The Finnish welfare state on the verge of bankruptcy

"In the past, people in Finland didn't mind paying taxes, but now they are waking up and understanding that raising taxes is no longer a viable way to keep public debt under control."

Poverty - where does it come from?
Poverty - where does it come from?

The article was translated from English original on pages Czech and Slovak Ludwig von Mises Institute

Proponents of progressive taxation in America often zealously promote the European welfare state as an argument for a large state, as does the health care debate. They point to European countries, often the social democratic Nordic states, with their state health care, public schools, generous social safety nets and all the happy people who live there as role models.

Such arguments saw significant growth after Newsweek published an article stating that Finland was the best country in the world to live, closely followed by Sweden and Switzerland. And of course they are happy. After all, there is no poverty in these great countries, the population is educated and people generally do not care about the world around them, because there is always a kind government that will solve any problem.

Many people have tried to dispel this myth, but it still persists. I do not expect to be able to dispel this myth, but there are things that people should know about this mythical utopia, the "best country in the world" - Finland.

State education system

Like the other Scandinavian countries, Finland likes to boast a public education system. All schools, including universities, are run by the state. There are no tuition fees for Finnish students. On the contrary, students actually receive 400 Euros per month in order to obtain a degree, as a bonus to heavily subsidized student loans, student lunches, etc. People see higher education as a right [to education] and therefore it must be available. To this end, Finland has 20 universities and 27polytechnic. All this in a country with 5.3 million inhabitants, of which 1 million people live in the capital and where only five other cities have a population exceeding 100.

One might think that it is great that there are so many places in the country with so few inhabitants that provide higher education, and that this is proof that the people of Finland are educated and civilized. There could be little further from the truth.

First, the reason for so many universities is regional policy. Politicians buy votes by creating and maintaining jobs in crisis areas - the oldest trick in the textbook.

Second, a large number of universities and polytechnics reduce the overall level of education because such a small population cannot maintain a high level of education in so many different places. There are simply not so many competent people to choose from, not to mention that many universities and polytechnics are in more than inappropriate places. Only a few Finnish universities can claim truly high standards of education. Of course, economic education is below the average.

Third, the higher education available in this way attracts thousands of people every year to earn a degree, even though they have nothing to look for in academia. This produces a huge number of bachelors, masters and doctors [PhD] who have no value in the labor market because they have studied subjects such as literature, art history, religious studies or something similar. In many cases, they did not choose a major because they thought it would bring them a job. They chose him because they found it fun or interesting, or he simply had easier entrance exams than law or medicine.

Unemployment among educated people has thus become a chronic problem. The other side of the coin is that Finland has an acute shortage of craftsmen: carpenters, plumbers, mechanics and so on - people who can actually produce valuable services. This shortage, predictably, increased prices and extended delivery times.

Public health

Like other Scandinavian countries, Finland has public health care. That's one of the things people like to brag about. However, the Finnish healthcare system is also bad by the standards of public healthcare.

First, it is not a single payer system, as you would imagine a government-run and funded healthcare system. Instead, the Finnish system is municipal. Each municipality is formally obliged to provide its residents with medical facilities service. Of course, not every municipality can afford a hospital or even a medical center. This is why Finland is divided among the myriad health areas that serve the hospitals or health centers that are in the municipalities that make up the area. This may seem reasonable and good at first glance. Finally, what is the difference between national and municipal health care? As it turned out, this difference is very significant.

The main problem of municipal health care is that it is very restrictive. Only people who are registered in the area can use the local care. If this is an acute case, you are entitled to the necessary care, but once you are out of the ICU, you must be moving to a hospital in your own area. This has led to many cases where people have been sent from one place to another for taxpayers' money to comply with these administrative rules.

One of the most bizarre examples was a woman who fell ill in the capital, Helsinki. She received the necessary treatment, but once the acute threat had passed, she had to be transported back to her own area, Rovaniemi, an area 500 miles north of Helsinki. Keep in mind that leaving a ICU does not mean that you are completely healthy and can be discharged from the hospital. Due to the way healthcare is set up in Finland, the sick person had to be transported by car to a place more than 500 miles from the hospital.

One of the basic rules of society is that the more administrative areas within one state, the more bureaucracy it brings. Of course, all these medical areas must have their own administration, which must gradually establish contact with officials in each municipality in the area and must coordinate with the administrators of each hospital and each medical center. And then you have to have other health officials, at the national level, who oversee it all.

As you can imagine, efficiency is not one of the main attributes of Finnish healthcare. Studies have shown surpluses for doctors in some places and shortcomings in others. Very few municipalities can afford to maintain the health care required by law. Medical centers close at any moment, but no officials are ever fired. The central government must regularly transfer money to individual areas to keep it afloat. In other words, Finland seems to have a government-run and funded healthcare system, but in reality it has a municipal system that has resulted in even more bureaucracy.

Any country that wants to introduce public health care should not look to Finland as an example to follow. One of the many real tragedies of this fiasco is the fact that Finland has some of the best private hospitals in the world, but due to public health care, very few people can benefit the people of Finland.

