Ireland should imitate Finland's rescue via education and R&D


Back in the 1990s, the Nordic country went through a crisis similar to what we are facing. Investment in education and R&D were vital in turning around their ailing economy, writes Sheelagh Drudy 

FINLAND IS a small open economy, with a population just a bit higher than our own (at just more than five million) and a history which has some interesting parallels with Ireland's - a background of domination/colonisation by near neighbours, independence in 1917 followed by a civil war and a mainly agrarian economy at that independence.

But while Finland achieved industrial and economic growth rather earlier than Ireland, in the late 20th century it experienced economic turbulence fairly similar to that which has recently been visited upon us.

After a period of sustained economic growth in the 1980s, when Finland became known as the Nordic Tiger, in the early 1990s the Finnish economy collapsed, partly as a result of global factors and partly as a result of the collapse of the Soviet Union, which had been a major importer of Finnish goods.

In the early 1990s, there was a severe banking crisis. By 1994, it had an unemployment rate in excess of 18 per cent.

Yet in the relatively short period between the early 1990s and the mid-2000s, Finland transformed itself from a resource-intensive economy into a knowledge-based one. It has been ranked top in virtually all international comparisons measuring competitiveness or knowledge economy developments, including the World Bank Knowledge Economy Index, and the Organisation for Economic Co-operation and Development's student assessment tests - the Programme for International Student Assessment (Pisa).

World Bank reports have suggested that the Finnish experience of the 1990s is an example of how a country can turn a crisis into an opportunity and how knowledge can become the driving force of economic growth and transformation. Ireland can do the same.

While a range of important economic and social initiatives were involved in the transformation, there were two vital educational ingredients:

1. a significant investment in research and development;

2. a significant investment in education generally.

Finland has adopted the Nordic social model. This model has attracted considerable interest because it seems to be able to combine a high level of social protection and a more equal income distribution with high economic dynamism, according to Erkki Liikanen, the governor of the Bank of Finland. Liikanen further argues that this includes a large government sector, high tax rates and generous social protection.

In spite of the fact, he says, that the standard economics text books teach that such features generally distort incentives for efficient resource allocation, during the past decade the Nordic EU countries have achieved, on average, higher growth rates than the advanced European countries.

According to Liikanen, the Nordics have been able to achieve high employment combined with macroeconomic stability. Finland, with other Nordic countries, shares a long tradition of emphasising the importance of education and these countries have benefited greatly from their well-educated labour forces.

"We should not underestimate the role of high-quality public institutions, especially in education and research, in supporting both economic growth and a democracy that is open to new ideas and change," says Liikanen.

Furthermore, the Finnish education system emphasises egalitarian values, including equality by gender, region, and socioeconomic background. Equal opportunities for all is the guiding principle. Everyone receives the same basic education, and education is free all the way up to university level.

OECD education figures show that Finland consistently spent a higher proportion of its gross domestic product (GDP) on education than Ireland from the early 1990s to the mid-2000s - even as it was just emerging from its very serious economic crisis.

In 1990, Finland spent 5.96 per cent of GDP on education, compared to Ireland's 5.2 per cent; in 1995, it spent 6.3 per cent, compared to Ireland's 5.2 per cent; in 2000, it spent 5.6 per cent, compared to Ireland's 4.5 per cent; and, in 2005, it spent 6 per cent, compared to Ireland's 4.6 per cent.

Of course, while educational investment is important it has not been the only ingredient. Research shows that it has been accompanied by education policies based on equity, flexibility, creativity, teacher professionalism and a high trust culture of schools and teachers; good leadership; and a lot of resources invested in teacher education.

The most recent analysis by Finland's Central Chamber of Commerce (October 2008) shows that the various measures Finland has taken, including its investment in education, have helped it to weather the current economic storms, with only a mild impact from the global financial turmoil. There appears to be economic stability and firm public finances.

Ireland can learn some lessons from this small country in northern Europe as we now face into a very difficult economic period.

There are a number of pathways we can take.

One of these is to give much closer consideration to implementing the Nordic socioeconomic model than we have to date, and to invest in the future through education at all levels from early education upwards, adopting measures which will be both effective and egalitarian.

We also need to invest in forms of research and development which will provide a stable democracy, social inclusion and sustainable economic development.

• Sheelagh Drudy is professor of education and lifelong learning, specialising in the sociology of education, at University College Dublin