined by a very small number of media-sector players and influence-wielders. Europe is being left in the shadow of the USA in this sector. Most of the world's television programmes, movies and news come from the USA, which also controls the satellites through which information is relayed.
Globalisation is changing many of the structures of solidarity. Large companies that operate globally do not regard combatting poverty as one of their fundamental tasks. Despite the situation of competition that exists between them, the top executives of large companies find that their minds meet in many matters relating to society. To a degree, they share the same values.
Changes in solidarity are reflected also on the level of workers. Employees of large companies that operate globally and base their operations on the use of information technology find those with which they wish to identify within their own circles. Greater solidarity is felt for persons working within one's own company or for others in similar tasks within the same sector than for other people in one's own country. In the third millennium, persons working on the information superhighway in the silicon valleys of Europe will regard their counterparts in similar places in the USA and Japan more genuinely as friends and comrades in destiny than other people in their own countries. A similar international solidarity has been observable in the past among groups like sailors, air traffic controllers or researchers.
It is possible that the traditional structures of solidarity will gradually crumble permanently. Homelands are fading away and fatherlands becoming blurred or acquiring new features as production becomes globally dispersed. Goods will no longer be marked "Made in Germany". Dyed-in-the-wool German products like Mercedes cars will more and more clearly bear the label "Made by Mercedes Benz". There will be many reasons for the change. Daimler's cars will not only be produced also on other continents, but will likewise to an increasing degree be designed elsewhere than in Germany. A product marque will be an important message to international financiers, the managers of factories located around the world, workers and product designers. The images in the minds of international buyers will also be important. A buyer in Latin America will have the same desire as Europeans to identify with owners of good and expensive cars, but not necessarily with Germans. Different images will be associated with a Mercedes or Volkswagen car made in South America than with one made in Germany. It will be important for South Americans that car marques represent also their countries and safeguard employment for their compatriots.
The global state. The states of Europe and their governments will have to assess their tasks from a new perspective. That does not mean merely the role of governments as international participants, but also as national managers of internationalisation and mediators of pressures from the global economy. Governments have performed that mediation task earlier, but as globalisation advances and national sovereignty crumbles the national government is becoming one level, with a new weighting, in a multi-level decision-making system. The nation-state must act on several different levels at the same time. In Finland's case, that means the global system of agreements, the European Union, Finland's geographical environs, the Baltic Sea, the regional level and the local level. Because of the new tasks, governments are no longer able to assume responsibility for all of their old ones, which took shape at a time when the state had the will and the means to handle tasks in society very extensively and in detail. Those tasks will have to be transferred either within the state to the regional level or local authorities, or completely outside the scope of the state's responsibility to civic organisations or commercial producers.
The World Bank and the OECD have in several of their reports outlined the role of the states of the future. What they predict could be summed up as being a shift towards a state that shapes ground rules for markets to observe and administration that will be expected to provide macro-economic guidance, intervene selectively, encourage a shift towards indirect production of public services and possess an ability to regulate private monopoly functions.
Globalisation is giving the state new kinds of co-ordination tasks. In a recent World Bank report on development, emphasis is placed on the tasks of the nation-state as an international player, a creator of well-functioning national markets and flourishing business activity and in supplementing the market by performing tasks that the market does not. Governments should safeguard the interests of the weak and ensure social cohesion. They should also redress the disequilibriums, such as environmental degradation and social problems, that spring from growth on the terms of the market. At their best, governments would anticipate what lay ahead and thereby prevent the drawbacks of a pure capitalist market economy.
Another new feature compared with the past is that internationalisation extends into most segments of politics. The traditional models for practising politics are losing their foundation not only in foreign policy, but also in economic and cultural policies. Internationalisation is particularly reflected in economic, educational, science and technology and environmental policies.
In endeavouring to protect their citizens' jobs and prosperity, governments have to compete for international investment and ensure that their own companies are competitive in international markets. In questions of education and training, taxation, social security, economic regulation and working life, which have traditionally been decided on at national level, new competitive trumps must be created from prosperity and an effort made internationally to promote social and ecological responsibility. That is a means of responding to the social dumping practised by some Asian and Eastern European countries.
Globalisation requires nation-states to demonstrate many forms of activity in defending their citizens' interests. They have to draft programmes of action to harmonise national and international markets. They must adopt stances on the processes and political instruments by means of which the economic and intellectual resources of different countries and regions and the prosperity of their citizens are safeguarded, in addition to proposing means of managing the national level of globalisation. They must plan how to penetrate international markets, how to ensure that the national domestic market and the labour market function well and with full effectiveness, and how to keep the national production structure healthy and competitive in the face of pressure from the international market.
The above-mentioned discourse on the tasks of the state began already in the 1980s. In those days it was the welfare state that was being talked about. The discourse in the 1990s continues that tradition, although it also contains new features. In Europe, the discourse can be regarded as partly a reaction to a narrowing of the state's tasks in the United States, the United Kingdom, New Zealand and Australia. In addition to that, the discourse also features an understanding of the important role of markets in focusing resources.
Since the mid-1990s, research data and political feedback have been available in relation to major reforms of the welfare state and administration in English-speaking countries. Representing the extreme positions in the debate are critics of big government and those who oppose cutting back the role of the state. The debate has ranged over such issues as unemployment figures and people's social security, the European state-centred regulatory model and the American market-centred model, and unemployment policy. Cutting back the role of the state in the USA and the UK has not affected the policies of several countries in Scandinavia and Continental Europe, because those countries have continued to do things in their traditional way and have maintained an extensive public sector, growing public debt notwithstanding. In the USA and the UK, the market has been given a better framework in which to operate and its ability to guide the economy has been relied on. In both of those countries, the significance of the market as a focuser of resources is greater than in Continental Europe. However, the creation of new jobs in the USA and the UK has not eliminated the difficulties that people have in gaining a livelihood.
Both models have very obvious defects. Whilst the USA has major differences between income levels, social marginalisation and a class society, Europe's problems are high unemployment, deficits in public finances and bloated administrations. Both models see Asian's arising giants as an economic challenge. The view taken in Europe is that in all probability responding to that challenge will mean reducing public expenditure and cutting social benefits, reducing tax on work, adding flexibility in the labour market and allowing wage differences to grow.
Discussion of the American, Continental European, Scandinavian or South-East Asian economic and welfare model indicates how many different levels are involved in globalisation. Everywhere, different answers are being sought to questions of economic management, people's livelihoods, democracy and economic growth. Models are compared and their functionality assessed. Although the debate is not often recognised as a global competition, it is in fact competition concerning the factors that will underpin success in the future.
Civil society. In the discourse on globalisation reference is nowadays increasingly often made to the responsibility of civil society, i.e. a society of citizens, and of voluntary organisations for handling tasks that were formerly looked after by the state. The view taken is that the state can no longer provide all of the services that it used to and that it should not regulate the details of people's lives, but rather ought to create a framework for citizens and their own associations. Researchers characterise the change that is taking place as a slow shift from state responsibility for taking care of matters to a system for which citizens and civil society are responsible.
There has also been discussion of the state's role as an activator of civil society. An extreme position is represented by the view that would deny the state all responsibility, even in activating civil society. Another position, which enjoys broad support, argues for active participation by the state during the transitional phase. Despite cutbacks in spending, a civilised state ultimately bears responsibility for ensuring that its citizens have the preconditions for a life of human dignity if people themselves are not able to secure a livelihood and receive help from no other quarter. Activating civil society could be compared to the responsibility which the state bears in arranging markets and providing the prerequisites for an advanced degree of networking in business activities.
Several causes lie in the background to activating civil society. The first is reduced public spending and the consequent limitation of the state's tasks. However, that does not eliminate those tasks; responsibility for them is transferred to others and they become different in character. It is obvious that the market will not assume anything like all of the tasks that the state used to take care of, nor can many of the tasks now handled by the state be returned to the care of families. That being the case, the voluntary organisations of a civil society are one answer to that challenge.
International models for activating a civil society and the numerous political and economic choices in their background are the subject of extensive discussion in especially the USA and the rest of the English-speaking world. Europe must adopt a stance on those models. Our continent's distinctive character and essential structural differences must be recognised in all comparisons. There might, for example, be an attempt to transfer the civil society model to Europe and Finland as a solution to the unemployment problem, without proper deliberation of all of the ramifications.
Nevertheless, the many possibilities of the civil society should not be denied. Because continuing unemployment may marginalise large groups of the population and undermine solidarity between people, civic and voluntary organisations offer a new foundation for social cohesion. They could activate people to take independent action on the basis of a highly-developed relationship of trust. The organisations draw various local and regional communities within their sphere and through the social capital and trust network that develops in that way eventually create activities that can lead to new types of jobs and livelihoods.
Globalisation's ripple effects on the democratic system call for the development of new, direct modalities of participation. Complementing representative democracy, big democracy, will be direct forms of participation, types of part-democracy or so-called small democracy, through which people's means of exercising influence will increase.
3.2 Exploiting information and technology to the full
The central observation in the knowledge society is that information and production based on knowledge and skills will be the most important prerequisite for success in the future. Natural resources no longer have the same significance as earlier. The idea is not new and natural resources have not been an essential precondition up to now, either, as the examples of Japan and Germany show. Both countries are poor in natural resources, for which reason they have built their entire economies on importing and processing raw materials and on all-round expertise.
A lack of knowledge or else the inapplicability of what knowledge did exist has destabilised entire social systems. Located as they were between East and West, the Finns probably had a better vantage point than other Europeans to see that one of the reasons for the collapse of the communist system was technological and scientific backwardness and barriers to the flow of information. Through high-level and comprehensive cooperation agreements, Finnish circles had access to information about the Soviet Union's technological and scientific capabilities, but the real development was different. The USA, Europe and Asia under Japan's leadership were already in the 1980s on a different level of knowledge that the Soviet Union, which had invested its resources in space and military technology.
New information technology has permeated production and working life. Everyone in employment has found that information technology is needed in even the simplest job tasks. The technological upheaval has affected the everyday lives of citizens. To collect their wages from the bank or fill their petrol tank they need automatic machines and cards. Public phones no longer work with coins. Smart cards are making their advent in trains and buses. If people want to be able to pay their bills without bother or get tickets for a concert or the theatre, they must learn to use computers. Especially in countries where the cost of labour is high, personal service is becoming increasingly rare.
Examined on its macro level, the knowledge society is founded on scientific research, applied research and product development. It has been described as an innovation system, the functionality of which determines the development of the economy. The components of the innovation system are the educational system, research and product development. Europe has traditionally been good in scientific research. The USA has been the most innovative. Companies there have been efficient at applying the results of science and new technology. Japan, in turn, has been in the front rank of exploiting technology in the development of products.
Finland is among the world's leading countries in terms of applying technology and automation. We are among the leaders in developing and applying information and telecommunications technology. We are a leading country in many sectors of automation, but also in teaching and learning technologies. In international fora we have been mentioned as number one in, for example, density of mobile phones and Internet use. From the perspective of the future, that is a good starting point. There do not appear to be any obstacles of attitude to the advance of automation that is inescapable and enhances the efficiency of production nor to increasing use of information technology. The Finns were early to recognise the benefits of information technology also on the level of everyday life. Rather than expending energy in opposing change we have concentrated on getting all the advantages we can from new knowledge and technology.
A feature in the advance of technology that has been given less attention is the fact that although new technology has undeniably brought large numbers of new jobs, it has also done away with old ones in its automation aspect. The traveller on the move in Central Europe may immediately notice a difference between Finland and, for example, France, Germany, Spain and Italy. Central institutions that serve large numbers of people, such as shops, banks, service stations, railways, post offices and hospitals, are not automated. They still have high staffing levels in comparison with Finland and the other Nordic countries. The same applies throughout the broad field of public administration. Europe has nearly 20 million people officially registered as unemployed. The unemployment figures would be even gloomier if in the large European countries automation had advanced not only in industry, but also in the service sector and public administration as rapidly and as profoundly as in Finland.
If the assumption that in most of Europe new technology has not yet been availed of in the rationalisation of production, services and administration is correct, Europe will have to be able to deal with its strongly growing structural unemployment rapidly and effectively. Jeremy Rifkin (The End of Work, 1995) argues that only 5% of companies in the Western countries use new technology, but when the percentage that use it rises in the near future, 80% of former industrial workers will drop out of the labour market. He believes that information technology will make more than a third of office jobs redundant. Even if the prediction seems to be only partially true, the future problems of work will have to be brought closer to the centre of the decision-making focus than they currently are.
Knowledge is often associated too one-sidedly with technology. However, there should also be a strong linkage between using knowledge and political decision-making. Do we base our decisions on facts and scientifically-founded assessments of effect? Do we choose the best-possible alternative from the range proposed by experts or, when we choose other than the best, are we at least aware, of what we are choosing and on what grounds?
3.3 The human aspect in innovation
In coping with this period of upheaval and transition and availing of the opportunities that it offers, a feature that assumes decisive importance is humanity, comprehending human resources and using them on an extensive scale.
The Committee for the Future would like to see the meaning of innovation in everyday language expanded into a broader concept. Innovation would then mean not only technological applications, but all of the resourcefulness, creativity and capacity for renewal that one finds in human life. Innovation can be the development of free health care or reform of the comprehensive school system, feats that were accomplished long ago.
Innovation has a key position in coping with change and exploiting opportunities. It contains the development of new ways of thinking, the creation of new ways of doing things, experimenting with them, accepting them and using them in human and social activities.
The creativity of individuals is interlinked with the world of values of people. Creativity is most fruitful at producing innovations when it is founded on humanity, ethically and morally tenable values and all-round education.
Creativity on its own is not enough for innovations. People and communities can be creative, but new inventions, ideas and thoughts do not necessarily lead to innovations. Innovative persons or communities are able to make effective use of their own and others' ideas and convert them into functioning innovations. The more open the world is, the more freely new ideas are at everyone's disposal. The rapid economic rise of the Asian countries has been regarded as being based on an ability to embrace new matters and avail of inventions and in general knowledge from more developed parts of the world. Japan is at its most typical a resources-poor country that imports raw materials, machines and know-how and then processes them into export products and new expertise. The processing stage increase the value of the product many-fold.
Innovation is difficult to define and its manifestation difficult to assess, but it can be assumed that a capacity for renewal has been and is an important property in the success of human communities. It has been regarded as one factor in the rise and fall of entire nations and civilisations. Futurologists regard people's thinking and ability as an important factor of production. That being the case, innovation as the practical implementation of inventions, new ideas and methods becomes even more decisive than it earlier was.
The European Union has published the results of an extensive study in which, using many different indicators, various countries are compared with respect to their technological competence and how well this is expressed in products being launched on the market. It emerged that in most sectors European technology was just as good or better than in the USA and Japan, but Europe, being divided into several nation-states, was clearly in a weaker position than its competitors when it came to translating technological expertise into business operations.
Innovation is often one-sidedly understood as meaning, on the one hand, technology and inventions and, on the other, the ability of top individuals. Innovation often expresses itself as new models of thinking and methods of action, but here too it is essential that change is converted into practice. What can also be involved is a return via error to the old, which has turned out to be better than the new after all. Governance is a fundamental prerequisite also in innovation.
A capacity for innovation becomes the art of survival for a society in a period of upheaval or rapid change. Since innovation is not rooted in natural resources or other material aspects, but instead mainly in people's thinking, work and efforts, it is possible in all societies and on all levels of people's lives. The preconditions for carrying through social innovations that benefit the whole of society include, in addition to the thinking and work of individuals, also sustained and hard work on the part of society. The emergence of social innovations like the system of cost-free health care developed in Canada or uniform comprehensive education for all, as developed in the Nordic countries, is particularly demanding because of the many ramifications of innovations of this kind. The deeper into a society an innovation penetrates, the more important is its constant development. That is because a typical feature of innovation is that its positive effects can weaken and even become negative and gradually a burden.
In many European countries cost-free health care is regarded as a particularly successful social innovation. In opinion polls everywhere it gains the absolute support of citizens. However, the system needs further development, Medical treatment is too late a stage from the perspective of promoting public health. Preventive health care is a more efficient means. Lifestyle, hygiene and social factors have a decisive role. The North Karelia Project is an example of the new approach. One of its achievements was a 75% reduction in the number of male deaths from heart disease in the region, which was achieved by means of measures that included enlightening the public about living habits.
In a learning and innovative society, the questions "why?" and "why not another way?" are continually asked. Decisions must be justified. Logicality is in vogue. Social taboos must not exist. If, for example, one sets about dismantling state assistance for the unemployed, all of the subsidies provided by society should be critically assessed at the same time. It would have to be asked, for example, why only unemployment benefits are in the centre of the focus of cuts in state spending, which amounts to blaming the unemployed. Why not blame operagoers, who are subsidised by the taxpayer? It has been said for decades in Finland that farmers live on state subsidies and that entrepreneurs are supported to a lesser degree. What is not said, however, is where the funds are directed, and how. We resent it if someone living on social security or a refugee is treated to some small pleasure in life out of the public purse. By contrast, we take it for granted than in an affluent part of the city the local authority sees to a park's beauty by changing the flowers in the beds there three times in the course of the summer.
A society does not acquire a greater capacity for innovation merely through individuals; indeed, it is obvious that in the future outstanding talents will enjoy even greater esteem in specifically science and technology. Besides the innovative individuals, there will also have to be a high degree of collective innovation, which should be expressed on the level of, for example, laws, government programmes and budgets as decision documents.
Besides people's workplaces, an important part of collective innovation is generated within homes and families and in the contexts of organisations and hobby pursuits. Unemployment and a sharp reduction in the number of permanent jobs are leading to a situation in which it would be necessary to strengthen the innovation basis beyond the sphere of gainful employment. Passivity will increase if growing numbers of people lack a home district; in other words, if their home is mainly just a place to sleep. Residential areas must have natural and meaningful community activities based on social politics, sport, music, religion, local heritage work, environmental protection and other aspects of the common good. A decline in family size, both parents going out to work and frequent changes of address reduce interaction between people on the basis of sharing a residential community and leisure interests and in that way erode opportunities for collective innovation.
Individual and community innovation needs a favourable growth substrate. Governments, schools, work communities and other central institutions in society must support the emergence of an atmosphere conducive to creativity and innovation. Innovation in society will not be increased by means of laws, commands, prohibitions or directions from above. Just as it is difficult to imagine creativity without the joy of succeeding, innovation must receive both immaterial and material recognition.
In order to promote innovation, society must create the economic, legal, educational and social structures appropriate for each particular time and by means of which 1) the prerequisites for innovation on the part of people are ensured, 2) the nation and companies are encouraged to be competitive, at the same time preserving the natural environment and other factors of vital importance for the future, and 3) prosperity is given to as many people as possible.
People must be encouraged to develop themselves and to understand the importance of maintaining their levels of knowledge and skill. Just as important is the maintenance of values, thinking patterns and action models that one associates with a good society: trust, honesty, a sense of common responsibility, loyalty and caring for others. A society that lacks openness, joy and enthusiasm does not support innovation. Knowledge, skill, enterprise and success - a rise in productivity in economic terms - must receive a sufficiently enticing reward on both the level of individuals and of their communities, but taking gender differences and tensions into account.
Society has many means of increasing innovation, but important among them are good basic education, university training and research. A difference often noticed between Europe and the USA is that in the former universities are seen as having more the role of ensuring historical continuity and cherishing European culture and the humanities than of acting as engines of the economy. In several countries, professors avoid commercial activities in their work, seeing it as tending to narrow scientific premises. In the USA, by contrast, part of the education and research work of universities is linked in many ways to production and business. The idea begins with university financing, in which the business sector is strongly involved. To put the matter in simple terms, universities produce the ideas that the business sector, through a variety of interaction channels, converts via innovation into production, jobs and thereby wealth.
With globalisation and information technology, openness in society has become a sub-factor in innovation in a whole new way. Besides overcoming material barriers, societies must be intellectually free so as to create fertile soil in which innovation can flourish. Open discourse, exchanges of opinion, initiative, striving, emphasising the challenging character of training and work, independent action and risk-taking are the foundation of an innovative spirit. Innovation demands a spirit that is oriented towards the future.
In describing a favourable growth substrate for innovation, it is emphasised that a society must not have taboos, things that can not be discussed. Outmoded structures, hierarchies and truths that are regarded as self-evident must always be called into question. Creating new things calls for constant questioning. The questions must also be answered.
Because innovation is largely the reception of influences from outside and fashioning them into usable ideas, models of thinking and products, society must support diversity. Small countries and remote regions must intensify their interaction in an effort to substitute for the wealth of influences that comes from greatness.
3.4 Governance of matters and of life
People in Continental Europe have traditionally been accustomed to the fact that they are governed, directed and supervised from on high. It has been assumed that the state, the church, the party, the employer the teacher, parents or anyone else in a superordinated position for one reason or another knows what is good for the nation and its people. Differentiation and individualisation as well as an emphasis on independent action by people will be characteristic features of future social and economic development.