Licensed to steal

As a tax advisor, I often participate in legal disputes with tax authorities, where I represent my clients and try to protect their rights. In these fights, I encounter arrogance and, in some cases, the sheer malice of tax officials. I will never cease to be amazed at the ignorance and ruthlessness of this state apparatus.

As a rule, the tax authorities are not at all interested in laws, if they know them at all. Not only that, but it is clear from their behavior that they consider every penny to be their money, which the taxpayer can keep only from their decision. It even happens that they come up with arguments that are blatantly untrue and have no legal basis to impose additional taxes and various other sanctions. If a taxpayer objects, they simply ignore it and continue as if nothing had happened - although the constitution requires that every decision and regulation issued by the government must be based on the law and explained in detail.

However, this does not seem to be the case for tax authorities, as do other legal principles. In all other cases, the presumption of innocence applies, but if you are accused of something by a tax official, then you must prove your innocence. If you can't prove it, then you're guilty and it's the tax office that decides your guilt.

This type of behavior is certainly known to the American public, because the IRS (Internal Revenue Service) has also exposed them to all sorts of wrongs. However, these wrongs are no less true in Finland than in the United States - the complete opposite of the aura of utopia that seems to surround the social democratic welfare states of northern Europe.

Statists may be happy with high taxes, but they too are picky when they hear about the triggers that tax authorities bring to individuals and their families. And, of course, it is the private individuals and small business owners who suffer the most from this aggression, because they seldom have the knowledge or resources to defend themselves. Billionaires and big corporations at least have a chance to fight, ordinary people don't. So much for compassionate society.

In such a system - with vague tax laws, tax officials relieved of responsibility for their actions, and burdensome, never-reimbursed legal expenses arising from disputes with tax authorities - taxpayers' rights are routinely violated. Officials have no interest in making the right decisions, so whenever the case is not completely clear, they decide in favor of the state.

The taxpayer can then choose between paying another and often unjustified tax, or he can use the extra money and time to challenge the judgment. And because tax officials can and often routinely ignore the taxpayer's arguments, even the most trivial cases can go through the entire judicial system to the Supreme Administrative Court, the country's highest court. If the taxpayer is unlucky, it can take up to ten years to settle the case, with court costs reaching tens of thousands euro. And if he wins, he is not compensated for the time and expense he has incurred in defending his rights, nor are the officials responsible for their behavior. For these reasons, most tax disputes are resolved by case law, which is largely paid by taxpayers. In other words, the state enacted vague legislation and then forces taxpayers to pay for its interpretation.

Growing debts

The reality and future of the Finnish welfare state is not too rosy. The crisis in Greece and other PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) has given rise to the much-needed debate on the state of public finances in Europe. For the first time in a long time, politicians are really talking about the need to cut government spending. While this is undoubtedly correct, even politicians who advocate spending cuts do not seem to understand what it really means.

Rising deficits and government debts are not the result of a lack of tax revenue. In Finland, the maximum income tax for private individuals is over 50 percent. Value added tax is levied on all products and services at all levels of production. The level of this tax was for ordinary consumer goods or service recently weighed from 22 to 23 percent. As in the United States, there are many other taxes in Finland that are imposed on everything under the sun.

What has brought the Finnish welfare state close to the fiscal disaster is ever-increasing government spending. Even during the fifteen years before the collapse in 2008, in a period known as steady economic growth, government debt was not repaid. In 1994, the Finnish debt was 51.7 billion euros, by 2007 it had risen to 56.1 billion euros. At the end of 2009, the debt shot up to 64.3 billion and at the end of June 2010 it rose to 69.8 billion. All this despite the fact that the state's tax revenues remained constant and even increased between 2000 and 2009. Figures show that government spending increased from 33 billion in 2000 to 46.9 billion in 2009 over the same period. Projected expenditures in 2010 and 2011 are 52.5 billion and 50.4 billion respectively. Government debt is projected to rise to $ 85 billion at the end of fiscal 2010.

záver

Finland is and has long been a model child of utopian social democratic welfare states in Europe, and has now been named the best country in the world as a bizarre remake of the appointment of Ben Bernake [Fed's chief] of Time magazine.

In Finland, advocates of progressive taxation believe that a large state is functioning. Just as public health and public education work "for free." And if it can work in Finland, it can work in the United States. But the blemish on this argument is that none of this works in Finland. Just as Obama's promises don't work.

The Finnish welfare state costs more than we can afford. Healthcare is terribly inefficient and costly and prevents normal people from accessing really good healthcare provided by the private sector. Public education is also very expensive and constantly suffering from a lack of money. The textbooks pass on to each other, each learning the same mistakes as those before him; provided that the textbooks are readable at all.

The idea of ​​the right to a university degree has resulted in a large number of university-educated people whose education is on the market work often zero. Due to high taxes and both legal and financial risk in employing people, the XNUMX% unemployment rate is considered normal. And did I mention that the pension system, like the United States, is a pyramid on the verge of collapse?

Government debt is already reaching alarming heights. What's more, there has been no longer period in Finland's history when the core of the debt is repaid. At best, the debt has remained at the same level, only to shoot up 50% in the last few years if forecasts come out. If there are no significant changes, bankruptcy will come.

