Finland’s cost competitiveness is poor, says Björn Wahlroos in Jaakko Honko lecture

The Jaakko Honko lecture series was established by the Helsinki School of Economics, the HSE Support Foundation, and the Yrjö Jahnsson Foundation in 1997 to commemorate the life’s work of HSE's former chancellor and rector Jaakko Honko (1922–2006). The lecture, which became a tradition, was first organised to mark Jaakko Honko's 75th birthday.

The biennial alumni event was last held in June 2019. It was the first time that it was held in the new building of the School of Business at Ekonominaukio 1 in Otaniemi. This year the lecture was exceptionally held as a remote event because of the pandemic.

Dean Timo Korkeamäki welcomed the participants. ‘The School of Business is celebrating its 110th anniversary this year. The exact date was already on 16 January, but we are celebrating it all year. The milestone year will culminate in a celebration for donors at Aalto University Töölö in January next year.

Professor Otto Toivanen, Academic Director of Helsinki GSE, noted that the centre had been given a new Finnish-language name: Taloustieteen keskus Helsinki GSE. The centre has now been operating for three years and its goal is to raise the quality and effectiveness of economics research and instruction to a higher international level.

‘In addition to the new name, things are also going well for us in other ways: the number of professors has increased by 50%. We have conducted our newest recruitments around the world. The quality of our student applicants has significantly improved, and we have increased admissions by as much as 100%, which means that we are taking more than 200 students into our bachelor’s programmes. We are promoting cooperation in economics and other disciplines. We have shared professorships and courses with other fields of study.’

Jaakko Honko medals for eight people who have distinguished themselves in economics

The Jaakko Honko medal is awarded to persons who have distinguished themselves in economic research, or its promotion, and who have made significant contributions to interdisciplinary research. The medal is made of bronze, and it was designed by sculptor Terho Sakki (1930–1997).

This year the medals went to Jaakko Kiander, Director of the Finnish Centre for Pensions, Mikko Kosonen, Chair of the Aalto University Board, Pii Kotilainen, Member of the Board of the HSE Support Foundation, Kristiina Mäkelä, Provost at Aalto University, Olli Rehn, Governor of the Bank of Finland, Ritva Reinikka, Professor of Practice at Aalto University and Helsinki GSE, Risto Siilasmaa, Chairman of the Board of F-Secure, and Hannu Vartiainen, Professor at the University of Helsinki.

The medals were handed out by Elli Dahl, Executive Director of the Yrjö Jahnsson Foundation, and Arto Mäenmaa, Executive Director of the HSE Support Foundation. The first time that the medals were handed out was in 1989.

Finland faces great challenges in the new world economy

The Jaakko Honko lecture was given by Björn Wahlroos, whose topic was The Pandemic and Structural Problems – Finland's challenges in the new world economy. However, at the beginning he changed his lecture's title to “Why does socialism not work ever, or anywhere?”

Björn Wahlroos said that he is mystified at how little attention has been paid to the fact that Finland is experiencing its 13th year of zero growth (as measured by per capita GDP).

‘Per capita GDP has hardly changed from it was in 2008. We have 13 years of zero growth behind us and in the future, Finland is on a path for growth of 1% or 1.5% a year. Of course, there are natural reasons for this underachievement, such as Nokia, which became a mirror image of its success story in 2008–2010, turning into a great damper on the development of Finnish GDP. At about the same time the prospects of growth for paper as an export product turned negative. These structural changes should be kept in mind. On the other hand, in 1991 we lost our trade with the Soviet Union, which is something that we did not boast about. Nevertheless, we rose out of that disaster.’

According to Wahlroos. Finnish business has become more international in an interesting manner. ‘Whereas Swedish engineering companies have succeeded in keeping production and product development in Sweden, we have globalised that activity heavy-handedly. In building a new economy we are, if we use R&D investments as a measure, very far from where we should be.’

Wahlroos also does not see future prospects as very bright. ‘The greatest individual factors in investments of the past 12 years are one nuclear power plant, which is still not in operation, and a couple of large pulp mills. Similar developments are in store for us. I consider it evident that the Finnish government will solve Finland's emissions problem by shutting down the Raahe steel mill.’

‘Furthermore, the cost structure of the Finnish forest industry in paper manufacture is pitiful. There will be no more investments in papermaking machinery, as none is being built in Europe. In Finland we have shut down machines that are technically superior to the ones that we are using in Germany. The reason for this is that the costs of logistics and energy are higher here than they are in Germany,’ Wahlroos said.

Text: Terhi Ollikainen

A recording of the event can be found at the bottom of this page.