It is unrealistic to expect individuals to accept responsibility for world-wide development when even states have difficulty finding ways of exerting influence. Nonetheless, the development described in the foregoing will transfer responsibility for so-called small-scale government to people themselves. At the same time, however, people will have to be provided with the wherewithal to assume governance of their own lives so that they are integrated with society.
Governance means an ability and opportunities for people to take care of their own lives. They must be encouraged to find the areas in which they have expertise and to take care of their abilities and skills. To be able to function successfully as parts of society and the economy, people must have an ability to learn throughout their lives. Job tasks do not remain the same for even the span of one generation. It is assumed that citizens will be more active than earlier in shaping the conditions of their own lives. Governance of one's own life is the foundation on which other abilities are supported. Families will become more important as a provider of security, as a growth substrate and place of development for skills and knowledge, and as channels of social interaction.
When companies compete for markets and success, efficient organisations and effective management of and decision-making in relation to operations are recognised as prerequisites. A good product is not enough on its own. In a good company, the knowledge and skills of every employee are availed of. The internal management system is inspiring and emphasises participation. The demands of governance do not apply only to the internal system and management described in the foregoing, but also to external relations. A company must network in many ways in its search for markets.
The demand for good governance of matters applies to all human economic and social communities both locally and nationally, to municipalities, the trade-union movement, societies and associations. All must govern their values and economies and define their tasks in a manner that ensures that core tasks are well taken care of. Nation-states and the European Union must find their values and roles. They must be able to renew themselves in a manner that ensures that whatever tasks they perform are taken care of efficiently and dependably. Power of decision must correspond to rights and obligations.
On the European level, there should be, for example, a critical examination of where the EU's centre of gravity and resources have been located over the decades. Too great a share is in legally detailed regulation, drafting directives and other regulations and guidelines and in the implementation relating to them. It has been calculated that most of those matters could be handled on the national level. Some regulation is completely superfluous and only gets in the way of society renewing itself, at the same time as questions of central significance from the perspective of people's and the environment's wellbeing still lack strong common ground rules. Agriculture's share of the EU budget and of the Union's activities in general is very great. Very heavy administrative structures are still a feature of the EU's decision-making.
Global-level political guidance and decision making must be developed on a new foundation. The idea starts from the premise that alongside the globalising economy there is a need to create political arrangements. Otherwise economics will gain hegemony. States are reluctant to abandon their sovereignty.
Global-level politics is practised all the time. It is difficult to foresee what forms it will assume in the future. It may be that networking along the same lines as among companies will take case. Already now, regional economic players like the EU, NAFTA, MERCOSUR and ASEAN are in existence and concentrate also on political questions. Those and other international associations like the UN, the OECD, the WTO and G7 are more and more clearly agreeing among themselves on ground rules for the economic sector, the principles to be followed in caring for the environment or guidelines for social care.
Naturally, the significance of governance is accentuated in conflicts and catastrophes. Europe has demanded that Asia implement democracy, freedom of expression and the right to strike. A wave of strikes and clashes between the political leadership and the trade-union movement in such an ethnically and even socially homogeneous country as South Korea shows how quickly social peace can be upset. If China, with over a billion inhabitants, is unable to keep the country's development under control, the consequences will be global. There are also numerous hotbeds of conflict in Europe.
A global example of the importance of governance and leadership is our dependence on computer systems. If for any reason telecommunications systems were to be disrupted, Europe's developed society would quite soon be in a state of chaos.
The development of society must be kept subject to good governance in time of both peace and crisis. Decision making must be clear and relations of responsibility must function in all circumstances. Above all, people must be able to have confidence in their political system.
4.1 Europe's own values - do they exist?
Europe's diversity and distinctiveness. Europe is a continent where numerous cultures and traditions have more or less co-existed for millennia. When Europe's success is evaluated as a continuing historical process, the examination can not be confined solely to economic achievements. Europe does not fit neatly into any of the GDP scales. Its wealth is a multi-level phenomenon, which includes many matters other than economic ones. Future success should also be approached from this perspective of diversity.
The foundation on which Europe's prosperity is based has always been and will remain anything but a simple matter. The importance of a modern knowledge society and of a global competitive economy should not be downplayed, but Europe has no reason to reject perspectives that are broader than the economic. Europe's wealth means Italy's palazzos, France's vineyards, Britain's small towns, Swiss Alpine chalets, Greek temples, Spain's rich language of form in both architecture and music, which for the first time blended the European and Arab cultures. Our continent's wealth also expresses itself in Germany's modern industrial buildings that glow with neatness, the skyscrapers in London's and Frankfurt's financial districts, or in Swedish homes with their kitchens equipped with advanced electronics and their living rooms with furniture made of real wood.
Wealth and prosperity are a cumulative matter. They can not be measured in terms of production volume not by any other exact criterion. They also include cultural and social capital, which is the foundation of the present and future economy and society.
Whilst preserving and availing of her multi-level and complex wealth, Europe should be able to participate in creating more of it. She should preserve her precious centuries-old heritage, but also be prepared to be always involved with the new. Europe should define the terms on which she will take part in the contest of the globalised intensive economy.
In building the future, Europe should approach success and prosperity in the light of goals broader than economic growth. European prosperity is the sum of the wealth of the people of Europe and should largely comprise the things that those people value. All citizens of Europe should feel that they have shared interests in the future success of Europe. European people must be committed to creating a shared future.
Values, economy and politics. Economic and political integration feature accentuatedly in European values and the European tradition of thinking. To paraphrase Ralf Dahrendorf, the task of social policy is to combine
1) competitiveness, i.e. a functioning economy,
2) political rights, i.e. democracy, and
3) social cohesion, i.e. a sense of affinity among citizens.
That can be characterised also as a European conception of equality in a broad sense. In the opinion of several commentators, it is just for this reason that the task set for European politics is nearly impossible.
The French Revolution proclaimed equality and fraternity. Adam Smith's classical tenets of liberalism are founded on the premise that a good, functioning and enduring economy can not be built solely on the basis of individuals, their interests and profits. There must be harmony between what is private and what belongs in the realm of the community. As Germany was making the transition from a constellation of minor states to a single large one, Bismarck emphasised the tasks of the social state. It can be assumed that the Europeans will not abandon this pillar of their identity - perhaps the most important of them all, but at the same time the most difficult to maintain. Thus it must also be part of the value foundation on the EU level.
Social cohesion can be defined as a moral bond between different groups of the population. There is a reluctance in European society to sever this moral bond, because when marginalised groups of the population find themselves in a desperate situation, their instinct for self-preservation overcomes moral inhibitions. The view is also taken that it would be deceiving oneself to believe that being well-off would be enough to be secure in a society where some citizens fear for the fate of themselves and their children.
Europe's values, which emphasise democracy and equality, manifest themselves as a difficulty in ensuring a good economy on the terms of the prevailing doctrinal structure. The same difficulty is inherent in the EU's attempt to deepen economic integration and expand into eastern Europe. The definition of a what a good economy must be in order to qualify for economic and monetary union (EMU) has attracted criticism for the same reason.
The European values that emphasise social cohesion are also in the background of the difficulties in the way of strengthening and enlarging the Union. Europeans will not give their unreserved support for a strong EU as long as it is only a monetary-, financial- and economic-policy project. Support for and the acceptability of the EU has increased whenever something has been agreed on security and defence, EU citizenship, regional benefits and drawbacks, common labour and social policies, environmental protection and the need to create common standards for foodstsuffs quality and purity and the ethics governing their production. European economic and political integration, the ultimate outcome of which is forecast to be political union, is a unique process, and therefore has nothing with which it can be compared. Partly due precisely to this social starting point, several American economic experts believe European integration will fail, because it is confused and aspires to contradictory goals.
Often presented as European values are, on the one hand, such ethical-moral virtues as humanity, solidarity, democracy and striving for peace and, on the other hand, juridical constructs like human rights and fundamental rights. Further matters that there is an eagerness to emphasise are historical traditions, humanism and an old cultural foundation - especially when the intention is to make a comparison with the New World. Those are undeniably values that can be attributed to Europe, but it has to be asked whether the same features can not be identified in other continents. Asia is built on a cultural and educational heritage older than Europe's, and a strong family institution is most obviously a wellspring of solidarity in Asia to this very day. Europeans like to emphasise the fundamental rights that derive from the legal basis that they have created, but forget too easily that those rights have often remained no more than theory.
4.2 Basic features of the European welfare model
Social and cultural differences within Europe seem small. Economic differences become obvious when the EU countries are compared with Eastern Europe. Cultural and social values change as one moves from East to West or from North to South. If the USA, Asia or Africa is chosen as the object of comparison, the content of Europeanness gains clarity and uniformity. Europeanness is based on its own multicultural values, traditions, religious doctrines, culture and conception of the human being.
It has been noticed in the EU that focusing attention only on a common market, currency and economy is not enough, but that people's social and cultural foundation must also be strengthened. That heads of states, governments and other elites recognise the common interests of Europe and reach agreement to promote them is a good beginning. Getting citizens involved will require more. The effects of integration on everyday life should be made visible. People have a conception of European values and of what is a good European life. They should have goals and ideals in pursuit of which they will develop their own continent.
Definition of the European social model creates a foundation for a common identity. Emphasising the Europeans' life values, view of the world and identity unites, but it also has its dangers. Presenting one's own state model as being better than others easily feeds nationalistic ideas. Nationalism was earlier recognised as a foundation for national enmity. Now the same mechanism for excluding "others" - strangers, threateners and enemies - is possible in the integration of economic and military areas or even whole continents. It is just that nowadays the areas to be defended are more extensive than nation-states and include several peoples.
A feature that can be attributed to European society is a need to oppose collective poverty and marginalisation of large population groups. Social differences between individuals can not be avoided, but deep structural differences can be prevented from coming into being. Social peace is respected in the European model also in this respect.
The model that emphasises structural sociality has been regarded as preventing, on the one hand, differentiation of wealthy people on the basis of work, place of residence or other aspect of their lives and, on the other, the gradual marginalisation of the poorest until they are completely excluded from society. The model that emphasises social equality also has the purpose of preventing violence and avoiding the need for society to have to prepare to deal with it. In Europe, building walls around residential areas, armed guards or the use of bomb- and weapons-detection devices at workplaces or schools are still unusual.
Although unemployment is at a record high level (20% adult, 40-50% youth), European society has remained relatively peaceful. Credit for that has been attributed to Europe's even social structure.
Unemployment has remained at a high level in Finland for a long time. In the beginning, a relatively good and comprehensive social security system helped people get by. Now that unemployment has persisted for a longer time, however, a division of people into two distinct groups is beginning to show itself in society. Cuts in social income transfers have in part been focused on the same families and this has made their economic adjustment more difficult. However, one can believe that Finnish society is socially and culturally on such a high level that economic recession and high unemployment have not completely disrupted people's quality of life and identity.
Fear of revolt on the part of the unemployed and deprived is probably not what lies at the heart of the matter, but rather the question of how long those in employment will be willing to pay for income levelling and growing public expenditure. How long will solidarity between different population groups, countries and regions last in Europe? In France, the tax-paying lower middle class supports the National Front and Le Pen. In Italy, the wealthy north has for years wanted to break away from the poor south and the middle-class Rome region, which it sees as living on tax funds and doing unproductive bureaucratic work. Will Germany remain willing to contribute such a large share of EU funding as now?
When the concept of work is broadened beyond paid employment to include also activities that are productive socially and from the perspective of the individual, public opinion no longer regards permanent mass-unemployment as a major problem. GDP is growing and many economic indicators look positive. Yet it is questionable whether Europe can stand such a large number of people remaining outside paid unemployment. It wastes large quantities of human resources, although global competition would require every possible reserve to be efficiently used. If Europe compares its own level of prosperity with its past, everything looks better. The same applies if we compare the situation in Europe with that in Africa or remember that in the background of China's economic rise are millions of poor and even starving people. Europe's relative situation seems good, but in global competition we must take notice of the burgeoning American economy and the Asian Tigers. The challenge of the future has many dimensions.
4.3 General and common good the foundation
European political thinking emphasises that the task of politics is to implement the public and common good. The contents of that concept and the emphases in it have varied over the centuries. During the French Revolution towards the end of the 18th century there was talk of citizens' political rights, freedom of expression and personal inviolability. At the same time, further east in the heart of Europe serfdom was only just being left behind. In Bismarck's Germany, the common good was anchored in security and order as well as in work and social care.
Europe's numerous petty political entities merged into bigger and bigger unitary states around the turn of the century. Around the same time the German sociologist Max Weber described the state as the champion and distributor of the common good. The core of the common good was built around the state and the prosperity that had been built up under its leadership. The starting point commonly adopted since the second world war has been that the broader the state, the broader the prosperity. The UK as part of the English-speaking world (USA, Australia and New Zealand) has in recent years adopted a more scaled-down state model.
Only towards the end of the 20th century has the definition of the public and common good acquired new features. The entire Weberian thought construct, in accordance with which the state is above everything and oversees the common good through a monopoly on physical means of coercion, was based on a conception of a good life in the here and now, of the security to be given to the citizens living at this time. Gradually, concern for the lives and wellbeing of future generations has begun to be felt in various spheres of life. The concept of the public and common good has been chronologically broadened. Values, moral and ethical points of departure have settled into a new context when this question has been asked: What is good for future generations and can what is good for today's people be bad for future generations? Questioning began in relation to nature and raw materials, but has broadened to encompass consumption and living habits.
At the same time in the Nordic countries, where today's citizens' welfare state has developed furthest, systems that took decades to build up have had to be scaled back owing to the public sector's financial difficulties. The sector's financial base weakened rapidly in Finland and public services had to be cut comparatively quickly. Sweden has had to take similar action, albeit later and more slowly. Norway's oil sector and self-sufficiency in other respects have enabled that country to cope with public-sector financial crises without problems. In the latter half of the 1990s, the rest of Europe is following similar lines, and the strict criteria that public finances will have to meet for admission to EMU are further accelerating the development.
The goals of the public and common good and means of achieving them are part of the European debate. In recent times, the "slim and efficient state" has been presented as a social goal. What is meant here is that the state continually defines its tasks and selects the core tasks of society as well as any sectors in which the state's participation is necessary. Core tasks are those that no other instance takes care of. It is in these that the public and common good has the greatest interest. The state's core tasks are financed using tax revenues and through annual budgets. All other public tasks within the compass of collective regulation can when necessary be transferred to the public sector or entrusted to the care of the so-called third sector, i.e. not-for-profit community associations.
An essential element in thinking on the state's new role and tasks in the beginning of the third millennium is first of all separation of the core state and its permanent tasks from the other tasks required by the situation at any given time. Secondly, the state is seen as having a different role as a decision-maker, overseer, financier, director and provider of financial or other support. The state discharges its different kinds of tasks in different ways.
The principles of good, responsible administration emphasised among core tasks are legality of decision making, publicity, legal security and in general the so-called traditional good. By contrast, when the state is functioning as, for example, a building client, a promoter of innovation or as a source of finance for some special service, it can act like a company, a research institution or a bank. In performing the state's cores tasks, the workers are civil servants with official responsibility, whereas in other tasks workers are in a situation similar to that of their counterparts in private organisations.
People are also in different positions depending on whether they are citizens and taxpayers exercising their rights and demanding from the state something to which they are entitled, or customers who can choose between public or private providers of services.
In EU circles, the tasks of nation-states have in many ways become the subject of debate. The EMU criteria have been framed in a way that requires all member states to get their government finances into shape. In practice, several states have had to effect sharp cuts in public spending and arrange their activities considerably more efficiently than hitherto.
Social security in the future and especially financing pensions for the ageing population is one of the most concrete problems that European states are having to deal with. Mainly in the UK - most recently as an aspect of opposition to EMU - the question of the state's responsibility for accumulating pension funds has been raised. British researchers have called the whole EMU project into question because neither in Germany nor in other EU countries do pension funds exist. Pensions must be accumulated. Budget deficits can not be filled.
The debate on the state's responsibility has gained momentum also in this sector of welfare as internationalisation advances. The USA and Asia have adopted quite a different way of ensuring that people can maintain a standard of living when they are old or ill. In the USA people themselves save for pensions and sickness benefits through insurance. Many Asian countries are only now planning social security systems, but it appears that Europe will not be taken as the model. The European system, which is based on each working generation paying most of the costs of supporting the sick, the old and the unemployed, is becoming the target of severe criticism in a situation where the average age of the population is increasing rapidly. It is not right to pass uncovered liabilities on to future generations. High youth unemployment (in several European countries as much as 30-40%) can be expected to increase moral anguish about the present way of sharing costs.
It is in environmental matters that the demand for the public and common good and concern for the future come together most visibly and understandably. Already since the 1970s, parallel to the rise of the Green movement, how to protect forests, clean water, seas, flora and fauna for the future and how to safeguard the original environment and natural resources so that they can be passed on to later generations have been recognised as problems in Europe. Increasingly strident demands for the preservation of some degree of natural diversity have begun to be made. The environment must not be destroyed nor natural resources overexploited in the name of any one era's or generation's prosperity. Not all shorelines nor bird nesting sites in the Mediterranean or Baltic should be used for human settlement. Continuity of flora and fauna must be safeguarded. The natural environment should be passed on to the next generation in at least as good a condition as we have received it.
In Germany, where deliberation of the state's future tasks has been the focus of systematic study in recent years, two new vital tasks comparable to the core ones have been proposed. These are: 1) forecasting the future and 2) science, technology and research. Naturally, in all states it is the leading party that determines the agenda and choices in social policy. An indication of the strength of the consensus that obtains with regard to the importance of forecasting the future and especially ensuring a capacity for innovation is that the Social Democratic Party, which has been in opposition for many years, called last autumn for the creation of an Innovation Ministry in Germany. Ministries for science, technology and research already exist at both federal and Land (state) level.
4.4 Risk-taking and -sharing becoming distorted
The new Director of the London School of Economics and Political Science, Anthony Giddens, sees the crisis of the welfare state as being a crisis of risk-taking. Too much responsibility for the risks that are part and parcel of people's lives has been transferred to the state. In his view, the positive welfare of the future will mean an active mobilisation of life's numerous decisions compared with the present passive calculation of risks.
The future is uncertain. Companies prepare for it by taking out insurance. Individuals everywhere in Europe have throughout the 20th century increasingly and more profoundly come to rely on the state to bear the risks that they face in their lives. The state is regarded as insuring its citizens for the event of illness, unemployment and old age and to varying degrees in different countries also against other risks. Some of the risks that have been transferred to the state are in principle, and already with regard to the premises underlying then, very problematic. In actual fact, the state bears responsibility also for its citizens' wrong decisions, neglect, misinvestments, self-destructive behaviour, criminal activity and indolence. On the level of society, however, an even greater danger lies in a way of thinking in which responsibility becomes blurred and motivation for enterprise and innovation vanishes. In the European critical social debate, this phenomenon is called the problem of the too-ready and too-easy society.
The transfer of risks to society can often take place imperceptibly, unintentionally, and the consequences are often not noticed from the perspective of society. Everywhere in Europe, irrespective of differences between religions, cultures and state model, divorces have increased explosively and, unlike in the past, now women are on an equal footing as initiators of divorce. An obvious cause of this is that risks associated with the family and children, in relation to supporting children, taking care of them, educating them and increasingly clearly also raising them, can be transferred to society. The downsides of this have been given less attention.
Attitudes to the sharing of responsibility between the state and the individual also vary with respect to positive matters. In international comparisons, the allowances paid to families for taking care of children at home in the Nordic countries and these countries' other support measures for families with children have been marvelled at. They have been understood in different kinds of cultures as amounting to a transfer to the state of responsibility for ensuring that children are born and the line continued. In the Nordic countries, by contrast, we are accustomed to completely opposite thinking. Children's day care that is either arranged or at least supervised by the state as well as school meals are essential preconditions for women being able to participate in working life and in general for equality. Differences have been observed between Finland and Sweden, in, for example, how easily (in the Finns' view) parents in Sweden relinquish, in the name of child protection, responsibility for looking after and bringing up their own children, doing so either under compulsion or on their own initiative.
A blurring of the dividing line in responsibility for children's future is one of the most difficult and likewise most sensitive matters. Have we in the Nordic countries transferred too much responsibility for our children's mental growth to society? From time to time at least, the number of places, class size and other material aspects have become the core issue in the debate on day care and schools, and have continued to be right up to the point of enactment of legislation. Learning, understanding and wisdom as goals have remained in the background.
4.5 Economists challenging the welfare models
Long-term structural unemployment is a merciless measure of the success of the European model of society. If Europe is unable to take care of mass-unemployment, the model's good goals and principles will not have worked in all of the most essential respects in the way that they were intended to. No organisation or action model is an end in itself; it must serve people.
The virtue of the European model of society must be assessed as a totality. For example, one publication distributed by the OECD assesses Finland and the headline of the article describes the country's public sector as "the world's best". In the light of several criteria that is so, but our high unemployment calls the whole argument into question.