However, I would like to end positively. Recently, in one poll after another, Finns have overwhelmingly supported cutting government spending as a way to gain control over public finances. In the past, people didn't mind paying taxes, but now they are waking up and understanding that raising taxes is no longer a viable option.

Next year, we Finns are going to the polls to elect a new parliament. I hope that the outcome of the elections will reflect this important knowledge.

The article was translated from English original on pages Czech and Slovak Ludwig von Mises Institute. The author is Kaj Grussner, translated by Jakub Skála.

0 comments

  1. Tomáš Nosek: Greetings from Sweden, from the famous Chalmers tekniska högskola, where in the last three years it doesn't look like much of a factory for creative candidates for employees and entrepreneurs. It is placed in the rankings mainly due to the number of published works, each teacher has a fairly decent production (by the way, recently most titles almost obligatorily contain the word "sustainable" and similar derivatives), teachers do not complain about salaries and joyfully publish and . On the other hand, they are often just writing theorists, and the overall approach to introducing and testing new school teaching practices through play can be said to be enthusiastic. For all the enthusiastic interaction, workshops, literature studies and other things, in the end, compared to the Czechs, one often spends most of the school time doing something completely out of the field, giving / receiving feedback and finding oneself in siutations, which according to scientific knowledge should . All I can say for myself is that these forced-creative moments in me killed creativity the most. It is not so much a habit to swear at school - at least not as openly as in our country, but when you have known a Swede for some time and see that you have similar opinions, even local girls often complain in private when describing the content of some objects they will use gestures. As for the ability to independently search and process information, I would certainly not give Sweden as an example, there are always a few individuals who will do it of their own free will, but compared to CTU, the percentage is quite sad.

  2. First of all, I would like to point out that I do not consider myself at all to be a supporter of a strong state (or a welfare state, whatever we call it). For me personally, however, the article seems too one-sided, the author presents completely opposite views of how many statistics show for many years, whether it is the quality of life, the environment or education. I am not saying that Finland is once on earth and there are no problems there. There are problems and the Finns know about them.
    Include Finland among the PIIGS countries? This cannot be taken seriously. Finland, as one of the few countries, decided to proceed with the recovery of public finances long before their situation really forced them to do so.
    I have no personal experience with the quality of their healthcare, so I will not comment on it. I would rather add my opinion on education. The quality of Finnish education (and no matter what level we are talking about) is known all over the world. In tests for primary and secondary school pupils, Finns are regularly placed on the highest ranks, at least in the EU. As far as higher education is concerned, hundreds of foreign students come to Finland every year, literally from all over the world, from all fields of study. Many of them return after exchange stays, either to complete the Master or for a PhD. The reason? Quality, infrastructure, expenditure on science and research. This is one of the reasons why they have so many schools - a high number of foreign teachers.
    And the argument that there is a problem with craftsmen and other people "producing really valuable goods" for free college studies. Is this the argument of a liberal economist? I am not saying that there is no overproduction of graduates of the humanities, but such an argument seems to me to be directly socialist, a valuable commodity is only one that is created by manual labor. Moreover, Finland is certainly not the only country with a shortage of quality craftsmen.
    In conclusion, I would like to add that one of the reasons why the Finns are aware of the long-term unsustainability of such a welfare state is precisely the high level of education. Perhaps it is precisely because of unnecessary university studies and the widespread horizons (eg in the field of economics) that they realize the need to raise the retirement age. That it is important to be able to take care of yourself and not rely on the state. Therefore, in Finland, due to these measures, cars do not burn on the street…

  3. Hello, I don't know what data you came from, but the Finnish national debt is not nearly as catastrophic as you write. A good comparison of which countries are really doing badly is brought by, for example, this CIA ranking: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
    As far as education and employment are concerned, I cannot agree with the article again. Studying any field at a university (even if it is useless from your point of view) will develop the ability to synthesize, search for information and be creative. For many companies, it is enough to know that the candidate graduated from a university degree and thus proved that he has the required skills. Education in the Scandinavian countries is well funded, so it can afford to attract quality professors from other countries. The Scandinavian countries have long won the so-called quality of life rankings. No wonder there is such a thing as a red scarf for a bull to economists. It is beyond their horizons. It is better not to send such a badly decorated article to Mladá Fronta…

  4. Lukáš, put it on idnes.cz, if copyright allows it. That article is very important.

  5. "As a rule, the tax authorities are not at all interested in laws, if they know them at all. Not only that, but it is clear from their behavior that they consider every penny to be their money, which the taxpayer can keep only from their decision. It even happens that they come up with arguments that are shamelessly untrue and have no legal basis to impose additional taxes and various other sanctions. If a taxpayer objects, they simply ignore it and continue as if nothing had happened - although the constitution requires that every decision and regulation issued by the government must be based on the law and explained in detail. "

    If such conduct acts as a tax advisor without a major reaction and lawsuits, he does his job very badly. Anyway, it's such a slap in the pub, no reference, or a specific case, nothing. Unnecessarily, this only reduces the credibility of the whole article.

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