Some economists have called the present European model of society into question most clearly. Ten European and American economists representing different views on society (The Financial Times' and The Economist's financial editors and eight professors) presented a nine-point programme, which they called the "Salzburg Manifesto", for solving the unemployment problem. In it, Europe's so-called "soft" approach to unemployment is rejected:
The manifesto, set forth in the book "Fighting Europe's Unemployment in the 1990s" (1996), recommends:
1. The central bank must both take care of inflation and ensure that demand does not decline.
2. Minimum wages must not be raised. There should be more local agreements and wage differentials.
3. The principle of the same pay for the same work should be abandoned. New employees should sometimes receive higher wages than older ones.
4. Wage differentials should be sufficiently large.
5. The most effective way to slow down increases in wage differentials is to channel training to suit the needs of the market.
6. Budget deficits should be eliminated in order to bring interest rates down and make investment profitable.
7. Unemployment benefits should be cut and the funds diverted to helping people in low-paid employment.
8. Pay-related unemployment benefits financed out of tax funds should be abolished.
9. The social chapters in the Maastricht Treaty are founded on justifiable social concerns, but they may weaken employment.
In the view of many economists, Europe will be able to cope with its unemployment problem only by accepting the above reassessments. Failing to avail of the work inputs of 20 million Europeans is too big a waste. The still-rising unemployment figures in Germany have caused concern among EU leaders. The Commission has presented models in which European competitiveness could be built, in a way that favours employment, by revising the taxation structure so as to tax work less and production inputs like energy more and to channel resources into research, product development and ecological expertise. (Delors Green Paper.)
Many researchers take the USA, where unemployment has been brought to below the European level, as their comparison basis. As recently as the 1960s, relative unemployment in the USA was twice as high as in Europe. The difference between the two continents founded on the same Western social principles appears to be growing.
Growth in the number of jobs in the USA since the 1960s is largely attributable to an increase in the working-age population (immigration and demographic change). In that respect it differs from the situation in Europe. It has become clear in the 1990s that the new jobs being created in the USA are not just low-paid "McJobs". The new jobs in the service sector do include low-paid ones, but also knowledge-society tasks that require a high level of expertise. Of the net increase in the total number of jobs in the USA last year, more than half was accounted for by jobs paying above-average wages. An economic boom has created jobs evenly in different sectors. For example, nearly twice as many jobs were created in construction as in information-technology services. Retailing is another sector in which jobs have been added at a brisk pace. Alongside the positive development on the employment side, however, problems of social differentiation and exclusion continue to worsen.
Something often forgotten in the European debate on unemployment is that the USA's solutions have been found by increasing material and immaterial capital. They have not been achieved by sharing work, shortening working hours or reducing the supply of labour by putting people into training programmes or pensioning them off. The assumption in the ongoing welfare reform model (the so-called Wisconsin Model) is that all must participate in work.
Whether the alleged crisis of the welfare model is real or created is a pertinent question. Some people attribute the crisis of the Finnish welfare society to the level and comprehensiveness of social security. On the other hand, others blame the crisis on, for example, unsuccessful and ineffectual investments.
It has been argued in the Swedish debate that what is involved is a question of political choice. There is a dispute in Sweden about the extent to which scientific objectivity is being forgotten in extensive studies concerning the crisis of the welfare state (most prominently the commission of economists headed by Asser Lindbeck in 1993) and instead economists are becoming political players.
Professor Walter Korpi (University of Stockholm, Social Research Institute) presents his thesis thus: "Economics professors and other university economists have long influenced economic policy through their arguments, according to which empirical studies clearly show that high taxes and a comprehensive welfare state caused economic growth in Sweden to slow down relative to other comparable countries after 1970. Thus these economists have argued that empirical material supports the so-called 'eurosclerosis diagnosis', according to which the welfare state, taxation and other political interventions slow down economic growth.
Professor Korpi goes systematically through the empirical material and other arguments presented by the economists in support of their claims and concludes that the economists have managed to alter Sweden's political course. He comments: "The value of this achievement is, however, dulled by the fact that their economic-policy advice is based on an analysis that could very well serve as a cautionary example in the introductory section of a statistics course. These economists' work shows serious symptoms of a crisis of objectivity. The fact that they include members of the Nobel Committee only indicates that such problems are not confined solely to the lowest strata of the profession."
A citizen's wage and a range of radical changes in the taxation system, a so-called negative income tax, have been mooted in Finland as an alternative to a model of society permeated with hard competition. National economies function and produce goods more and more efficiently and with smaller and smaller inputs of human labour. According to this thinking, all could be assured of a moderately good life by making a small work contribution. A "take-it-easy society" has begun to be discussed.
Critics of the citizen's wage and take-it-easy society ask a fundamental question that especially a country like Finland that lives from export income must answer. That question is: Where and by what means will Finland get income to distribute unless working is set as a clear goal?
Britain has been among the first countries when major economic, political or general transformations of society have gotten under way. From the perspectives of policymaking, important turning points were 19th-century industrialisation, 20th-century Keynesian economics and in the final decades of our century Thatcherism. Britain is in the centre of European focus in making choices also today. For that reason it is important to include in the Finnish political discourse precisely the models competing with each other there, because - to oversimplify the matter somewhat - they reflect the hard capitalist market economy and socially sustainable economics - and their various hybrid forms.
We are familiar with hard capitalism, in which regulation has been abolished, taxes minimised and public services privatised and in which the point of departure is that people must cope in life without the support of the state. Less attention has been given to doctrines of sustainable economics, which are set forth in, for example, the Report on Wealth Creation and Social Cohesion in a Free Society produced by a commission chaired by Ralf Dahrendorf. These doctrines are intended to develop a sustainable economy as an alternative to capitalism. The report calls for realism in relation to, for example, globalisation and compares degrees of capitalist "hardness" in various parts of the world.
The report describes how civilised peoples have protected their key functions from markets. There has been a conscious wish to exclude certain parts of society from free competition. Those sectors have included, with some variation in different countries, administration, politics, public order and the army, justice services, education, health care, sanitation, care services for the aged and so-called natural monopolies. Keynesianism expanded the share of public power and even brought macro-economic matters within the public sphere in many countries. According to the authors of the Dahrendorf report, a large part of Britain's problems stem from the fact that the public and the private were mixed up with each other and institutions between the market and society were subordinated to the market. The public area has been allowed to become a battleground for private interests and it is dominated by market values and business interests. Local-government democracy has withered and the government has entrusted more and more tasks to bodies that are not democratically accountable.
The committee warns of a danger of ending up with the corruption and misery characteristic of early capitalism. It argues that the efficiency of public authorities must be defined more broadly than in terms of cost cutting or increases in productivity. Economies in public administration can lower the quality of services and cause costs in other areas. The efficiency of public administration can not be measured using the same criteria as one would apply to globally-operating companies. In the view of the committee, attitudes to taxation have become one of the immediate causes of the malaise that is afflicting society. Taxes have come to be detested by all. However, politicians make no progress in solving social questions, because they try to implement reforms in such a way that they do not cost anyone anything.
The marks that a hard economic policy has left are probably more clearly visible in Britain than in any other European country. There, a search has begun for a third way that would allow a market-oriented economic policy to be made more humane and the traces that it leaves softened.
Measures proposed by economists can ease the problems of the economy and produce solutions of one kind for unemployment, but they do not on their own guarantee that the criteria for a good life will be met.
The British report "Social Justice" ponders the future and analyses the problems that Thatcherism has brought the country. As the turn of the millennium approaches, a million pensioners depend on social assistance to make ends meet, one man in five is unemployed, every third child lives below the poverty line and, owing to the large number of divorces, one child in five lives in a one-parent family. Income differences are greater than they were in the late 19th century and crime has become the fourth-biggest sector of the economy.
In order to create a more humane picture of the future, a third alternative is being sought alongside deregulation, on the one hand, and increasing taxes and income transfers, on the other. A positive alternative that has been postulated is a stakeholders' Britain, in which community ethics are combined with market dynamics. The idea is that there is a need to invest in the most important resource, human capital. It is believed that doing this will increase the efficiency with which the economy functions and enhance individuals' opportunities for self-fulfilment. Social security should not be just for distributing money, but also for encouraging people.
The idea in the report is that all citizens should be guaranteed a basic livelihood. What is new is that social security is seen as a springboard rather than a safety net. Welfare policy is no longer seen as merely a means of levelling incomes, but more as an instrument for creating similar economic and social opportunities. The creation of equal opportunities is emphasised as a question of equity.
Employment is seen in the report as a basic element in welfare policy. However, there is no going back to the goods-production-based full employment of the post-industrial society. The belief is that new jobs will be created in services that enhance the quality of life. Higher work productivity will increase the amount of leisure time and the view taken in the report is that work will have to be shared in order to ensure a more even distribution of the growth in productivity.
Education is seen as the second basic element. It helps people cope with changes in working life. Training determines the real competitiveness of the economy, but also the ability of individuals to fulfil themselves. The need for education is unlimited.
The third basic factor identified is the comprehensiveness of the social security system as a counterweight to a system based on means testing. The view is that services produced only for poor people leads to differentiation in the production of services, lowers their standard and increases opposition to even the slightest level of public services. The willingness of the middle class to finance public services only for the poor out of their taxes will be put to the test if they themselves do not receive a share of those services.
4.6 Tasks of the state need redefining
In the Europe of the 1990s, globalisation, economic and political integration and the transformation of the economy and working life that new technology is accelerating have shattered established assumptions about the state, its structures, tasks and modi operandi. Profound and rapid changes in values, the model of society and the economy have led to a situation in which the states of Europe must reconsider their tasks. The old nation-state is no longer able to function in the way it used to do on the basis of old fundamental assumptions. The old ways and means of doing things are no longer enough to enable it to guarantee its citizens prosperity and assume responsibility for activities that are ecologically sustainable on a global scale as well as for a just distribution of resources.
The international system affects state finances both directly and indirectly. The state must assume new tasks associated with preserving and improving international competitiveness. It must bear partial responsibility for the challenges with which globalisation confronts the national economy. Of the various indirect effects, perhaps the most significant is that in the new operating environment the state must bear the costs incurred in adjusting the structure of the economy and society.
Change in the structure of society puts states in a new situation. Ageing of the population, a toughening of the demands of working life and the resultant differentiation of segments of the population are examples of the pressures that will have to be contended with in the third millennium. The danger is that some segments of the population will be completely excluded. Without various forms of intervention by the state, the working population could be divided into highly-educated, well-paid persons working in competitive sectors and part of the international system and, on the other hand, those with little training and in low-paid jobs. Governments must identify and recognise their tasks and the diversity of expectations that citizens harbour with respect to the way that those tasks are discharged and try to strike a balance between them.
The trend of differentiation that began in the tasks of the state in the early 1990s reflects change in the character of those tasks. In Finland, centrally-managed public activities are divided between budget-linked core state tasks, services which are mainly taken care of by municipalities, and extensive commercial operations on the terms of the market (state-owned businesses, companies and funds). Of these, only the core state tasks are subject to the guidance of Parliament. It is no longer possible in the same way as formerly to speak of uniform state administration, nor can all of the state's tasks be placed in the same category. The state's responsibility for society and citizens is a jointly-agreed sharing of risk, levelling of income differences and provision of services and resources, the collective production of which bestows qualitative and economic efficiency-related benefits. Two questions now in the focus of political debate are: What, from the perspective of society or the citizen, is vital pursuit of the public and common good, and what are state functions to be undertaken only if they can be afforded?
In the future, the state will have to be more effective at forecasting long-range development. It can not remain merely a mediator for negotiations between actors and parties of the current moment, but will also have to represent the demands of the future in today's decision making. Important matters in grasping control of the future include ensuring a sustainable ecological system, strengthening social balance and the foundation of public finances, ensuring balanced demographic development and promoting harmonious intergenerational coexistence.
The role of the state would appear to be changing from that of a service producer to one of strengthening the functioning of the social system and economy. In the globalised world of the next century, the state and the government will have to be highly capable in their core functions in particular. By reassessing tasks, room must be created for new opportunities for action.
Besides being an entity that issues legal commands and prohibitions and wields coercive force by virtue of a monopoly right to do so, the state will probably apply doctrines and experience borrowed from the private and community sector in the way that it operates, in addition to which it will practise networking along the lines of the scientific world. The trend is towards a participatory negotiating and contracting state, the authority of which is no longer founded primarily on traditional coercive power, but rather on knowledge, support and guidance. Regulation will be cut back to apply only to the peripheral conditions of activities. The new instruments that will be used to guide the contents of activities will be consultations, agreements, persuasion and support as well as, for example, the provision of start-up financing for projects calculated to speed up a desirable development.
The negotiating and contracting state will monitor compliance with the ground rules regulating the negotiation system, even out inequalities between the positions from which the various parties negotiate and in some cases itself participate in negotiations. The state's responsibility for ensuring that the common good is realised presupposes special attention to championing poorly-organised but significant interests. The state must look after the interests of those people who are not able to negotiate on their own behalf.
It will be important in the future to introduce problems of economic and social development into the public discourse and ensure that they are grasped in good time. The state must ensure balance between the rates of development of different sectors of society. The private sector's desire to criticise the public sector springs in many respects from its own economic interests. However, the public sector should not abandon its task as the representative of the public interest and balancer of the views of various parties.
What would appear to be becoming the basic principle would be that of seeking a functioning division of labour between the state, civil society and the economy. Any intervention by the state in production, the economic sector or enterprise would have to be very restrained. By contrast, the state must assume primary responsibility for general leadership of the nation and ensuring the wherewithal for its development, for citizens' basis security of livelihood and for seeing that citizens enjoy equality and are provided with the prerequisites for building their own lives. The tasks of the state could also be defined as involving those that the market does not look after (such as some branches of research and education) and those that are best not left to the market for fear of inefficiency.
In public tasks, the closer one is to the state's core tasks, a feature that is likely to be accentuated also in the future is a fixation on the public interest, order in and legality of the organisation and administration of the state, attention to the political will of Parliament and the Government as well as balanced and independent handling of matters. Public tasks are those that are taken care of using tax funds. In the discharge of public tasks the state is entitled to use coercive force.
The position of the state or political system relative to the economic sector so much emphasised in this committee report as well as to a market economy permeated with competition and profit should not be seen generally as that of an opposite. In most cases what will be involved is a complementarity of functions, systems and organisations.
As an everyday example, but one that is very important and involved with principle, let us take gender equality. The political system must ensure through legislative means that men and women have equal opportunities to participate in and influence decision making on different levels, both quantitatively and with respect to contents. It is equally important to provide the structures important for equality. Examples of these are comprehensive welfare services, such as a subjective right to children's day care, comprehensive public transport services and redressing gender sectorisation in working life through assessment of the difficulty of work tasks and by revising wage structures. There is also a need to develop assessment of the effects of technology from a gender perspective and for all-round promotion of training for men and women.
Further, there is a need to examine the means by which Finland as a nation can ensure success. If the educational system does not foresightedly ensure that women study the natural sciences and technological subjects in sufficient numbers, Finland's intellectual resources will not be adequate for industrial success.
4.7 A broad concept of security
Although taking care of security and defence is regarded as one of the cores tasks of the sovereign state in political thinking everywhere in the world, also this fundamental article of doctrine could be called into question early in the third millennium. First of all, globalisation and new technology in its various forms have undermined the foundations of the ideological structure. Several peacetime economic and political alliances and cooperation agreements (ASEAN, EU, APEC, MERCOSUR, NATO) have in fact weakened the credibility of the doctrine in practice. Secondly, the sovereignty of nation-states has always been put to the test at times of war and crisis and in general only the biggest and strongest states have been able to continue to adhere to the principle of maintaining an independent defence.
The first fundamental question is what solution can most effectively promote European and global security in a post-Cold War situation in which threats to security arise more and more clearly from disputes rooted in economic interests, local, ethnic or religious clashes or conflicts about the sharing of resources. What kinds of security structures could engage the different parties in closer cooperation and create a foundation for the peaceful settlement of unresolved conflicts of prestige?
The new Europe employs a concept of security that differs from the old one: the security of states is realised through the security of its citizens. Security is understood in a broad sense as applying to all of society's and citizens' vital interests. Thus in the final analysis it is linked to the realisation of people's wellbeing and civic rights. The new Europe's shared values with respect to wellbeing, democracy and plurality were adopted at the CSCE summit in Paris in 1990.
This broadened concept of security formed the foundation of the 1995 Government report to Parliament on security policy and Parliament's ensuing comment on the report as well as for the Foreign Affairs Committee's submission to the Committee for the Future on the report. Thus security policy does not relate only to military questions, nor is it state-centred. Its core is the security of citizens. External hazards that are more likely than military threats and also more difficult to manage include environmental catastrophes, international crime, terrorism, uncontrolled migration and violence spreading across borders when societies disintegrate. Military alliances and the guarantees that they provide can not help in the face of such problems. What is needed is broad international cooperation to promote democracy and human rights, protect minorities, put social justice into practice, stimulate economic development and solve ecological problems.
The European Union's intensifying internal cooperation, its enlargement and closer cooperation with surrounding regions create the preconditions for an enduring European security structure. It is especially important to ensure that enlargement creates mutual dependence and common interests rather than new dividing lines and confrontations either within Europe or vis-à-vis the rest of the world. Russia's integration into the common security pattern has been dealt with in detail in the Government's report to Parliament.
NATO's future development and expansion must likewise be assessed from the perspective of the premises on which it would be able to increase cooperation-based security. The question revolves around both the contents of NATO's security concept and its extent. Enduring security can be created only by means of common structures encompassing all parties. In this process, cooperation-based bodies like the OSCE have a central place. An opportunity for more detailed examination of those questions will be provided when the Government makes its report on security and defence policy to Parliament in spring 1997.
4.8 The northern dimension
Europe contains regions where problems arising from population growth, asynchronous economic development, threats to the environment, cultural differences or religious conflicts have caused instability and added to fears about the future. That is particularly the case on the Mediterranean. There are problems in, for example, France's, Spain's and Italy's relations with North Africa. Developments in the eastern Mediterranean region (Albania, Greece, Turkey and on into Israel and the Arab countries of the Middle East) likewise involve many dangers for the future of Europe.
Because matters of common concern for Europe are involved, Europe's southern dimension has begun to be deliberated as a separate complex of issues within the EU and other bodies. Europe's northern dimension has likewise begun to be discussed. With respect to both dimensions, the goal is stable development of the regions.
When the northern dimension is mentioned, it is particularly the development of the Baltic and Barents Sea regions that one has in mind. The focus of attention is on matters like exploiting natural resources, preventing environmental pollution and improving the framework for economic development, but also on aspects of human endeavour like science and culture. Of essential importance is the fact that the countries involved in this cooperation include existing and prospective EU members in addition to Russia, Norway and the other states in the region.
An indication of the EU's activity in relation to problems of the northern dimension was the arrangement of a summit of heads of government of the states in the Baltic region in Visby in summer 1996. A series of conferences of northern European economics and finance ministers is another indication of the importance of northern Europe for the entire continent. The first such conference took place a year ago. The second, chaired by German finance minister Theo Waigel, was held in Bergen, Norway in early March 1997. The economics ministers represented 10 countries, only four of which are EU members. The theme was economic cooperation in the northern region and preparations for EMU. The underlying idea is, in a revived Hanseatic spirit, to strengthen unity in northern Europe.
Removing historical friction factors is one of the central tasks to be performed in order to increase stability in the northern sea areas. Stability, in turn, will provide a foundation for the region to flourish in the economic, social and cultural senses.
The Barents Sea is part of the Arctic regions, the threats and possibilities of which are beginning to be understood more and more clearly. Their resources, environment and legal status have become subjects of discussion. The Arctic ecology is extremely sensitive and vulnerable, because it is located in a zone of extreme natural conditions. Global and regional pollution has already affected the Arctic environment. Pressures to exploit natural resources will presumably grow.
The interests of both states that belong to military alliances and those that do not have coincided and cut across each other in the Barents Sea region. The Barents Sea and the northern circumpolar region to which it belongs have been the foci of military activities on the part of great powers. The sea has been a central focus of military activities, including the deployment of nuclear weapons. That could in many ways cause new threats - also to the sea's ecosystem.
A fundamental problem is the lack of a comprehensive system of international agreements and regulation designed specifically for Arctic regions and allowing for their special features. Another is that scientific study of those regions has not yet begun to develop at a pace commensurate with their importance. The creation of the Barents Euro-Arctic Council and other recent steps are putting in place a good framework for the development of cooperation in the region.
The Baltic was an important borderline during the Cold War. Now that the Cold War has ended, the significance of the sea is regarded as having changed. It can develop into a genuine sea of peace. An awareness of the change that has taken place in the status of the Baltic has developed both in the countries belonging to the region and within the EU, which has developed into a central organisation for peace in Europe.
Questions relating to the Baltic Sea region have begun to be discussed since the European Union launched a programme aimed at achieving economic, political and institutional stability there. The Union's goal is to create the framework necessary for stable economic development in the region. Poland and the Baltic States have indicated their desire to integrate into the West's economic and security arrangements. As a consequence, the focus of Baltic cooperation and the problems with which it deals have extended to all of the most central sectors of state policy, i.e. security and defence as well as the question of alliance. That, in turn, has engendered new problems, because Russia, as an important actor in the Baltic, sees certain actions as a threat to her own security. That notwithstanding, Poland and the three Baltic States remain committed to their original objectives.
Irrespective of how the security issues of the Baltic region are resolved in the future, the Baltic States and Poland will continue the process of integration into the European Union that they have already commenced. The European Union's member states in the region are participating as representatives of those outside the region in helping Poland and the Baltic States to create the institutional, economic and social prerequisites for accession to the Union. The work of building up state, political, legal and economic institutions is a central precondition for a favourable development of the Baltic Sea region. Only in this way can the countries of the region form an economically and politically effective and functioning network so that the countries can trade with each other and cooperate to take care of the problems connected with the sea.
Economic interaction in the Baltic Sea region must begin with basic matters. All of the countries in the region must have functioning, efficient political and legal systems that enjoy the confidence of citizens and administrations that respect the principles of the rule of law. The financial and banking systems must be stable. Those are basis requirements when investors are pondering where they dare put their money.
Uncertainty and ferment in the Baltic Sea region manifest themselves on the everyday level in the form of difficulties in maintaining order. The basic security of society must be looked after in the Baltic Sea region, because the region is on the interface between East and West, capitalism and the remnants of communism, the Orthodox, Lutheran and Catholic traditions, different cultures and very different standards of living. If confidence in order and security is undermined, if crime, poverty and inequality increase, the region's good physical communications and information networks could make it a very convenient place for the mafia, smugglers, extremist elements and forces antagonistic to organised society. Any development conducive to increasing disorder will be reflected in the economy and through that on the prosperity of the region.
Some general lines of development and features of operational logic, to which Europe and Finland will have to be able to respond, can be discerned in the economy of the future. They include:
1) unprecedented growth in the world economy and tough competition on a global scale,
2) irresponsible outsourcing, i.e. externalisation of production costs, and
3) blurring of the institutional structure of the economy.
5.1 Unprecedented growth in the world economy
In terms of growth, the world economy is doing better than ever in the past. On the threshold to the third millennium, the locomotives of growth are, in addition to the United States, China, India, South-East Asia and Latin America. Economies are growing in wealthy and poor countries. According to The Economist magazine, it has been 80 years since so many parts of the world economy were growing at the same time. Europe's success will depend in part on how she relates to this growth.
A new GATT agreement regulating world trade and monitored by the World Trade Organisation was signed in April 1994. The point of departure in the universal gain mentality is that removing barriers to trade stimulates it, to everyone's benefit. The World Bank and the OECD estimate that the new agreement will generate additional trade worth about one trillion Finnish markkas ($200 billion) by the year 2002. The GATT Secretariat estimates that the agreement will create 2.5 trillion markkas' ($500 billion) worth of extra income world-wide by the year 2005.
Of essential importance is how the new income is divided. Under the current ground rules of world trade, it is believed that the biggest gainers will be China and South-East Asia. The United States, Europe and Latin America will also benefit. Sub-Saharan Africa is forecast to be among the losers. The amount of social problems or damage to the environment has not been calculated. Some organisations have, however, made estimates in those respects. According to critical estimates, international free trade in its present form will lead to 800 million people being hungry. It is further estimated that the six biggest transnational corporations will control 60 - 90% of world trade in basic food commodities like wheat, maize and rice. Poor countries have had to open their borders to these giant companies. Because of them and the subsidy policies pursued by the industrial countries, cheap food has been put onto world markets, thereby reducing the incomes of poor countries' own agricultural producers and further impoverishing them. It has been demanded that trade agreements should cover also workers' basic rights and minimum requirements with respect to environmental protection.
The opening up of the economy's borders and the development of information technology have suddenly accelerated globalisation so much that it is difficult to control. Companies are competing globally for markets. States compete globally for companies to locate within their borders. Today, global markets guide the decisions of most states and governments rather than the situation being that democratic bodies would determine the framework of conditions within which markets operate.
A recent, quite tangible example of the growing power of large companies in the global economy comes from Britain, where the Conservative government is having to reassess its opposition to the EU and EMU on a new basis since the President of Japan's Toyota announced that his company would not make any new investments in the country if it remained outside EMU.
Unless the rules of competition change, it will follow in the light of what has been outlined above that competition will become tougher and penetrate into various sectors and levels of life. When companies and states have to be harnessed to constant competition in order to succeed, the logical consequence will be that competition extends also to people. Decisively more knowledge and skills than earlier will be demanded of labour right down to the lowest production level. Corporate managements will have to motivate their subordinates to achieve constantly better work performances and develop new products.
Europe's and Finland's success will depend on what choices companies, governments and people make in relation to toughening competition and the rules governing it.
5.2 Irresponsible outsourcing: externalisation of production costs
Externalising production costs is another factor that will affect the future development of the economy and which must be addressed.
In the development of organisations, the term outsourcing is used to describe companies' practice of seeking the most appropriate sources of know-how and the division of labour that suits their purposes best. Well-managed outsourcing is an essential aspect of cooperation between organisations, enabling each organisation to develop its own strengths and obtain some of the know-how and work inputs it needs on a contract basis from another organisation.
In this context, irresponsible outsourcing means the practice by which companies transfer onto outside bodies the burden of economic and social costs in a manner that must be considered problematic, or indeed downright, reprehensible in the moral and ethical senses. It would seem that in the short term the companies that will do best in economic competition will be those that are most effective at ruthlessly transferring responsibility for and the costs of production factors like labour and the environment onto others, mainly society. Tax dumping is one of the most difficult forms of irresponsible outsourcing to control, because it is usually indirect in character.
Companies that operate globally locate some of their functions in countries where they get well-educated labour at low rates. They want the labour to be as young as possible, because in that way they can be sure of getting the latest knowledge and skills. A company is unethically externalising production costs when it does not ensure that its workforce is provided with refresher or supplementary training as it ages or job tasks change, but instead continually hires a new generation of employees to replace the earlier one. Taken further, outsourcing of personnel means that if the best labour can no longer be found in the country, the entire production is transferred to another country. Since companies recognise no homeland, their operational logic can not be expected to include training labour to any extent over and above what their own purposes and immediate gain dictate. In order to maximise competitiveness and profit, responsibility for preserving and renewing the personnel's capacity for work, physical and mental job safety, health and security of livelihood in old age are transferred outside the sphere of companies' responsibility.
In Europe, that development is driving states into severe financial difficulties. No state can bear the costs of a situation in which companies hire 20 - 25-year-old highly-skilled persons who have been trained at society's expense, suck them dry in a decade or so and when they are 40-year-olds throw them back to society to take care of. With Europe's population ageing, the length of time that people will live after their participation in the workforce has ended will be twice as long, i.e. from 40 to 80.
The environment is one of the most vulnerable areas of production costs. When the costs of environmental protection are not taken into consideration, but rather a situation is tolerated in which companies gain the biggest profit by investing where environmental standards are lowest, we are drifting towards catastrophe. In such a situation, neither states nor future generations will be able to meet the costs that environmental protection will demand.
From the perspective of European values and the premises underpinning our model of society, a fundamental flaw in this operational logic is that products are sold at a price that does not include the costs that are inescapable in a good society. There is an awareness of the problem everywhere in Europe, but it is impossible to find a solution to it on the national level. Even on the European level, finding a solution will be very difficult. By what means will Europe be able to seek a different line if the USA and Asia do not take part? A wave of strikes in South Korea shows that not even in Asia is it easy to shift permanently into the road of externalising production costs.
Unless the consequences of globalisation and irresponsible externalisation of production costs are grasped politically, societies will begin feeling poorly. Nature will be destroyed permanently, social problems will grow to the point of unmanageability and the number of marginalised people will increase. Democracy will lose its foundation. Several economic leaders have expressed their concern at the malaise afflicting society, because if society and its people are sickly this will inevitably also have a devastating effect on the economy in the long run. Companies will begin feeling unhealthy. In that way markets deprive themselves of the prerequisites for success.
One recent statement of the type referred to in the paragraph above is contained in a report entitled "The 21st-Century Company" published by a group of young French corporate executives. In the report, relations between companies and society are seen as a difficult problem of our times. France is a country where citizens are accustomed to demonstrating and marching in the streets. Solidarity is a strong force. Young corporate executives in an explosive France are warning that unbridled capitalism can lead to ruin. It can disintegrate. It can crumble like communism unless people can be restored to their position as the centre of society. The economy can thrive even though society is disintegrating as unemployment, poverty and crime grow and families fall apart. A large proportion of people - perhaps eventually the majority - are excluded and no longer have any real contact with society. Their opportunities to participate and their civic rights wither away.
Concern has begun to be expressed in nearly all of the leading European economies that companies are going too far with rationalisation and outsourcing, especially in relation to personnel. When companies have set about cutting costs in the name of maximising profits, skilled employees have also been externalised. The thinking has been that, just as companies need not maintain laboratories or cleaning staff as fixed overheads but instead can buy these services from outside, the entire staff can be regarded as one big bought-in service.
Making personnel bear the main thrust of irresponsible outsourcing of functions has led to an end result that differs from the goal sought. Employees feel insecure when they do not have permanent jobs and reasonable prospects that they will continue. Families can not plan their lives. Ageing skilled employees suffer anxiety as they fret that younger persons will be taken on to replace them. The result of constant insecurity is that people no longer identify with their workplaces and employers. That deprives them of a bond and commitment and renders them unable to achieve the best results. Both parties regard work as detached performances. Work is a means to a livelihood, nothing more. Corporate executives in several European countries are concerned because workers have jobs with several employers. The quality of the work suffers when no employer is regarded as a "patron", none is identified with, and an employee shares no values with any of several employers. Loyalty disappears from the relationship between employer and employee. Jobs are switched immediately if someone pays more. Over the longer term, that model of working life can not be in the interests of a successful company.
The idea of trust as a cementing force in society (Fukuyama: Trust 1995) has been introduced into the European discourse from the OECD and the USA. Companies in the USA have strong local ties, in addition to which, no matter how much they have internationalised, American patriotic sentiments remain strong. In Germany, the system of Mitbestimmung (co-determination) can be identified as a similar cohesive force in the economy. A similar cementing function is performed in Japan by the strong ties that large companies with global operations maintain with small subcontractors. The better a society looks after its capital of trust and feelings of affinity, the better also companies will thrive.
A debate has been in progress in Britain for a couple of years about whether capitalism operates too much in accordance with the pure profit orientation of shareholders. Shareholders determine where companies are located, how they operate and the ground rules that they observe. As an alternative to the shareholder society, the stakeholder society has been proposed. The idea in this model is that shareholders' interests must be safeguarded, but their power must not completely exclude the interests of the rest of society. Workers, customers, subcontractors, banks, the communities where companies are located and other of companies' linkage groups would have to be taken into consideration.
5.3 Blurring institutions
The institutional structure of the economy in Europe is a challenge. The USA and Britain differ in this respect from the large states of Central Europe, and because the English-speaking world is winning in international competition, at least when one examines the matter in the light of current criteria of success, the matter must be addressed in Europe.
At its simplest and most concretely, the difference between Central Europe and the English-speaking world manifests itself at the core of the economy, on the stock exchange. Of publicly-quoted companies (excluding the financial sector) 36% in the USA and 30% in Britain are owned by private persons. The corresponding figure in Germany is only 14%. In the USA companies own 15% of shares, in Britain 4%, in France 56% and in Germany 42%. In the financial sector, the share of pension and insurance funds representing private households is 31% in the USA, 40% in Britain, 2% in France and 12% in Germany (figures extracted from the Bundesbank's monthly report for January 1997). The difference is interpreted as being due both to a different political and economic tradition and to a failure so far on the part of Germany and France to respond to the challenge of globalisation.
A typical feature of Germany is that banks and big companies have not yet separated; instead, banks own large portions of big companies and their representatives sit on the boards of those companies. In France, this is associated with the additional feature of the government owning controlling shares in companies. A significant number of banks and large companies in France are owned and run by the state. The strength of the state sector in the French economy is such that it employs a quarter of the workforce either directly or indirectly. This structural feature of the economy is reflected in the French thinking that puts politics before economics and emphasises political decisions. In the context of building EMU the Germans, true to their own tradition, are emphasising the economic aspect. In their view, economics take precedence over politics.
The difference between the economy and politics can also be expressed more generally on the level of social models, as Ralf Dahrendorf has pointed out. The USA and Britain are accustomed to thinking in accordance with which one first sees whether people themselves can do something, and if they simply cannot succeed, the state steps in to help. The thinking in Germany and the Nordic countries has been quite the reverse. The state leads and initiates matters and then tries to get people to participate.
Summa summarum: What do the features of change in the economy presented above - globalisation, irresponsible outsourcing of production costs and the institutional structure of the economy - mean? Put in the simplest terms, they mean that they determine the positions in competition of continents, economic regions, states and companies. From the point of view of European people, they influence the standard of living and create the preconditions for prosperity.
The most effective solutions to the problems of the global economy outlined above will be found on the level where problems are created and manifest themselves. The problems must be identified, goals set and strategies created. But that will not be enough. We must seek contacts and ally ourselves with those that share our values and thinking. That is what European integration at its finest is about. The only problem is that the democracy of European citizens still lacks a lot of the infrastructure with the aid of and through which people's will could be transformed into democratic decisions. Instruments of democracy like parties, civic organisations, the information sector, interest organisations, public opinion and opposition are only starting to find effective means of exercising influence on the international level.
On the brink of the third millennium, Europe's economy is in a challenged situation compared with the rest of the world. Asia is becoming a major economic centre on the global scale. North America remains a large and developing economic region. The countries of Latin America are extricating themselves from their debt difficulties and getting economic growth under way. The same can not be said for the world's poorest continent Africa. The transition economies are seeking their place in the global economy and seeking to intensify their cooperation with the EU. However, the social costs of economic reform have been very great and solving them is a challenging task and a prerequisite for the reform process being able to continue. Changes in the transition economies have brought in their wake both wage competition for work and a need to reach agreement on common ecological and social ground rules.
Globally, from the perspective of national economies - but above all of people, a good level of employment is important. Although working life in the USA could justifiably be criticised in the light of several of the criteria for a good life in Europe, it must be acknowledged that throughout the 1990s unemployment in the USA has been only half the European level. In the Western world it is the USA that has created clearly the largest number of jobs.
With the future in mind, investment is of central importance. In 1996 the USA bought companies abroad to a total value of 296 billion Finnish markkas, whilst foreigners bought companies in the USA for a total of 320 billion. In Britain's case, the corresponding figures were 160 and 174 billion. By contrast, Germany bought foreign companies worth 132 billion, but Germany inspired foreigners to invest a total of only 28 billion there. In France's case, the corresponding figures were 52 and 47 billion. Europe, with the exception of Britain, has been rapidly losing ground as a location for production and a destination for investment. Today's investments are an essential prerequisite for economic growth.
Although globalisation in the form of corporate investment abroad has spread rapidly, great caution with regard to moving head offices, research and development centres out of the mother country can still be seen. Because know-how is in people, it is much more difficult to transfer than production. On the other hand, many companies are already setting up research and development units in countries where skilled people are available. It is worrying from the perspective of the future development of Europe that European companies have invested in research in the USA on a considerably greater scale than companies from elsewhere have made investments of this
kind in Europe. Where research is done is the place where new jobs are created
Table: Foreign investment relative to GDP (based on replies by 310 large companies and experts in the field to an UNCTAD questionnaire in 1994)
Investment abroad Foreign investment USA 9.1 7.5 Canada 19.2 19.2 France 13.8 10.7 Germany 10.9 6.8 Britain 27.5 20.9 Sweden 26.0 9.7 Finland 12.1 6.8 Japan 6.2 0.4 Africa 3.9 14.6 Latin America 1.3 12.7 Asia 4.7 12.1 Eastern Europe 0.4 7.4
In some Asian countries - such as China - clear demands that also creative, innovative units be transferred to Asia have been made in recent times. The intention, naturally, is to safeguard future development.
Total investment by Finnish companies abroad is about twice the total of investment by foreigners in Finland. Finnish industrial companies' foreign subsidiaries and partnership companies now employ nearly 150,000 people, which is equivalent to about 40% of the entire industrial workforce in Finland. Internationalisation began late in Finland, but has taken place clearly faster than in the OECD countries on average. Thus it could be that in Europe Germany and France, for example, will not feel the full effects of globalisation, with all its benefits and drawbacks, until the early years of the third millennium.
5.4 1996, the Elephants' Wedding Year
Internationalisation and growth in the size of companies has given globalisation added momentum. 1996 was a record year for corporate mergers, witnessing the biggest fusions of large companies in the history of world trade. The objective of large companies that operate globally is to capture markets rapidly all over the world. That feature of development requires European companies, which have concentrated on national operations and often also become accustomed to receiving the support of the nation-state, to face a tougher competition situation than they have had to cope with up to now.
German economic analysts had dubbed 1996 the year of the elephants' wedding, by which they mean large companies merging to form even more enormous ones. Growth in the number of large mergers had been predicted, but yet the rate at which massive corporations have been fusing with each other has come as a surprise.
Seven of the eleven biggest mergers in US corporate history took place in a single year, 1996. The biggest mergers in the USA have been in the media, banking and transport sectors. The amounts of money involved in the mergers reflect their importance. Walt Disney bought a rival at the beginning of the year and two large television companies merged the following day. Both deals involved around 100 billion markkas ($20 bn) each. The early part of the year also saw several telecommunications companies combine to form the second-biggest entity in their sector. The second-biggest corporate acquisition in American history (120 billion markkas) took place when the telecommunications giants Bell Atlantic and Nynex merged. Three or four large mergers took place in the banking sector in 1996. In the air transport sector, large companies bought smaller ones for around 50 billion markkas during the early part of the year and then, towards the end of the year, the two biggest aircraft manufacturers, Boeing and McDonnell-Douglas, merged to become the overwhelmingly dominant force in their sector.
A major fusion in the telecommunications sector in 1996 was between British Telecom and MCI of the USA. This produced the world's fourth-biggest company in its sector (after NTT of Japan, ATT&T of the USA and Germany's Deutsche Telekom). The merger was the biggest in British corporate history.
An everyday example of merging is provided by the creation around the Pepsi company last year of the world's biggest fast-food chain. Pepsi owns 29,000 outlets (Pizza Hut, Kentucky Fried Chicken and Taco Bell) and has turnover of 94 billion markkas.
Biotechnology and pharmaceuticals will be important sectors in the future. Concentration is making it possible for demanding and expensive product development projects to be carried out. The cost of developing new drugs is likely to continue rising strongly. The merger last year between the Swiss pharmaceutical giants Ciba-Geigy and Sandoz was one of the biggest corporate fusions in world history.
The capture of markets and mergers between giant companies should not be assessed only from the economic perspective, but also politically. In association with the merger in the US aircraft industry, for example, there was a public debate on security policy. Besides its implications for the civilian sector, the merger also affects the defence industry, which has become concentrated to almost the point of monopoly status. As a consequence of corporate acquisitions, political configurations change in many countries and can cause new kinds of tensions.
In the media sector, the effects of major mergers on opinion moulding in the world is still difficult to assess. It is not good for any society if mass media, entertainment and popular art forms like cinema are in the hands of a few. In the USA hegemony has long existed in several media sectors, and the position is being further exacerbated by mergers. A new feature in the Nordic countries is the transfer of advertising agencies to the control of large international, mainly American, companies. Media can be a powerful instrument of "opinion power", especially in conditions of crisis.
The trend towards mergers between globally-operating companies has its effects on the conditions of competition. Since success in capturing markets in most sectors depends on the funds that can be made available for R&D, bigger companies are in a better position than smaller ones, because research is expensive. This applies to the natural sciences in particular. One can find examples, also in Finland, of research results in medicine failing to be developed to the point of marketable products. In the telecommunications and information technology sectors, the fear has been expressed that small and medium-sized enterprises in small countries may not be able to keep up with the pace of competition for much longer as the big global actors merge and multiply their R&D capacity.
Europe differs from the USA in the feature than in quite many countries big companies are state-owned or have close links to public sources of finance. France is a good example of this. A large proportion of banks and insurance institutions in various sectors are directly or indirectly state-owned or state-financed, or at least their pricing policy and other operations have been subject to state direction. Because of this element of state control, the development of mergers between large European companies is difficult to forecast from the same starting points as apply to the USA. The same goes for postal and telecoms services, railways, energy utilities and many other companies that provide society with basic services. With the exception of the Nordic countries and Britain, they are only now becoming objects of privatisation in Europe. Yet a strong tendency towards large global entities can be discerned also in those sectors. The combination of telephone and data-transmission services is one example of this. As banking is likewise liberalised, French and German banks are also combining their operations in this traditionally sensitive sector.
Another European feature is small family companies, especially in the service sector in France, but in Germany also in industry and the distributive trades. The difficulties afflicting French family enterprises manifest themselves most concretely in mass closures of family-owned cafes, restaurants and shops, which any visitor to Paris can see. In Germany, where family companies are more on the production side, the trend is slower, but just as clear. Indicative of the development is that everyday service companies like cafes in this country of 80 million are controlled by a major company since several smaller ones merged in late 1996.
In Finland companies are small to begin with, but there are also signs of them merging. The banking sector and the timber and paper industries have had the strongest wave of mergers. In retailing, the Kesko merger foundered on the EU's opposition in the interests of consumers. At the same time, however, consumers' interests have been considerably undermined in the goods trade, because international large-scale producers are gaining a dominant position. In foodstuffs, for example, in spite of numerous different producer companies and many brand names, the manufacturer of more and more of the current consumer goods sold in Finnish shops is Unilever, which used to manufacture also in Finland, but has now transferred that production - and the jobs that go with it - elsewhere. There are dozens of margarine brands, but only one Finnish manufacturer (Raisio) remains. The same monopoly-like situation applies also to product categories like household chemicals and cleaning and hygiene products as a whole.
The Year of the Elephants' Wedding could eventually turn out to have been a passing phase and different kinds of trends could be generated in the business world as a reaction. In the data-processing sector, the 1970s were the golden era for giant companies like IBM and they were expected to continue their triumphal onward march indefinitely thanks to their financial and know-how superiority. In actual fact, the development went in exactly the opposite direction. Small companies that grew up more or less around ideas generated by one gifted person (e.g. Bill Gates) conquered the market. While the giant firms that operated globally were concentrating on only the big computers that their big clients needed, small companies were coming up with products that met people's needs, i.e. personal computers.
Yet, several leading economic experts argue that toughening competition in open world markets will lead to a situation where there is room in each sector for only 3-4 large international companies, which will divide markets, production and research among themselves. The others will have to be content with operating in regional and local markets. The major reasons for concentration are the speed at which products become obsolete and have to be replaced with new ones, the soaring costs of R&D, the expensiveness of new applied technology and the high price of skilled labour.
If the prediction that a few companies will lead and dominate their sectors is correct, Europe should find the sectors in which different companies from different countries have the best prospects of success. A shared challenge is that of trying to create the pan-European framework that will enable us to create new prerequisites for competitiveness, such as reforming the tax structure and channelling research inputs into promising new sectors. One such example is environmental technology. A new orientation is important because Europe's state-centred tradition and the monopolies that go with it tend in several sectors to be an impediment to large companies rejuvenating themselves to cope better with competition.
Where Finland is concerned, the question is whether we can retain our status as a leading country in the wood-processing sector and stay in the front ranks in the electronics field. In order to ensure that we continue to be competitive as a country, we must also look for new sectors, environmental technology for example, in which we are so strong that we would have real prospects of taking a place among the leading 3-4 actors. One means that has been used to identify new ascendant sectors is the so-called technology foresight method, which will be gone into in more detail later.
5.5 Four levels in the economy
The future can not be built entirely on the foundation of the global economy. A large proportion of the economy and production will remain on the regional and local level. It could be that even on the European level the majority of the population in traditional production sectors will hardly participate at all in competition in the high-tech and advanced-knowledge global economy. The ageing of the European population sets natural limits to that participation.
Secondly, the global economy will trigger many kinds of reactions, one of the consequences of which will be that the economies of large cities will lead lives of their own. The same could happen with the economies of remote and sparsely-populated regions. Economic life and production in the poorest regions of all may never be able to rise to the level of competitors in the global sphere, but will probably remain poor as a result of competition.
Thirdly, the global economy could collapse or at least suffer grave damage, in which case there will be a step backwards also in the world economy. It would be advisable to be prepared to cope with such an eventuality using the means that the national economy provides. Sensible economic management means being able to get by on one's own resources. It would also be important for Europe to prepare for the possibility of the US and Asian companies winning out in the contest and leaving European companies further and further behind. Especially small countries must allow for the fact that leading positions will be harder to retain. Large countries and large economic units will invest in R&D on a scale that not even the biggest companies in small countries will be able to afford.
The idea of plunging the whole business sector and economy into global competition can also be called into question. What if the achievement of a leading position is probable only in a few sectors? Not all people want to or are able to participate in a constant race for better and better results. Nor do all states and regions want to engage in a struggle that is waged on the terms of the big actors in the global economy - the economic giants. The economy and economic actors may be divided between several levels. However, the main line will run between the hard-competition global economy and the local economy.
Three economic levels that are directly or indirectly linked to the global economy can be discerned. The uppermost level is the one with the toughest competition to achieve international leadership in a particular sector. The next level comprises companies that manufacture special products for sub-sector niches and base their operations on innovative advanced technology. The third level comprises subcontractors serving companies on the other two levels. The fourth level of the economy comprises primary production in a national context, local industry and public- and private-sector services in addition to any new local economies that are capable of meeting people's needs by virtue of their lesser dependence on markets and mainly through local endeavour and exchange.
From a Finnish perspective, these three levels in the global economy could manifest themselves in the forms of company types that have made the following production- and operations-related choices: 1) large companies that are the leaders in their sectors and whose goal is to get an even tighter grip on their sectoral markets, 2) pioneers in their fields, companies that create new inventions and innovations, and 3) expert and well-functioning subcontractors that serve companies belonging to the first two categories. Nokia, Kone, UPM-Kymmene and Vaisala are Finnish companies that belong to the first, hardest-competition, level. Companies of the second level typically base their operations on a few, or perhaps even one product (such as a pulsemeter) with global markets that could be difficult to conquer. This category also includes companies operating in narrow niches that have escaped the attention of the big actors.
Because Europe and Finland can not be competitive in mechanical goods-production sectors, the competitive economy of the next century will be concentrated around know-how. Countries like Finland will mainly succeed by exporting knowledge and technology. No country will be able to get by without export earnings. A small country will have to find, by specialising, its own areas of strength in competition between the big actors. In knowledge and capacity to respond they must stay a step ahead.
If Finland intends to retain a more significant position in the global economy than her share of the world population would warrant, her companies must be competitive on all three levels of the global economy. Because Finland buys goods and services from abroad, Finnish companies must be able to focus more strongly on exports. On this level, the domestic market is important mainly as a development foundation for products and as a practice field where companies can test their effectiveness. In the global economy, growth is created, profits generated and new investments made. In it, there can be no survival without innovation and know-how. The global economy produces export earnings, skill and resources.
Depending on state-of-the-art technology and automated to the highest possible degree, global-level companies do not acknowledge responsibility for employment. It would seem that Europe's densely-populated countries are only beginning to introduce technology. Finland experienced a severe structural change in the early 1990s. If Europe experiences the same with a time lag, it will have to respond to a serious challenge of mass unemployment with a similar delay.
That well-functioning regional and local economies take care of society's basic social services and utility tasks can be regarded as a healthy development goal for the economy.
The division of the economy into four levels along the lines set forth above is based on the premise that the threatening image - that is being presented increasingly often - in which Europe's and Finland's economy, production sector and population will be sharply divided into two groups can be rebutted.
It is a mistake to think that in the world economy profits are generated only on the level of advanced know-how. The whole world will not change overnight into a knowledge and skill society, where only the ablest succeed. Between the wealthiest and the poorest, the most and least capable everywhere there will remain several functioning strata of society. All will need food and drink, consumer goods, various machines and equipment, services and entertainment. Not all countries nor groups of people will for a long time to come be able to afford new technology nor be able to obtain the education and training by means of which they can obtain the knowledge and skill that those in the vanguard of the economy need. Africa is the continent that in all probability will lag behind for a long time. Also in Europe there are places that it is difficult to imagine being in the vanguard of new technology and production.
The regional and local economy will be based on self-sufficient agriculture as well as on the production of everyday goods and services. The category will also include personal services generated in both the public and the private sector.
In Europe and in Finland there have long been self-sufficient, perhaps remote, sparsely-populated regions with old-fashioned production structures. It would be advisable in Finland to strengthen domestic alternatives to imported everyday consumer goods. The large global manufacturers of consumer goods and foodstuffs are, by and large, not interested in the small Finnish market.
The success of a local economy will depend on whether, through voluntary choice, lively and functioning local markets based on their own work and mutual trade can be created. By reforming taxation and support structures in working life as well as by lightening the sometimes excessively strict regulations and bureaucracy with which the business sector has to contend, we can create the prerequisites for success on the local level.
The globalised high-competition economy will employ the best European workers with special skills without the intervention of society. The right to a full life in society must also be safeguarded for persons with little or outdated training, those who have been excluded from technological development and, as competition stiffens, more and more clearly for persons of average-class skill, who for one reason or another can not keep up with the pace of competition in the global economy. Those population groups can enjoy good success in regional and local markets. Every person has the right to participate fully in the functions of society, of which working life in its various forms will continue to be one of the most important for a long time to come. It is easier for a small nation than for one numbering many tens of millions to find creative applications that can ensure the welfare of all of its members.
The various levels of the economy also challenge science to serve the needs of people better. If the technological sciences and the economic sciences have a special orientation towards seeking and supporting global-level success factors, the social sciences and arts should also support efforts to find solutions to the problems of the regional- and local-level economy.
The laws that govern the high-competition economy hardly affect the economy of people's everyday lives. People who are not sucked into the global economy or who do poorly in competition can find their place in local economies. Without breaking the laws of the market economy, the public authorities can employ active measures to create opportunities to employ people. When support for the framework that facilitates activities is limited to everyday products and services in the immediate areas where people live, the competitiveness of the international economy is not necessarily jeopardised.
Despite the different characters of the global and local economies, there can be points of similarity. In product development, for example, companies intending to launch onto the global market can test their product ideas within the family circle, as it were, i.e. in a small market. A point made repeatedly by experts on world trade is that no company will be able to conquer its global sector without succeeding in its domestic market.
Strengthening local economies will provide insurance against possible crises. Because many leading economists warn of the danger of the world economy collapsing, society putting resources into strengthening the local economy is not just a matter of employment, but also of security. Inputs should also be assessed starting from this premise.
Functioning local economies ensure that no group of the population is isolated. One of the most important forms of insurance is the maintenance of a sense of belonging together, equality and belief and faith in the future in all children and young people. By giving all who want to work the opportunity to do so - even in return for small benefits - society ensures that all new citizens have the opportunity to succeed, irrespective of what family or region they are born into. If forecasts of the decisive significance of intelligence and top-level abilities in future success are correct, regional and local markets will have a significant role in offering people equitable opportunities.
Not all countries and groups of people can afford to buy nor have the requisite knowledge to use products based on state-of-the-art technology. There will always be countries, regions and population groups with slower growth, more modest development and a lower level of knowledge. Poverty can change its form, but it is unlikely to disappear even in the remote future.
By developing regional and local economies, it might also be possible to generate new vitality to help the developing countries. Good examples of successful projects are literacy programmes for women in developing countries and other development of everyday life, together with well-drilling projects. Developing countries do not primarily need the latest products of advanced technology, but rather instruments to get basic production under way - more modest everyday goods and services. But technological know-how also has its significant role. Environmental technology can help developing countries solve their environmental problems and information technology can facilitate the creation of systems to enable citizens to participate in decision making.
Markets in those parts of the world with more modest standards of living are not trivial. Focusing on serving their needs would be one future opportunity for a country like Finland to succeed abroad as well as in the domestic market. Also this line will require work, innovation, advanced know-how and specialisation.
6.1 Technology
Scientific research is the foundation for the development of the knowledge society. Science produces new knowledge, which can be applied to find solutions to human problems and to generate social and economic innovation.
Since the beginning of the 1980s the developed countries of the world have had a better understanding of the importance of science for economic growth than they earlier had. The share of scientific and applied research and product development as a proportion of GDP has likewise grown rapidly in most European countries. Besides the inputs made by companies, the state has also increased its investment in research and product development. Yet the EU's research spending as a proportion of GDP is clearly smaller than in the USA and Japan. Besides that, Japan and, above all, the USA are more efficient at applying new technology.
The EU has noticed that Europe is lagging behind. To improve the competitiveness of European industry and of the other actors in societies, the EU has devised framework joint research programmes, within which companies, research institutions and universities in member states receive support. The annual total now spent on joint research programmes is 14 billion markkas, or 5% of the EU budget. That sum may seem large, but is actually about the same as the Commission's administrative costs. The amount spent of research is only a tenth of spending on agriculture.
The EU's research funds amount to only about 5% of the public funds devoted to R&D by the member states. Many fields of research are so expensive that they require European cooperation if the critical mass demanded by global competitiveness is to be achieved.
The aim in the new programme is to achieve significant breakthroughs in a few selected areas rather than dissipating efforts on many small projects. The goal is to improve employment, enhance the quality of life and health and protect the environment. The intention is that the foci of research chosen should represent sectors that are expanding and enjoy good growth prospects. They must be sectors in which European countries can and have to improve their competitiveness. They must also be sectors in which technology is developing significantly. The foci chosen are 1) the organic world and the resources of ecosystems, 2) the creation of a user-friendly information society and 3) promoting competitiveness and sustainable growth.
(Kuva)
% Proportion of GDP
Sweden
Japan
USA
OECD
Finland
Norway
Denmark
R&D spending as proportion of Gross Domestic Product
Besides the EU basic research and technology programmes, there are several other joint research programmes in Europe. They include the nuclear physics research institution CERN, where the Internet was originally developed to facilitate links between researchers. The European Space Agency (ESA) was created to conduct space research and develop related technology. It has developed the successful Ariane rocket for launching satellites and the commercial aspects of this are entrusted to the company Arianespace. Another joint development project that has led to a competitive product is Airbus. Cooperation would be needed in several other sectors as well, because there is a danger of human and economic resources being squandered if similar research is done in a fragmented manner in many parts of Europe.
Europe has relatively well-educated labour and also innovative ideas in abundance. It is pointed out in the EU Commission's Green Book on innovation that our weakness has been in combining technological and organisatory innovation. It is of essential importance that we speed up the process of innovation. Translating the insights that emerge from basic research into products that will succeed on world markets must be done in a considerably shorter time than is now the case. High-quality, effective strategies presuppose training on the company level, meticulous work planning and, above all, rapid implementation of innovations.
In Finland, the public sector and private companies spend 15.5 billion markkas on research. That is equivalent to about 2.5% of GDP. In late 1996 the Government made a science policy decision to the effect that three billion markkas of the money received from the sale of state companies would be channelled into research and development (mainly through the Technology Development Centre TEKES, universities and the Academy of Finland) in the period 1997-99. Companies have likewise increased their R&D investment to a record total in recent years (up 20% between 1995 and 1996). In 1999, Finland will spend 2.9% of GDP on R&D, a figure that will place her among the countries at the top of the league table.
A key question is whether the funds allocated for research can be used in the best possible way from the perspective of increasing the nation's welfare. The prerequisites for that happening are in place, because in recent years Finland has enjoyed exemplary success in exploiting the results of research. To take one example, the electrical and electronics industry has more than trebled in size in five years. The value of its output is already close to catching up on that of the paper industry. Methods that are only now being considered elsewhere in Europe are already in use in Finland.
(Kuva)
Billion
markkas
Fast
Slow
Forecast
(VTT, the Technical Research Centre of Finland, 1995)
Gross value of output in the electrical and electronics industry
SHARE OF EXPORTS
Electrical and electronics industry 70-80%
Forest products industry 70-75%
Attitudes to both research funding and science in general are different in Europe from those in the USA and Japan. There is not the same clear ability as in competitor countries to exploit science and research as a driving force for economic development nor as a wellspring of social innovation. The emphasis in Europe is on the humanities and within the university system on their Humboldtian task.
An example of the difference between New and Old World attitudes to branches of science that are important from the perspective of the future is provided by biotechnology. Besides being a theoretical discipline of science, this is also a typical science-based production sector of the future, one with the prospect of a huge global market.
The problems that biotechnology is experiencing in Europe stem from political positions and the general social atmosphere. It is obvious that the problems of biotechnology and its apparent threats to the development of society as well as its hazardous aspects with respect to the environment must be studied before the sector is allowed to develop freely.
In Germany, among other countries, a broad debate on the ethical problems of this discipline of science began in the late 1980s. Demands for stricter legislation and control were continually stepped up as the public debate went on. German industry warned that research in the field would be transferred abroad if political decisions, which were forecast to put clear obstacles in the way of the development of the sector, were delayed. The same debate took place on the EU level a few years later. The legislation passed as a result by the EU and member states is regarded in industry and product development circles as stringent.
It is impossible to assess the impacts of political decisions on prospects for the development of biotechnology in Europe and on locational choices with any degree of certainty, but the fact that 100,000 people are working in the sector in the USA and only 17,200 in Europe gives some indication of the difficulty of the situations in which politics, science and the industry now find themselves. Biotechnology well reflects the difficult relationship between these three actors.
Politics must take care of people's safety, the state of the environment and in general of the conditions of life from the perspective of the future of all humankind. That always means some degree of laws and norms and monitoring to ensure that they are complied with. However, limitations also cause problems. Science tends to gravitate to those places where it has the best prospects of flourishing. In turn, industry that avails of science locates close to science. Political decision-making must take very different considerations into account. It can not function on the terms of the market, but neither can it simply resign itself to the fact that ethically-justified restrictions on science lead to science being relocated elsewhere. Thus science is an area in which there is a need for activities and decision making transcending national boundaries.
A fundamental requirement in science policy is that governments are aware of the consequences of their decisions and base their choices on information and its analysis to the greatest degree possible. The European political system must not settle for less in the formation of its knowledge. Demands with respect to the supply of information to politics and especially its understandability must be set at a high level.
6.2 Technology assessment
In the future, innovations based on science and technology will change society even more. Increasingly often, there is a need for new legislation, in which science and technology feature significantly. Parliamentarians often have inadequate information to assess the advantages and drawbacks of new applications. There is a danger of Parliament gradually losing a considerable part of its power of decision to government officials and experts.
To be able to manage decision making better, the parliaments of several countries have introduced assessment of the social impacts of technology. The intention here is to provide parliamentarians with high-standard and independent information about new matters in which science and technology have an important role and which are of significance from the perspective of future legislation.
Assessment of technology has long been done by research establishments, companies and ministries, but it is a rather new activity in the context of parliamentary work. It is now practised by the parliaments of five European countries and has been regarded as an essential requirement for implementing democracy in practice, because it guarantees impartial assessment of matters that interest parliamentarians and in which science and technology feature centrally.
In Finland, on the recommendation of the Committee for the Future, Parliament has given the Committee the task of assessing the impacts that technology has on society. This work is done in collaboration with other committees. All committees can propose themes to be examined.
Technology assessment is research and study work, but it is of benefit also in the creation of national technology strategies and in the assessment of their technological and economic impacts. Technology assessment is an important means of understanding and managing the future development of society.
6.3 Technology foresight
Technology foresight - predicting the course of development that technology will follow - has been practised in Japan and the USA for decades and in recent years also in several European countries, among them Britain and Germany. The European Union has entered the field of technology foresight by establishing its FAST (Forecasting and Assessment in Science and Technology) programme and by setting up a small research unit in Seville, Spain. Technology foresight has not yet been practised in a comparable manner in Finland.
Technology foresight involves collecting basic information about future alternatives and opportunities. The underlying assumption is that success is built on exploiting innovative basic research, the possibilities of technology and by accumulating a fund of know-how. A successful industrial strategy is founded on understanding and dovetailing the possibilities of technology (technological push) and the needs of the market (market pull). A third key factor is the ability to exploit industrial strengths and make rapid and clear use of new opportunities as they present themselves. A small country must build on its strengths and eliminate weaknesses.
In Japan, a 30-year technology foresight is drafted every 5 years. The fifth was drafted in 1992. The central principles employed in drafting these forecasts are: 1) the analysis covers both the possibilities of science and technology and the social and economic needs of society, 2) the analysis covers everything, not just narrow sectors, 3) the R&D needs of different sectors are estimated and prioritised, and 4) the analysis produces goals and experts' assessments of how and within what time frame those goals can be achieved.
In the United States, a list of critical technologies has been drafted by government officials and several research institutions. In 1989 Congress passed Public Law 101-189, which requires the Defense Department to draft annual technology assessments for national defence purposes. In 1990 Congress appointed the National Critical Technologies Panel and gave it the task of reporting biannually on the development of technologies deemed to be of critical importance for the security and economic welfare of the USA. Congress likewise set up the Critical Technologies Institute.
The following are examples of the sectors on the Japanese list of future technologies and of goals set for the 21st century. (The figures in brackets are the years in which the technologies will be introduced.)
1. Materials technology
- superconductivity at room temperature (2017)
2. Information techniques
- the principles involved in human creativity will be studied and applied in
information techniques (2020)
3. Biosciences
- prevention of cancer metastasy (2007)
4. Climate
- dynamics of ozone layer explained (2003)
5. Raw materials and environment
- automatic sorting of city wastes (2001-2003)
6. Production
- office work at home will become common (2007)
7. Communications
- telephone capable of interpreting languages in real time (2008)
8. Society
- efficient and safe nursing/treatment robots (2003)
The technology sectors that the Germans expect to be the top ones include:
1. Materials technology
- combination of inorganic and organic matter (2004).
2. Electronics
- electronic identity card in widespread use (2003)
3. Energy
- solar energy in widespread use (2017)
4. Raw materials and environment
- completely automated mines (2012)
5. Production
- artificial photosynthesis in widespread use (2012)
6. Construction
- widespread use of buildings self-sufficient in energy (2012)
7. Transport
- car fuel consumption reduced by 30% (2003)
8. Health care
- vaccination against HIV virus (2003)
The road from basic research to products on the market is long and difficult. Only some of the factors that determine whether or not a venture will be successful are technological in character. Many of the factors involved are economic, cultural or, above all, dependent on consumers' values. The latter category includes the environmental impacts of production and the products themselves, the social desirability of the products and their ethical acceptance.
First of all, since the Finnish welfare model has had to be pruned owing to financing difficulties, a question that must be asked is whether it still sufficiently accords with the original goals set for it. If the difficulties besetting public finances persist and further cuts have to be made, how will the rump system match the original goals?
Secondly, our welfare model must also be called into question on ethical and social grounds by asking simply: can any model be regarded as successful if half a million people in a nation of five million are permanently without jobs and in the process of being excluded from active society?
The third reason relates to the national economy. Just as in all other European countries, there must be constant assessment in Finland of how big the public sector must be relative to the private.
There is a general perception in Finland that the public sector has contracted by reducing staffing levels in conjunction with economy measures, and that consequently the public authorities would have it in their power to ease unemployment. The public sector's personnel strength has indeed been reduced in absolute numbers, but not as a proportion of the total national labour force. When change in the number of officials is spoken of, what is often being referred to is a reduction in the number of persons working within the traditional state budget system. In 1996, the "budget state" system employed about 124,000 officials, compared with 240,000 at the beginning of the 1990s. The change was due to structural arrangements, since some of the "budget state" employees have been transferred to state-owned bodies run on commercial principles or as joint-stock companies, categories that nowadays employ about 150,000 people. The biggest personnel cuts, about 30,000 in all, have been made in precisely those units, which function on the terms of the market.
More then 390,000 people are employed by municipalities in administrative tasks and in commercial operations (excluding municipally-owned joint-stock companies, such as energy utilities). Calculated that way, the public and private sectors employ more or less the same proportions of the national labour force as in the late 1980s, i.e. 30:70. That was when the public sector's absolute size was at its greatest ever. Slightly more than 700,000 people are currently employed in public administration, in the public market-governed sector (joint-stock companies and commercial operations) as well as in municipal administration. Since the unemployed and persons in training or retraining under employment programmes total about 600,000 and about 50% of the over-55s who have worked in state administration are on pension, claims that the public sector causes a heavy financing burden are substantiated. The borderline between the public and the private sector is often blurred in Finland. For example, can a private care institution really be considered private if the fees that finance its operations are obtained entirely from the municipality under various contract arrangements?
Unemployment is expensive to deal with everywhere in Europe. It has been estimated (by EVA, the Council of Economic Organisations in Finland) that unemployment costs this country 100 billion markkas a year if also the value of lost output is included in the calculation.
From the perspective of future policymaking and somewhat simplifying the matter, Finland can be regarded as having three important sectors that to a greater degree than other factors will determine work and livelihood and through those things our overall human welfare in the next century. They are:
1) social security and in general the Finnish model of society,
2) forests and
3) knowledge.
The latter two are easier to approach, because their importance for the future is already understood very widely and fairly well. The prerequisites for developing them enjoy support, because the perception is that success in those sectors will undoubtedly benefit all. Forests are our most important natural resource. The ability to exploit them must be ensured. A feature nowadays emphasised is that forests should be put to a diversity of uses. As is the case in relation to forests, there is complete unanimity in all political circles and administration that in the future work and production will be founded more on knowledge and skills than they are today.
The first problem, the features of development of social security and the model of society, is difficult to deal with, because opinions on it differ sharply not only between, but also within parties. Fear of losing benefits is strong. It may be, however, that unless we are able to create a good and functioning model of society our strengths in the forest sector and knowledge will not be enough.
A point to which attention has been drawn in the latest - albeit in some respects still preliminary - studies of the effectiveness of welfare policy is that the welfare model does not meet all of the goals set for it. When welfare in the 21st century is being pondered, problematic aspects must be addressed as openly and honestly as possible. The hypotheses are:
Hypothesis no. 1: Morbidity follows social dividing lines, i.e. the poor die considerably younger and become ill more than the rich.
Hypothesis no. 2: University education follows social dividing lines, i.e. the best places at universities go to the children of wealthy, well-educated parents in the greater Helsinki region.
Hypothesis no. 3: Upward mobility is more difficult to achieve in Finland today that it was in the highly-stratified, estates-based society of the turn of the century.
Hypothesis no. 4: In quantitative terms, the relatively well-off middle class has benefited most from housing subsidies and many other subsidies intended as forms of social support.
Hypothesis no. 5: The dependency ratio in society is becoming untenable, because the number of people employed is dwindling due both to unemployment now and more and more people taking early retirement, a trend that is likely to strengthen in the future.
In the light of these assertions, one can ask whether part of the foundations of the welfare state are failing. Can it really not increase equality in the most critical points of all? Has a system that is good and just on the level of principles and goals have been implemented wrong and have these great social innovations of our times become paralysed?
Even if the hypotheses prove only partially correct, but the trend in which the welfare state is developing accords with them, critical evaluation of the system is necessary also in that case. The European and Nordic welfare state model must actively demonstrate its capacity to function, if only because of its expensiveness. Results must correspond to goals.
Behind the last concern, i.e. the dependency ratio, is the knowledge that in Finland the number of 55 - 64-year-olds retiring on disability pensions is six times as high as in the 12 member countries of the EU as constituted until the beginning of 1995. The average age at which people retire in Finland is 59, not 65. In 1993, 60% of 55 - 64-year-old Finns were on pension. The corresponding percentage in Sweden is 35, in Norway 33 and in Denmark 37. Pensions have been used as an instrument of rationalisation and to tackle unemployment. By contrast, persons whose capacity for work is seriously impaired can find it impossible to get a disability pension. As the large age-cohorts retire, the burden on those still at work will further increase. It is estimated that in the year 2030 the labour force will be 300,000 smaller and the number of pensioners 400,000 more than now.
One of the most central questions to which attention has begun to be paid in assessment studies concerns the focus of the welfare state's no-charge or heavily subsidised services. Have public welfare services that are aimed at all led to a situation in which those most in need of help are not covered by systems because some other factors get in the way?
The most important subjects of research are public health care and education. On the basis of the studies conducted, it can even be asked whether free health care increases inequality, especially in a situation where the public authorities implement cuts in general care. Can investments - that are expensive in terms of both the national economy and public finances - in comprehensive education that is supposed to be available to all on a basis of equity not redress the disadvantages that the poor and people from rural and remote areas face on the road to education? Has the demand for equality hampered the development of the talented? What is the best way to ensure that people like those who developed Nokia mobile phones and Raisio's Benecol margarine will be found?
The only sector in which special schools for the exceptionally talented, from kindergarten on, have long been accepted is music. And is it not precisely in the field of music that Finland has produced indisputably the greatest number of top talents, by any international standard, relative to population? Equality is a precious thing. It has taken the Nordic countries forward at a brisk pace in the 20th century. Yet it should not prevent us from critically examining prospects for the 21st.
We can easily argue that without the comprehensive school that is there for all, our educational standard would not be so high and without good basic education no outstanding talents would be discovered. In a small nation, all of the different kinds of talent must be found. Education has been the focus of attention in all of the Western countries. In the USA and Britain, business leaders who favour private systems are concerned at a decline in reading and writing skills. The standard of basic education has declined to such a low level at the expense of special schools that production and industry can no longer find enough workers with the requisite reading and writing skills.
Education is a complicated matter. On the one hand, it is difficult to dispute the need for good basic education. On the other, one must also ask whether, if Finland had provided mathematically- and technically-gifted children with opportunities to specialise, we might not now have more companies that are leaders in their sectors.
The question is a very sore one from the perspective of the future, because most futurologists take the view that in the early 21st century competition for exceptionally skilled persons will prevail not only in the economy, but also in research, science, the arts and entertainment. Ensuring a capacity for innovation will be one of the most important competitive trumps in a small nation's hand.
The ideological guiding principle of the welfare state has been that of ensuring the prerequisites for social cohesion and equal opportunities for success. Because people are different in their initial endowments and aptitudes, the task of the public authorities has been defined as being to level out inequalities. If claims that upward mobility has remained at the same level as it was in the days of the old four-estate society contain even a grain of truth, there has been a failure to implement the goal of equalisation. Studying the matter is not easy, because social structures that can be concealed by other factors are involved. Statistics and studies indicate that in the 1990s, despite high unemployment and cutbacks in social security spending, there have been hardly any increases in income differentials. The explanation naturally lies in our good unemployment benefits and social security system. However, the result does not reveal all of the features of the development of the social structure.
Data indicating that the recent recession did not shatter the foundation of the welfare state have been greeted with satisfaction in Finland. For example, income differentials in this country have remained among the smallest in the world. Relative poverty has remained in the 2-3% range, one of the lowest figures in the world. In this respect, Sweden lags behind Finland even though her spending on social security is relatively higher than in Finland. However, this satisfaction should not be allowed to conceal the structural threats to the welfare state that have been outlined earlier in the part of this report in which Europe is reviewed.
The hypotheses presented earlier are examples of the fundamental research subjects, even in a way key questions of policymaking, which Parliament should examine in a search for substantially better answers than those found to date. Those answers should be written in a manner that enables them to serve dependably and as clearly as possible as a foundation for political choices in the 21st century.
In the view of the Committee, the Government's report provides decision-makers with an important instrument for use in outlining future alternatives. Finland can not just be an adjuster. Prerequisites for being in a position to take the helm of the future are prediction of technological and other development trends, the boldness to develop methods and new means, as well as the innovation and initiative that spring from profound know-how and understanding. Government reports on the future at four-year intervals increase interaction between the Government and Parliament. They add continuity and depth to political decision-making. Additionally, they facilitate deliberation of the future from a perspective transcending the limits of different parliamentary committees' remits, and they are conducive to decision-making that yields results.
The policy decisions that Finland and Europe make affect the whole world. Human welfare and sustainable development must be regarded as the guiding principles in grasping the helm of the future. A setting in which all can build good lives on the basis of their own choices must be provided. The elements in the foundation of that future are equality, human rights, democratic decision-making, support and respect for culture, tolerance and acceptance of diversity as well as strengthening citizens' political, social and economic rights.
Nature sets the constraints within which human activities take place. An excessive burden on the environment and the consequent failure of nature's self-regenerative systems is a real threat that must be recognised and curbed. Europe bears central responsibility for ensuring that a good environment is preserved for future generations. The environmental perspective requires international cooperation and agreement. Clear ecological limits must be set to restrict the strains that the environment has to bear and systems must be put in place to monitor compliance with agreements.
8.1 European welfare should not be measured in economic terms alone
The present GDP-based way of measuring things is too narrow and even leads to false assessments. The wellbeing of people and nature can not be measured using economic criteria alone. As an alternative to GDP-based measurement of welfare, other methods, such as wealth accounting, have been developed. An annual statement of wealth accounts would include the gross domestic product figure, but also an explanation of its shortcomings. The index calculated on this basis would explain also the state of the living environment and the employment situation.
In the view of the Committee, the measures used as a basis for decision-making must be developed so that they more sensitively take account of different variables. The list of matters measured should be supplemented with several reflecting the quality of people's lives, for example the level of basic livelihood security, the standard of health, the level of skill, equality and the state of the environment. Efforts should be made to standardise practices in the OECD and EU countries so as to ensure comparability of criteria and facilitate benchmarking.
The Committee takes the view that comparability between these measures of the quality of social wellbeing, know-how, intellectual property and capacity to develop and the international comparisons that are drafted as a result also facilitate assessment of different countries' political policymaking and decisions.
The Committee calls on the Government to
develop a system broader than a GDP-based set of criteria to serve as a basis for social decision-making.
8.2 Internationalisation demands development of democracy
A globalising economy, environmental challenges, refugee problems and unbridled population growth require decision-making to be international in character and scope. Problems do not recognise international borders. Decision-making must likewise be transnational. The global economy needs effective political guidance and control to curb undesirable developments like irresponsible outsourcing. The international decision-making system could easily break loose from the democratic control of citizens. Constant attention must be paid to the smoothness with which democracy functions and to ensuring that citizens have the opportunity to participate in its functioning.
The Committee believes that on the national level we must develop the modes of operation of so-called big democracy, representative democracy, so that society will be able to prepare in advance for the challenges of the future and set guidelines for its actions.
It is the view of the Committee that power of decision and responsibility must be delegated to bring them as close as possible to municipal residents and, for example, service users. The opportunities for participation and influence provided by small-democracy bodies that operate in people's everyday living environments, such as residents' associations, village committees and parents' associations, should not be regarded as competing with representative democracy and therefore feared. Their role is complementary to the party-linked system.
It is the Committee's assessment that Parliament participates in the handling of EU matters more actively than is the case in other countries. Procedures must be constantly developed and the role of representative democracy safeguarded.
The Committee calls on the Government to
act to strengthen the democratic international decision-making system,
support so-called small democracy, which is to be developed alongside representative democracy and with a bearing on the everyday lives of citizens,
support participation by Parliament in the preparation of and decision-making on EU matters,
take action to ensure that new information technology and telecommunications are developed and brought into use in a manner that gives citizens broader opportunities for participation.
8.3 Success in the future depends on ourselves
The globalising economy demands tough competition and a high level of expertise. The nation must ensure its ability to cope with competition. Welfare can not be maintained without sufficient economic resources. But welfare is not just economic success. It is a broader concept. In order to succeed, individuals and society must fresh-mindedly make forward-oriented choices. They must strive to be in the vanguard of development in sectors where they possess strengths.
The care and welfare systems maintained by society complement individuals' own responsibility and make it possible to develop our international competitiveness. They create the foundation for success and the framework of conditions within which it is achieved. The pillars supporting the welfare society should not be seen as an obstacle to international competition. Provided they function well, they will be our competitive trumps in the future. They will lay the groundwork for a good life. Top international experts in their fields of skill and expertise will find it easier to concentrate on their work and professional development when they know that their parents and children are receiving good and safe care.
In the view of the Committee, globalisation, internationalisation are prerequisites for the success of the knowledge society. We must prepare for internationalisation and make use of its benefits on every level of society. Companies, institutions of learning, political parties, civic organisations, labour-market organisations and other interest groups must all make their own contributions to developing their international aspects.
In the view of the Committee, information and knowledge are fundamental factors in future success. Prerequisites for successful endeavours include mutual trust between skilled personnel and other actors in various sectors, cooperation and purposeful networking. By networking we can improve the new strengths developing in Finland and the clusters based on them.
In the view of the Committee, innovations in the services, industrial and administrative sectors are essential for the success of the individual and society. Culture as a source of creativity lays the groundwork for innovations. Innovative activity and networking are particularly important in education and working life. Innovation does not come from nowhere. The culture in which activities take place must support fresh-minded thinking and a search for new ways of doing things.
In the view of the Committee, good governance of life and affairs plays a key role in the present era of strong transformation. The changes that are taking place represent above all new challenges and opportunities for every individual, every company and every community as well as for the whole of society. They must be predicted and steered in the desired direction. To a greater degree than in the past, citizens' own activity will determine the immaterial and material quality of their lives. Lifelong learning must be adopted as the strategic foundation for Finland's national success.
The Committee calls on the Government to
take the success factors defined in the Committee's report into consideration in planning, drafting and decision-making: wisely influencing globalisation, availing to the full of information and technology, the human aspect of innovation, and governance of affairs and life.
8.4 Science and technology at the service of people
Scientific and technological developments are human achievements. They do not just happen. People can also predict and assess in advance the effects of technological inventions. The positive features of those effects must be supported and the negative ones must be prepared for.
Basic and applied research as well as product development create the prerequisites for companies based on innovation and for the development of society's other functions. The Government's decision to raise research funding and product development subsidies to the level of the leading countries will help Finland succeed.
Technology foresight is the foundation on which companies plan their future and decision-makers shape public science and technology policy. Foresight already has an established position in several countries. Sectors that are important for Finland should be brought within the scope of technology assessment and foresight.
Society must ensure that mastery of knowledge and technology does not become a new factor that causes inequality between citizens. The task of politics is to set ethical standards for the new territorial conquests of science and technology.
The Committee for the Future is responsible for assessing the effects of technology on society. As this work of assessment develops, it will improve the information base at the disposal of Members of Parliament and make it easier for them to respond to future legislative challenges relating to science and technology. The Committee hopes that other committees will participate actively in choosing technology assessment tasks and in the guidance work.
In the view of the Committee, Finland must dare to make choices, dare to exploit her natural opportunities and focus her resources to ensure success. Our strengths on the international level must be improved. New knowledge and skills must also be used on the national and local level in the development of production and services.
In the opinion of the Committee, research must be supported on a European or global level when an individual country's resources are too small to achieve results.
The Committee calls on the Government to
pay attention to the research fields chosen by the EU and other organisations engaged in research and to ensuring that the efficiency of these activities is increased,
devise a method to be used in Finland for forecasting technological development, emphasising the sectors of important from this country's perspective and means of improving opportunities to exploit technological innovations faster,
to ensure that, through the educational system, all citizens have the opportunity to master information technology and that especially girls are encouraged to become proficient in it.
8.5 The way to improve the welfare society is to recognise its weaknesses
It is not possible to harness the whole country for the sole purpose of strengthening international competitiveness. There will always be people unwilling or unable to meet the stringent demands of the global economy or who cannot cope in a situation of stiffening competition. However, society must see to it that the basic prerequisites for a good life are made available to all.
The principles underlying the welfare society are good, but the reality does not always conform to what it is supposed to be. For example, there are nearly half a million unemployed and studies show that also in other respects the welfare society is failing to respond to all of the challenges facing it. Alongside the global economy, primary production, small local manufacturing operations as well as public and private services are significant employers and ensure that basic services are provided. The Committee views the local economy as being of equal value as the global. It is part of the chain that a functioning national economy needs. The employment opportunities available on the local level must be examined with particular care.
In the view of the Committee, the effectiveness of the welfare state must be analysed in the light not only of its principles, but also of the effectiveness with which it functions. Only by identifying society's weaknesses and seeking functioning solutions to them can the future be effectively managed. Its structures must be made more flexible and such that they take people's future needs better into consideration (for example new forms of work, children's day care). The division of labour between the State and municipalities must be made more distinct and the economic foundation for basic services must be safeguarded.
The Committee calls on the Government to
make an unprejudiced situation analysis with respect to the tasks of the State and the strengths and weaknesses of the welfare society. On the basis of the results, the welfare state model should be revised in a way that enables it to fulfil the tasks assigned to it and provide people with equitable opportunities for success.
The Committee respectfully proposes
that Parliament brings this report to the attention of the Council of State [Government] for its deliberation.
Helsinki, 18 March 1997
The following Members of Parliament participated in decisive deliberation of the matter by the Committee: Chairperson Martti Tiuri /National Coalition Party(KOK), deputy chairperson Tarja Filatov /Social Democratic Party (SDP), members Janina Andersson / Green (partial), Klaus Bremer /Swedish People's Party (SFP) (partial), Jukka Gustafsson /SDP (partial), Kyösti Karjula /Centre Party(CP) (partial), Kimmo Kiljunen /SDP (partial), Markku Markkula /KOK (partial), Kalevi Olin /SDP (partial), Risto Penttilä /Young Finns (partial), Sirpa Pietikäinen /KOK (partial) , Juha Rehula /CP (partial), Aino Suhola /CP (partial), Pentti Tiusanen /Left-Wing Union (partial), Pia Viitanen /SDP (partial), Markku Vuorensola /CP (partial), Jarmo Wahlström /Left-Wing Union (partial), as well as deputy members Tuula Haatainen /SDP (partial), Kari Kantalainen /KOK (partial), Tapio Karjalainen / SDP (partial), Riitta Korhonen /SDP (partial), Sakari Smeds /Christian League (partial), Säde Tahvanainen /SDP (partial) and Hannu Takkula /CP (partial).
UaVL 1/1997 vp - VNS 3/1996 vp
Council of State (Government) Report 3/1996 vp
To the Committee for the Future
When it sent the Council of State's [Government'] report "Finland and the Future of Europe" (VNS 3/1996 vp) to the Committee for the Future for preparatory deliberation on 2 October 1996, Parliament also ordered that the Foreign Affairs Committee give the Committee for the Future a submission on the matter.
The following persons have appeared before the Committee, which has heard their opinions: Head of Department Pertti Torstila, Director Eikka Kosonen of the EU Secretariat as well as Special Researchers Kari Möttölä and Ilmari Susiluoto of the Ministry for Foreign Affairs, Consultant Counsellor Pauli Järvenpää of the Ministry of Defence, Director Tapani Vaahtoranta and Researcher Sergei Medvedjev of the Finnish Institute of International Affairs, Research Director Pekka Sivonen and Special Researcher Teija Tiilikainen of the National Defence Academy, Director Valdemar Melanko of the Russia and Eastern Europe Institute, Ministers Jaakko Iloniemi and Max Jakobson, Chancellor Jan-Magnus Jansson, Professors Esko Antola, Pekka Sutela and Heikki Ylikangas as well as Ambassador Antti Karppinen. A delegation from the Committee had consultations in connection with the theme of the report also with representatives of the US State Department and the Department of Defense in Washington in November 1996.
Having deliberated the matter, the Foreign Affairs Committee respectfully submits the following proposals:
1. The report of the Council of State
It is noted in the report that individual states, in common with their regional and global cooperation systems, will over the next few years face many demanding challenges, which will put their capability to the test, as they attempt to manage the changes that are taking place. The report limits the examination to Finnish perceptions of what current demands are of particular significance from the perspective of the future of Europe. In order to be able to respond more effectively to those challenges, the European Union is preparing for ever-deepening mutual cooperation so that it will be able to enlarge in the next decade. Some central features of development are illustrated through global comparisons, in addition to which Russia is the focus of special attention on many points. It is noted that Russia is undergoing a historic change, the direction of which will in many ways affect the future of Europe.
The central points of the government programme that the report deals with are set forth in the introduction. It is stated that the document under deliberation is the first of two parts of a report on the future to be submitted to Parliament. The Government makes it clear that in both parts of the report it will also outline its policy and its stances on the questions under deliberation.
Unlike in the Council of State's earlier report "Finland's points of departure and objectives at the 1996 Intergovernmental Conference" (VNS 1/1996), general examination of matters and the Government's positions are not clearly separated from each other in the present report. Naturally, there is not the same need to make such a distinction as there is when defining the stances to be taken on separate points on the agenda of a specific conference. However, the manner in which description, analysis and statements of programme are interspersed can be a problem for the reader of the report.
The Committee has discussed alternative possibilities of drafting reports on general themes. One possibility would be to publish research reports requested from independent research institutions or working groups together with the conclusions and stances that the Council of State would arrive at on their basis.
The Committee concurs with the comment made by the Grand Committee in its submission to the effect that, depending on theme, the perspective on the future is longer or shorter, ranging from less than five to around thirty years.
2. European security
As in the report "Security in a Changing World" submitted to Parliament by the Council of State in 1995, the concept of security structures founded on cooperation receives central attention as a component of the future of Europe. The Foreign Affairs Committee noted in its submission 12/95 vp concerning an earlier report: "A distinction is made in the set of concepts under examination between politico-military security and cooperation-based security the all-round promotion of which is regarded as being the central task in Finnish security policy. The Committee concurs with the view that a cooperation-based international security system is the best alternative, especially from the perspective of a country like Finland".
The concept of cooperation-based security structures is closely linked to a broadly-based concept of security, in relation to which the present study contains the following statement: "Finland emphasises the importance of broadly-based security and wishes to promote its strengthening The fundamental goals of broadly-based security are to create greater openness and transparency in security questions and to expand cooperation to include more and more comprehensively the basic questions of national security". Characteristic sub-areas of the broad concept of security that the Foreign Affairs Committee cites in the above-mentioned submission include human rights, the question of refugees, environmental problems, development cooperation and demographic problems. Examples of typical sub-areas of the more traditional concept of security that are mentioned include disarmament, peacekeeping and management of regional conflicts.
Commitment to the shared values and principles of the OSCE has provided a politically-binding value foundation for the post-Cold War aspirations of all European countries. The Committee notes that this has not, however, led to the emergence of a common European institution for maintaining collective security, nor is there indication that such a development will take place.
A deepening and broadening of the European Union's internal political and economic integration is important for strengthening the broadly-based European security order. In the assessment of the Committee, the future significance of the EU with respect to security policy will, however, depend to a large extent on the degree to which the Union's common foreign and security policy can be made more effective.
In the perception of the Committee, a precondition for a cooperation-based security order is that the existing security institutions in Europe complement and reinforce each other's operations within the framework of collectively-formulated goals. Here it is assumed that between the OSCE and other institutions that affect security in various ways - mainly NATO, WEU, EU, the Council of Europe and various regional arrangements - forms of cooperation will develop for promoting, especially, stability policy, conflict prevention and crisis management. In the view of the Committee, NATO's so-called reinforced Partnership for Peace programme, which would be implemented by means of bilateral arrangements to be agreed on separately with each partner country, contains positive possibilities. If the programme is implemented in accordance with plans, it could become a new kind of core component of the European security system.
The Committee emphasises that a detrimental hierarchy should not be formed between institutions created to promote work on a basis of cooperation and that parallel institutions must not find themselves in a situation of competition because of the security and other interests of the states exercising influence in the background. Otherwise, security institutions could become in fact instruments of power politics, whereby they would no longer serve the end of eliminating the security-related and politico-economic dividing lines in Europe.
The report primarily outlines cooperation-based choices as answers to the challenges facing Europe, but, by way of a concession to Realpolitik as it were, it is also stated that: "Traditional military security policy, which emphasises relations of power and force, has not lost its significance, either." That happens in a context in which it is noted that the future of Europe with respect to security can not be outlined without assessing relations between Russia and NATO.
The Committee concurs with the latter conception and takes the view that in the development of pan-European cooperation-based security structures it is specifically necessary to take Russia's new position and security aspirations into consideration. Put simply, this means that it is necessary to study how Russia could be linked into the common security order rather than feel that she has become isolated.
NATO as an organisation does not present a Russian military threat as an argument in favour of its enlargement plans, arguing instead that its goals, such as promoting democratic change, relate to stability policy. "The new NATO" is striving to become a new kind of component of the European security system by expanding and developing its Partnership for Peace programme and attempting to engage the states of the entire OSCE area in crisis-management cooperation. Plans include also a new multilateral institution (the Atlantic Partnership Council, APC), through which the alliance's functions other than collective defence proper would be opened up to the PfP countries.
Those NATO endeavours notwithstanding, Russia may assess NATO enlargement mainly from the perspective that it would be filling the strategic vacuum that has come into being in Central Europe and strengthening NATO militarily. Russia's visible reaction so far has been to oppose NATO enlargement at the same time as she emphasises and seeks to strengthen the status of the OSCE as a foundation of the European security order.
Russia's attitude will be influenced by the contents of the charter between herself and NATO, which is currently being negotiated and is intended to be completed in spring 1997, before a decision on which countries to invite to join NATO. Further, Russia is striving to increase her room for manoeuvre in military policy and to limit armament in the eastern sector of an enlarging NATO by proposing amendment of the Conventional Forces in Europe (CFE) Treaty.
The Committee considers the section of the report dealing with the future of Russia as meritorious and concurs largely with the views expressed in it. In this conjunction, the Committee wishes to emphasise the great importance from Finland's perspective of a profound understanding of political and other social development in Russia. It is the opinion of the Committee that there should be a continuing concentration in Finland on developing and maintaining this expertise, at the same time as it is shared with the EU member states and our other international cooperation partners.
The Committee considers it very important from the perspective of Finland's security interests that NATO enlargement and the arrangement of NATO's relations with Russia be anchored in the principles of the OSCE, which guarantee states the freedom to make their own choices in the field of security policy and prohibit spheres of interest. The arrangement of relations between NATO and Russia must not create a privileged great-power axis, but rather must support implementation of the OSCE principles and strengthening of all cooperation-based institutions. The principle of indivisible security, which forbids striving for security at the expense of other countries' interests, must be respected in altering the CFE arrangements.
In the view of the Committee, the uncertainty that may arise from NATO's first expansion, which will probably be limited to a few countries of Eastern-Central Europe, would be mitigated by developing cooperation in the Baltic Sea region. As has been noted in OSCE circles, the significance of regional cooperation is growing in the field of security policy generally. The Committee takes the view that also EU enlargement, which has a character conducive to promoting cooperation-based stabilisation policy, could soften the power-politics influence of NATO expansion.
The collective defence provided for in the fifth article of the NATO Charter will continue to be the alliance's main purpose, which applies only to member countries. However, NATO is striving to include also countries outside the defence alliance in crisis-management activities, as the IFOR operation in Bosnia and its follow-up SFOR demonstrate. Multinational staffs (called Combined Joint Task Forces, CJTF) create a basis for cooperation of this kind.
In the perception of the Committee, the EU member states' national defence and military cooperation will continue to depend above all on the countries' own preparedness. The defence dimension of the common foreign and security policy would appear to be remaining limited, for the present at least, to little more than a consultation mechanism without binding significance for member states. The slow strengthening of the European Union's defence dimension makes it probable, in the assessment of the Committee, that the EU member states will, at least for the next few decades, consider it in their interests to keep the United States committed through NATO to the security of Europe. Not even NATO enlargement is likely to reduce efforts to preserve the trans-Atlantic link.
However, a more visible European element than in the past is being created in NATO: the European Security and Defence Identity (ESDI) is an attempt to meet European objectives in a manner acceptable to the United States. ESDI is not being built as a competitor to NATO, but rather within the framework of NATO and through cooperation between the organisation's member countries. An important element in it has been the partial resumption by France of participation in military cooperation.
3. The future of the European Union and integration
The historical background to European integration is outlined in the Council of State's report. According to the report, the tendency in the early half of the 20th century was to envisage integration in a federalist light. The same thinking model prevailed again after the second world war. The federalist model's supporters emphasised the primacy of security aspects in post-war Europe.
As pointed out in the report, the federalist integration phase ended when the international situation had become inflamed into the Cold War and the United States had achieved an important role also in European politics. The factor that now assumed importance was economic integration, with the central goal of promoting prosperity in Europe. On the other hand, the 1951 treaty establishing the European Iron and Steel Community also served-security-related ends.
The common market integration model was continued with the foundation of the European Economic Community. The 1957 Treaty of Rome was aimed more clearly at achieving economic integration and creating a single internal market throughout the economic area. The development of European integration has been strongest in precisely the economic sector. As actors in the security sphere, the European Communities and later the European Union have proved relatively weak, even though, as noted in the foregoing, clear security-related motives played a part in getting the whole integration process started.
The possible future development of integration is dealt with relatively briefly in the report. A striking feature is the very fast enlargement timetable envisaged for the Union in the report. The authors have attempted to describe three alternative models for the possible development of the Union. In all alternatives, development is seen as taking place through the complex of problems associated with broadening and deepening the Union.
The multi-core European Union alternative is one in which the member states form core groups with different compositions, and these core groups proceed in selected sectors separately from the member states that have remained outside the core. The Council of State's report conveys the impression that the Government is prepared to accept the Union having a multi-core character, especially in conjunction with the third stage of EMU. However, the problem with having several cores is that of drifting far from one of the Union's fundamental principles, that of member states being equal in standing. Indeed, in the development model outlined, the possibility of different core groups forming would be based specifically on the Treaty on European Union and not on separate agreements, as is the case with, for example, Schengen.
In particular, the formation of several cores around questions of security policy might prove very problematic. Different conceptions of how security policy should be taken care of could in a worst-case scenario even lead to serious disagreement between the member states of the Union.
Other problems that would accompany a multi-core Europe are likewise brought up in the report. Relations between core states and those remaining outside as well as possibly between different cores would have to be arranged.
The Foreign Affairs Committee takes the view that a multi-core Union would involve problems the resolution of which would require reforms of institutions and the Union's decision-making processes. However, a more worrying aspect in the Committee's view is that the formation of a core or cores would tend to weaken equality between member states. The Committee as such is in favour of strengthening the Union's power in certain central areas. However, that can not happen at the expense of the Union's central principles.
The second of the development models for the Union presented in the report is the one called the lean European Union. It is based on the assumption that the Union will neither enlarge nor become any deeper. The powers that the Union currently wields would be narrowed and certain sectors of politics would be returned in their entirety to the responsibility of member states. Implementing a stripped-down Union model would be difficult both juridically and politically. Now that the Union has given a clear signal of its wish to enlarge, the Committee takes the view that it is of primary importance from the perspective of the Union's credibility that the decision in question be adhered to. Alone for that reason, the lean Union model in the form outlined in the report is out of the question. In the perception of the Committee, the lean model could be conceivable only in the event of a certain kind of crisis affecting the Union as a whole.
It is the opinion of the Foreign Affairs Committee that Europe's economic development and competitiveness presuppose the creation and maintenance of a functioning internal market. That does not mean that, in the view of the Committee, certain matters that belong within the sphere of the Union's authority could not be re-entrusted to the care of the member states if it is considered appropriate to do so. The matter could very well arise as the Union further enlarges. Taking care of regional policy and agricultural policy at the Union level on the present scale could prove extremely difficult.
The view taken in the report is that the lean model would automatically lead to the adoption of a kind of smorgasbord model. In this model, each member state could select the sectors of politics that it wanted taken care of at the Union level. In the conception of the Committee, the adoption of the model would inevitably lead to the scrapping of the most central principles of the Union in its present form.
The third possible development model presented in the report is a "congealed" European Union. In this model, adjustments would be made only in institutional relations that would enhance the efficiency of the Union as presently constituted. According to the report, a congealed union would not be able to respond to major challenges such as those associated with increasing democracy or enlargement. The implementation of economic and monetary union would also be unlikely, at least in the form envisaged. According to the report, the model would lead to the large member states gaining influence at the small ones' expense.
No clear view is expressed in the report as to which direction the Council of State considers it probable that development will follow with respect to the future of the Union. All of the models outlined are recognised as involving their own risks. In the view of the Foreign Affairs Committee, what appears most improbable is that the process of integration will go into reverse or that the Union as presently constituted will crumble.
Future development will be shaped clearly by the solution arrived at in relation to the future of economic and monetary union as well as by the decision as to whether or not Finland participates in EMU when it is implemented. When a decision on participation in monetary union is made, a stance will once again be adopted on willingness to participate in European cooperation as intensively as possible. With respect to the timetable for economic and monetary union, the Foreign Affairs Committee has stated in its IGC submission (UaVM 7/1996 vp) that EMU should not be a political end in itself, one because of which the difficulties involved in reconciling convergence principles and the timetable would be resolved in a manner that prompted legal criticism or overlooked the economic and social effects of monetary union.
The Foreign Affairs Committee regards enlargement of the Union as being justified for both economic and security reasons. From the perspective of both the countries that have applied for membership and existing members, it is however essential that enlargement take place according to a timetable that gives countries time to adjust to the significant social changes caused by enlargement. In the opinion of the Committee, the countries that have applied for membership must meet the objective criteria that have been preconditions for accession in earlier enlargements of the Union. The Committee considers it regrettable that signals are being given that could lead to false, perhaps over-optimistic estimates of the accession timetable.
A prerequisite for enlargement is an efficient decision-making structure in an expanding Union. It is the view of the Committee that none of the alternative development models for the Union that the report outlines provides as such an answer to the problems caused by enlargement. What is, however, most probable is that development will largely follow the lines staked out by the biggest member states, mainly Germany and France. The formation of a tighter core group would appear to be the alternative that is likely to be implemented at the latest when the Union further enlarges. A European Union to which Germany and France would not be committed seems improbable.
On the basis of what has been presented in the foregoing, the Foreign Affairs Committee respectfully proposes
that the Committee for the Future take the points presented in this submission into consideration.
Helsinki, 6 February 1997
The following Members of Parliament participated in decisive deliberation of the matter by the Committee: Chairperson Markus Aaltonen / Social Democratic Party (SDP), deputy chairperson Eva Biaudet / Swedish People's Party (SFP), members Satu Hassi / Green Party (partial), Esko Helle / Left-Wing Union, Sinikka Hurskainen / SDP, Tytti Isohookana-Asunmaa / Centre Party (CP), Kauko Juhantalo /CP, Antero Kekkonen / SDP, Juha Korkeaoja / CP, Martti Tiuri / National Coalition Party (KOK) and Ben Zyskowicz (KOK) as well as deputy members Kaarina Dromberg / KOK (partial), Jorma Kukkonen / SDP, Annika Lapintie / Left-Wing Union and Mats Nyby / SDP.
SuVL 4/1996 vp - VNS 3/1996 vp
Council of State Report 3/1996 vp
To the Committee for the Future
When it sent the Council of State's report 3/1996 vp (Finland and the Future of Europe) to the Committee for the Future for preparatory deliberation on 2 October 1996, Parliament also ordered that the Grand Committee give the Committee for the Future a submission on the matter. The Grand Committee has decided to make the following submission on the report:
1. Drafting of the submission
The submission was drafted by the IGC section, which was appointed by the Committee on 15 and 22 September 1995 and had the following composition: Chairperson Tuomioja / Social Democratic Party (SDP), deputy chairperson Sasi / National Coalition Party (KOK), members Brax / Green Party, Jääskeläinen / Christian Union, O. Ojala / Left-Wing Union, succeeded by Lapintie (Left-Wing Union), M. Pietikäinen / Swedish People's Party and Vanhanen /Centre Party. The Committee's deputy members Tarkka / Young Finns and Vistbacka / Basic Finns also participated in drafting the submission.
2. The report by the Council of State [Government]
The report deals with changes in the international environment in which Finland functions and especially with the challenges that European development is posing for this country. Questions that will be important for Finland during the period that she holds the presidency of the EU from July 1999 are given particular attention.
The report is divided into two chapters. In Chapter I (Finland's Options and the Future of Europe) the Government sets forth the outlines of its policy and its stance on the questions under deliberation. Assessments of global, European and Russian development lines as well as of the European Union's development alternatives are presented In Chapter II (Europe and a World of Change).
3. General assessment
Examination of the assessments made in the Council of State's report is rendered difficult by the fact that the future under deliberation appears to be located chronologically at different points in the various parts of the report. Global lines of development and the development of Russia are examined over a span of about three decades, with the period under review ending around the year 2020. This approach has made it possible to present development assessments founded on expertise in social science and economics.
By contrast, the period of review with respect to the European Union's development alternatives extends only half a decade into the future. The basis of examination in assessing the future of the European Union does not, therefore, appear to be analysis of social and political lines of development, but rather deliberation of thinking constructs that take place on the level of political discourse also as development alternatives that are being or could be implemented on the level of social reality. The brevity of the future perspective adopted in examining development alternatives for the European Union means also that the review period overlaps political decision-making processes that are already ongoing, such as the Intergovernmental Conference (IGC) that commenced in 1996.
In the view of the Committee, it is difficult in the parts dealing with the European Union to separate from each other, on the one hand, what the Council of State sees as a possible or probable development and, on the other, what it considers desirable or positive from the perspective of Finland's interests. Instead of the future, what is examined in this respect consists of current political questions that it would have been more appropriate to examine in another context. This applies in particular to questions under deliberation at the ongoing Intergovernmental Conference.
In Chapter 4 of this submission, the Committee concentrates on examining the political stances and policy outlines contained or expressed in the report. Chapter 5 contains a presentation of views on the justifiability of the development alternatives for the European Union that are presented in the report as well on the validity of the assumptions underlying them.
4. Finland's options and the future of Europe
Chapter I of the report (Finland's Options and the Future of Europe) contains a presentation of the Council of State's views on the general goals and areas of emphasis in EU policy over the next few years. In the view of the Committee, the stances assumed by the Council of State accord on a general level with the policy lines set forth by Parliament in various conjunctions. With respect to details, however, the Committee wishes to present the following comments:
As stated in the foregoing, the time span used in the parts devoted to examining EU policy is remarkably short. At times, the issues examined are even current or at least within the compass of already ongoing policy planning and drafting. This comment applies, for example, to the report's presentation of Russia and [Finland's] geographical environs (pages 14-17). In what sense the report can in this respect be regarded as a special report on the future is a question that must be asked. Besides that, these sections of the report lack an analysis of the lines of development and threats that could prevent or impede the achievement of the goals set for Finnish policy.
This comment applies in particular to the stances taken in the first chapter of the report on questions that are under deliberation at the EU Intergovernmental Conference. The Council of State gave Parliament a report on Finland's points of departure and objectives at the 1996 EU Intergovernmental Conference (VNS 1/1996 vp) on 27 February 1996. Parliament's reply to the report was given in the submission of the Foreign Affairs Committee (UaVM 7/1996 vp) that was approved in plenary session on 14 May 1996. Parliament required the Council of State to give it or the Grand Committee or the Foreign Affairs Committee certain additional explanations. The Council of State had not yet given them when it submitted its report on the future for the consideration of Parliament.
In some parts of Chapter 1 of the report on the future, stances that differ in emphasis or detail from the IGC report are taken. The Committee does not wish in this context to assess those stances. By contrast, it wishes to draw attention to reconciling the Council of State's decision-making on EU policy. In the perception of the Committee, some of the policy outlines contained in the report on the future had been presented at a stage where the Council of State had not yet taken decisions in those matters within the framework of its IGC deliberations.
The Committee follows on a weekly basis the activities of the Finnish representatives in the decision-making work of the European Council. The Committee has also striven on its own initiative to create an opportunity for itself to follow closely the course of the IGC and the actions of the various parties at the conference. On the basis of its experience, the Committee does not take the view that the characterisations, presented in the first chapter of the report, of the policy pursued by Finland within the EU are accurate in all respects.
In several questions, Finland does not in the view of the Committee belong to the vanguard of EU countries in environmental protection, contrary to what is stated in the report. Nor in concrete decision making relating to new technology, such as gene technology, has Finland been particularly active in emphasising the right of consumers to obtain information, when compared with the views of other quarters with an interest in the matter.
A more accurate reflection of the policy pursued by Finland is the statement on page 19: "Finland considers it important that protection of consumers and environmental protection be developed to as high as possible a level in the European Union without their being used to defend short-term local interests." Thus it appears that in the EU's practical decision making Finland examines her own and the other member states' goals with respect to consumer and environmental policies in the light of assumptions that hint at concealed protectionist background motives. She appears also to accept the lowest common denominator as the general level of protection even in cases when some or other member state would have reasons, based on the objective natural environment, consumption habits or traditional national political emphases, to demand a better level of protection. In the IGC report on the relationship between free movement of goods and environmental protection submitted to Parliament by the Council of State on 25 October, by contrast, the outlines of Finnish policy in this respect are clarified and Finland's stance in the matter is anchored in the positions adopted earlier by Parliament. Also on the question of transparency, Finland seems to have chosen a clearly more passive role than the Netherlands, Denmark and Sweden.
One could ask whether in Finland's practical EU policy a sufficiently clear distinction has been made between the preparedness to compromise that is needed in all international negotiations and the determination that is a prerequisite for success in achieving national objectives in those negotiations. The fact that achieving national objectives can take time and presuppose compromises at various stages of negotiation and decision making must not lead to the level of objectives in Finnish EU policy being lowered by abandoning the goals that have been set within national, democratic decision-making processes. From the perspective of safeguarding Finland's opportunities to wield influence, there must also be a determined effort to prevent the emergence of a perception that Finland is always prepared to go along with a compromise worked out by the central member states or a qualified majority of the Council, because such a perception would be likely to lead to Finland's marginalisation in the drafting of decisions. The Committee further draws attention to the fact that in EU decision making all member states, also the smallest, have had national objectives of such importance to them that they have been able to opt to remain in a minority rather than compromise or in defence of which they have been prepared to go against the other member states when necessary.
The foregoing comments concerning the relationship between the expressed objectives of EU policy and practical actions prompt a question about the efficiency of the Council of State's drafting and harmonisation system for EU policy as well as about the manner in which the Council of State's and Parliament's general policy lines are taken into consideration in national deliberation of EU decision making. The Committee is not convinced that the Council of State's present systems for preparatory handling of EU matters are such as to ensure the implementation of a policy that is harmonised in all bodies and on all decision-making levels and accords with the political goals defined by Parliament and the Government. In association with this, there should be a closer examination of the adequacy of political guidance in working-party- and Coreper-level negotiations, the effectiveness of civil-servant-level coordination between ministries, especially on the level of the EU Affairs Committee, the role of the EU delegation in harmonising and shaping policy as well as of the EU ministerial sub-committee's real opportunities to concentrate on deliberating questions that require a political stance on the level of the Council of State.
All in all, it would seem that choices to be made on the level of officials as well as matters associated with claimed or actual limitations relating to negotiating tactics in decision making take more room in Finland's parliamentary-democracy-anchored formulation of positions than in the member countries that were regarded as models when a decision was being taken on the arrangements concerning Parliament's participation in national deliberation of Union affairs. It must be noted that before our accession to the EU a centrally-coordinated, parliamentarily-directed system was seen as the model that would lead to the best results also in deliberations within the Government-level decision-making system. Correspondingly, models in which the activities of separate ministries are uncoordinated and in which harmonisation is largely left to the EU delegation were regarded as ineffectual from the perspective of achieving the goals set.
The Committee takes the view that the implementation in practice of the goals set in the first chapter of the Report on the Future presupposes evaluation of the effectiveness of the Government's deliberation, decision-making and harmonisation system for Union affairs from the perspective of the goals set for it and the practical results achieved. The Committee recommends that the Committee for the Future include in its report an examination also from this perspective of Finland's opportunities to exercise influence in the EU's future decision making.
5. The future of the European Union and of integration
The themes dealt with under the heading "Future of the European Union and European Integration" in Chapter II of the report are the premises that gave rise to European integration, development options for the European Union, cooperation-based security structures and eastward enlargement of the Union. The Grand Committee will concentrate in the following on the first two of the above-mentioned totalities.
Taking the limits of its authority into consideration, the Grand Committee does not deal with security structures in its report. In the view of the Committee, the text dealing with eastward enlargement is based on a careful, albeit not particularly detailed analysis of the background factors that are associated with eastward enlargement and significant in relation to social and economic integration. With respect to eastward enlargement of the Union, the report is, in the view of the Committee, a good foundation for the work of the Committee for the Future.
Section 3.1 (History of European Integration) of the report on the future sets forth the main outlines of the European Communities' development from the second world war to the foundation of the European Economic Community. The method of examination is limited mainly to explaining the expressed programme and political goals of the various parties as well as to a broad outlining of the course of events as they happened in practice. By contrast, real political and economic processes were not given the attention they deserve.
Section 3.1 of the report (Development options for the European Union) comprises an introduction dealing mainly with the ideological basic alternatives applying to the history of the development of the EU's system of rules and of the EU itself as well as a presentation of three alternative courses of development for the EU. What has been noted in the foregoing concerning neglectful analysis of realistic political and economic processes influencing integration applies also to the historical description that this section contains. In the view of the Committee, a political and economic analysis of the integration-related goals of the central member states (France, Germany the United Kingdom) would have greatly enhanced the usefulness of the description, also from the perspective of the development alternatives outlined after it. The same applies to examination of the role and powers of community institutions (Council, Commission, Parliament, Court) in various phases of the integration process.
An examination of that kind would, in the view of the Committee, have shown that the development and future of the EU can not be looked at in the light of simplifications like "the federal state model" or "intergovernmentalism". From the perspective of the EU's past and future development, tension between federalist goals and the sovereignty of nation-states is not the only significant conflict dimension. Alongside them it would be necessary to examine also the relationship between large and small member states, the relationship between market- and regulation-guidance in the social and economic policies of different member states, the degree of development of various member states' political and regional systems as well as member states' economic and political interests outside the EU. Presented in the report is the assessment that "Some of [the Member States] consider that the trend that began with the Single European Act will result in an ever closer union and a gradual transition from a union of states towards a federal state." (p. 59). A "federal state model" of this kind is seen as including the adoption of a constitutional system founded on the fundamental laws of the Union and the relationship between citizens and Union that is involved as well as a solution of the associated problem of legitimacy.
The Grand Committee is not aware of any EU member state or important European-level political party that sees a federal state as its goal. Instead, an integration goal expressed in this way enjoys support in ideological organisations that carry on the tradition of the 1920s and 1940s federalist movements.
Implementation of the federal state goal would involve the abandonment on the level of international law and politics of member states' separate status as sovereign countries vis-à-vis the Union. It would deprive member states of, inter alia, membership of the United Nations and other international organisations, the opportunity to maintain diplomatic agreements with third countries or independently to conclude treaties with them. Further, the federal state model would mean that the power of member states would be based on delegation enshrined in the fundamental laws of the Union, not on the sovereign power of an independent state. With respect to the relationship between citizens and the Union, the Committee notes that also in historically-established federal states the relationship between constituent states and citizens is considerably closer and unproblematic from the perspective of political legitimacy than the relationship between the federal state and citizens.
Instead, there have been efforts in various member states and within European political forces to develop the EU federatively, i.e. in the direction of a federation. These ideas are reflected especially in demands to develop the Union's decision-making system and institutional structure in the direction of something like a federal state, without however abandoning the member states' status as independent and plenipotentiary states. The central goals of development from a federative perspective are a more exact definition of the relations of power between the Union and the member states, in association with that a more precise definition and implementation of the secondariness principle as well as emphasising the supranational character of the EU's institutions.
From the perspective of the preciseness of the political and juridical discourse, a problem can be identified in the impossibility of precisely defining at what stage a Union that has been developing in the direction of a federation would have attained a status in which it has become a federal state with its own character as a state entity. In the background to this problem is the fact that the set of concepts relating to inter-state structures is founded on distinctions developed in the 19th century (federal state / association of states) that can not exhaustively describe the totality that the European Union and its member states constitute.
A second factor adding to the difficulty of the discourse is that the semantic content of the word "federation" and the emotional attitudes associated with it are different in different member states. In Germany and Austria as well as more recently in Spain, Italy and Belgium, federalism is understood on the national level as being a solution that reduces centralisation of the political system by giving states or other regional or cultural communities constitutionally- and politically-protected spheres of independent action. In Britain and France, by contrast, federalism is often understood in a directly opposite sense; its content is seen as being the creation on the Union level of a centralised power structure that is the same as their own national political system.
In the light of the above, the concepts federal state and federal state model are likely to lead the discourse astray. As for a federative development or goal, it can be stated that it is part of the European discourse. However, the conceptual content of the goal and the import of the decisions that will have to be made in relation to it are quite unclear.
A strengthening of the position of the European Parliament is presented in the report (p. 61) as a central question in relation to strengthening the legitimacy of the Union in the eyes of citizens. The Committee has set forth its position regarding the status of the European Parliament from the perspective of democratic acceptability in its IGC submissions (2/1995 vp and 2/1996 vp). In the perception of the Committee, the Union's democratic legitimacy will continue to be founded on democratic processes conducted in the member states and, in association with those processes, especially the opportunities of national parliaments to monitor the activities of governments in the European Council.
The Committee notes the importance of the European Parliament, as a body complementing national parliaments, in safeguarding the democratic character of the Union. The European Parliament has, however, no possibility of attaining the position indicated in the report with reference to the acceptability of the Union as long as at Union level there is no independent party system founded on mass support and independent organisation or activities of civic organisations, nor genuinely European publicity. In turn, persistent differences associated with culture, language and history are obstacles to the development of this kind of European-level political citizenship. Also on the level of principle, one can raise the question of whether it is possible to combine a democratic character with a system of political powers based on different decision-making levels without some of those levels being regarded as primary from the perspective of citizens' political identification and democratic acceptance of decision making. In the view of the Committee, the development of an independent democratic acceptability for the Union vis-à-vis the member states' democratic political systems is not probable at least in the foreseeable future, nor can striving for it in a manner that overlooks the realities associated with the national and cultural diversity of the Union be considered a wise policy.
The third stage of economic and monetary union (EMU) is dealt with in the report solely from the perspective that its implementation would be conducive to deepening the process of integration and increasing the Union's capacity for action in employment policy and improving European competitiveness. The Committee does not dispute that implementation of the third stage of economic and monetary union may constitute a factor that could contribute to the emergence of political and institutional structures representing a deeper degree of integration than currently exists. In particular, a need for clearly closer harmonisation of member states' macroeconomic policies would seem an inevitable result of implementation of the third stage of economic and monetary union. In the view of the Committee, the report should, however, have included an analysis also of the alternative in which implementation of the third stage of economic and monetary union can also trigger political and social processes with the potential for creating instability within the Union and adding to or exacerbating conflicts between member states and impeding implementation of the enlargement process.
The committee refers in this connection firstly to the fact that when the third stage of EMU is being implemented the Euro's rate of exchange relative to third currencies, above all the US Dollar and the Japanese Yen, will have to be determined. Even if the initial assumption is that the Euro will float relative to those currencies, it will not be possible in the Union's monetary and currency policy to avoid posing questions relating to the character of the Euro as a "strong" or "weak" currency. In these questions, the traditional basic lines followed by the central states participating in the third stage of EMU and by their political decision-makers are quite divergent.
The same applies more generally to conceptions of the relationship between decision-making systems for economic and monetary policy and to the principles on which policy in those sectors should be based. Especially when the matter is examined from the viewpoint of member states' national parliaments, it can by no means be taken for granted that the thinking on economic and monetary policy to which the member states have committed themselves as an aspect of implementation of the EMU plan would be effortlessly implementable as a permanent policy also during the third stage.
This assessment applies in particular to those member states in which monetary policy has traditionally been subordinate to general economic policy and in whose economic policy an undervalued or unstable national currency, budget deficits and strict regulation of the economic sector by the state have enjoyed support across party boundaries or at least have been widely tolerated. During the third stage, the relationship between the participating member states and those excluded or choosing to remain outside may also prove problematic. This applies in particular to development alternatives in which countries participating in the third stage encounter economic difficulties, in which case the protectionist pressures against the Union-wide single market that are already discernible could gain further strength.
Also from the perspective of the trust that the Union and its institutions enjoy, implementation of the third stage may exacerbate problems. This is associated with the distrust that large segments of the population in the member states already harbour towards the single currency scheme. Three alternative courses of development for the EU are outlined in the report. The first of these is called the "multi-core Union". In the view of the Committee, the designation chosen in the report leads thinking in a direction that can not be regarded as the probable one that development will follow.
A multi-core Union is associated with, inter alia, the discussion of "flexible integration" at the IGC or "intensified cooperation". Those phrases refer to the possibility of a group of member states stepping up their cooperation in a certain sector, even though not all member states would be prepared to participate in that cooperation. What is essential in this discussion is that cooperation would take place on the basis of the Union's founding treaties and within the framework of its institutions, which would distinguish it from, for example, arrangements like the Schengen Agreement.
In the background to the discussion of flexible integration are, on the one hand, ideas of a core Europe mooted in German Christian Democratic circles and, on the other, French conceptions of European integration based on a pattern of circles that are concentric but different in their degrees of integration. Characteristic of both ways of thinking is the assumption that an axis formed by Germany and France would serve as the locomotive of integration. It is also assumed that at least the Benelux countries would participate in deeper cooperation.
Taking into consideration the basic idea that the foundation for a multi-core scenario would be operations within the framework of the EU's institutional system, the Committee can not regard as realistic ideas of a core group in which Germany and France would not participate. The cornerstones of the EU's institutional system are the Commission's roles as a planner and presenter of political initiatives, an implementer of policy and an overseer of member states' activities. It is difficult to imagine how the Commission could present an initiative on stepped-up cooperation and carry it through if Germany and France were unwilling to participate in that cooperation.
In such an event the Commission would find itself in the extremely difficult political situation of simultaneously representing both the participating member states and those that had remained outside, with the likelihood that disputes between those would crystallise into Franco-German ones. For this reason it is more realistic to assume that in all implementable models of flexible integration the core that proceeds faster than the others will include both Germany and France. Putting it another way, they would then form the core of the integration process in the sector mentioned. It is a different matter that the group of other member states joining the core formed by Germany and France may vary in different sectors. That, however, can not, in the view of the Committee, be described as "multi-core", especially if the intention in using this term is to refer to the possibility that cores, as groups of member states, could be in relationships of cooperation or competition with each other.
In the view of the Committee, the report should also have included a specification of the sectors in which member states could begin stepped-up cooperation, and towards what goals. That would, however, have presupposed a similar analysis of economic-social and political development in the central member states as the one that has been meritoriously made in the report with respect to Russia.
In the perception of the Committee, the idea that it is possible to deepen integration substantially beyond the present degree is not necessarily unproblematic. In this context, the Committee refers to two matters in Germany's case. In a growing number of sectors, the powers of the Länder restrict the room for manoeuvre that the Federal government enjoys in its European policy. Nor in the post-reunification situation is Germany so unreservedly prepared to finance the Union's operations as in the past. In France's case, correspondingly, reference can be made to the opposition to deepening integration that is clearly discernible in the country's parliament and political parties as well as to the problems that implementation of integration projects affecting internal and external sovereignty have caused in the country's political debate.
The second development alternative presented in the report is the "lean European Union". In the view of the Committee, the model can not be regarded as a realistic course of development, because the development that it presupposes does not seem politically possible in the Union's decision-making system without first detaching that system from its legal fundamental principles (the exclusive right of the Commission to introduce legislative initiatives and member states' right to veto amendments to the founding treaties). In the perception of the Committee, a development along the lines of this model could be implemented only in conjunction with a crisis of the kind that would factually amount to a dissolution of the Union. In a situation like that, on the other hand, the solutions that are prerequisites for the relatively systematic decision making and planning that the model contains are not realistic.
The model is presented in the report as a kind of anti-Utopia. The Committee does not concur with the view in accordance with which returning one or several policy sectors to the national sphere of authority would amount to "stripping-down" the Union. Especially from the perspective of enlargement, rational management of the Union's decision-making system and of budgetary policy may require solutions of precisely this kind. Especially in the Common Agricultural Policy, application of the present systems, which were originally created for a community of six states with a combined output level falling short of self-sufficiency, may prove insurmountably difficult after enlargement. In such an eventuality, changing the power relations in favour of the member states could be more conducive to strengthening than to weakening the Union and its effectiveness.
It is suggested in the report that the "lean Union" model would emphasise the position of national parliaments. That demonstrates perhaps even more generally the methodological weaknesses in this part of the report, i.e. that conclusions are founded on certain preconceptions that are mainly institutional in character. In actual fact, the position of national parliaments in the EU has strengthened as a reaction to the process of deepening integration. Among the matters that demonstrate this are that the implementation of systematic cooperation between the national parliaments' EU committees began during the years that the Single European Act and the Single Market were coming into being. The constitutional position of national parliaments was also confirmed in member states' national-level EU decision-making, often specifically as part of the Maastricht Treaty ratification process. It can be assumed on similar grounds that in a stripped-down Union the need of parliaments actively to follow Union matters would be more likely to decline than to increase.
In the conception of the Grand Committee, the third model presented in the report, "the congealed European Union", also represents an analysis based on problematic preconceptions. The development of the European Communities in the period from the 1950s to the mid-1980s shows that it has been possible to deepen and broaden integration markedly even though the development of its institutional framework attracted less public attention than was the case in later years. Nor does the Committee consider it probable, as is done in the report, that "The Union's development will be stalled by the lack of a blueprint for legitimacy, democracy or relations between the Union and its citizens." (p. 65) In the report, these questions are defined as major challenges with a bearing on the Union's own character, challenges to which it will not be able to find an answer in the event of its becoming congealed.
In the perception of the Committee, the major challenges facing the Union concern adjusting its economy to technical development and the new competition situation in the global market, solving the employment question, social marginalisation and environmental problems as well as curbing threats to the internal and external security of the Union and its member states. These challenges are being met on different levels of the political system: within the Union, in member states, in regions and municipalities. In part, solutions to them must be sought in civil society: in the world of economic life, labour markets, education, culture, research and voluntary civic activities. Problems associated with the Union's democratic acceptability are only one, albeit important part of these challenges. In the view of the Committee, the relationship between the Union's various development alternatives and its enlargement could have been analysed more profoundly and in a less preconceived manner than has been done in the report. In the report the multi-core Union model is seen as being actually an answer to the problems caused by enlargement, in the lean Union model enlargement would further "dilute" the Union and a congealed Union would be incapable of enlarging, a situation that would be compensated for by means of a transitional arrangement of a character that is difficult to predict.
In the view of the Committee, it might have been more fruitful to examine enlargement in this context also from the perspective that new member states' opportunities to adapt to Union membership and conversely the Union's ability to function in a post-enlargement situation could in part be also inversely relative to the degree of deepening of integration. The more broadly and deeply the Union restricts member states' own power of decision, the more difficult it will be for the countries of Central and Eastern Europe to meet the requirements for membership. Correspondingly, the restrictions that enlargement may impose in the Union's capacity to function constitute a bigger and bigger risk for the old member states. In the sectors of environmental, consumer and social policies, for example, it lies in the interests of those member states that are weak in terms of economic resources and competitiveness to strive for the lowest possible level of community protection binding on all member states. On the other hand, it lies in the interests of the developed member states advocating a high level of protection in these sectors either to prevent community-level decision making by insisting on unanimity or securing exceptional arrangements to safeguard the implementation of national policy, i.e. preventing a deepening of integration in those particular questions.
On the basis of what has been presented in the foregoing, the Grand Committee respectfully proposes
that the Committee for the Future take the points presented in this submission into consideration.
Helsinki, 4 December 1996
The following persons participated in decisive deliberation of the matter by the Committee: Chairperson Erkki Tuomioja / Social Democratic Party (SDP), deputy chairperson Kimmo Sasi / National Coalition Party (KOK), members Maria Kaisa Aula, Centre Party (CP), Tuija Brax / Green Party, Kaarina Dromberg (KOK), Mikko Elo (SDP), Jouko Jääskeläinen / Christian Union, Tarja Kautto (SDP), Kimmo Kiljunen (SDP), Annika Lapintie (Left-Wing Union), Johannes Leppänen (CP), Kalevi Olin (SDP), Margareta Pietikäinen / Swedish People's Party, Aapo Saari (CP), Irja Tulonen (KOK), Matti Vanhanen (CP) and Matti Väistö (CP) as well as alternate members Risto Kuisma (SDP), Pekka Saarnio (Left-Wing Union), Jukka Tarkka (Young Finns), Marjatta Vehkaoja (SDP) and Raimo Vistbacka (Basic Finns). In all, 22 members and alternate members as well as the Åland constituency representative Gunnar Jansson participated.
paula.tiihonen@eduskunta.fi