Globalization Insurance: Finland’s Leap of Caution
Though people have lived in what is now Finland since the end of the last Ice Age, its birth as a country is relatively recent, only since its independence from Russia in 1917. Like Maine, Finland endures long winters and relies on natural resources for a large part of its economy. Outside of a few large population centers, the country’s 5.5 million people are sparsely settled.
In the 1990s, after the fall of the Berlin Wall and the collapse of the Soviet Union, Finland faced an uncertain future. As exports to Russia plummeted and many producers lost the protection of price negotiations to competitive European Market producers, the country identified cooperatives as a way to protect jobs and communities from increased market exposure-an “insurance policy” for globalization. That is, while it became impossible to negotiate or legislate protection, institutionalizing cooperative development through public policy could help local consumers, workers, producers and small businesses work together to protect themselves. Particularly in more remote areas with higher unemployment, cooperatives provide opportunity and local “glue” to keep communities from experiencing a strong downward spiral. Today, Finland’s modern, developed economy has reached a balance between the race-to-low-wages forces of globalization and the need to create local resilient communities. As a result, Finland ranks near the top of every index of social and economic health as one of the world’s most equitable, educated and prosperous nations.
Its history of cooperation dates from the beginning of the last century. Finland has strongly promoted cooperatives using multiple pieces of legislative and institutional foundations as part of a deep, culturally rooted economic strategy.
Because of their proactive strategy, Finland has become a global leader in cooperation, with the highest concentration of cooperatives relative to its population-over 10% of Gross Domestic Product produced by cooperatives, and 84% of Finns being a member of at least one cooperative.
At first, these efforts were part of a broader strategy of economic independence from Russia and the affirmation of a unique cultural and political identity for Finland. But for Finland the set of statutes, model rules, and communications about cooperatives coordinated by Confederation of Finnish cooperatives, called Pellervo Society, was more than just an economic strategy to alleviate rural poverty, it was seen as a school of democracy for its citizens.
New cooperatives pioneered consumer education through cooperative societies, developed new retail concepts such as department stores, chains, and customer-ownership models, established numerous standards and new operating models, and promoted scientific research. These cooperative initiatives enabled local communities that lived in often extreme conditions to achieve autonomy and independence in the management of their local economy.
Although there was a decline in cooperative numbers in the 1980s, the movement was reinvigorated by the economic downturn that followed the collapse of the neighboring Soviet Union. The Pellervo Society played a critical role in the research, education and training programs that assisted in creating an explosion in the numbers of cooperatives. In the time between 1987 and 2006, 2,921 new cooperatives were established. They included 696 worker, service and expert cooperatives, 312 marketing cooperatives, and 152 publishing and media co-ops. Research has shown that although cooperatives can thrive in all economic situations, they are most invaluable at times of high unemployment, such as Finland was experiencing in the early 1990s. Historical data shows that co-operatives are more often formed in areas with high unemployment whereas conventional firms are more often established where unemployment is low and demand is growing.
Although Finland has been competitive on the global stage with star corporate performers such as Nokia and Skype, the country has depended on the cooperative sector to develop and maintain a strong foundation of broad-based, locally rooted business ownership and living wages in a time of increasing inequality around the globe. Currently, Finland’s cooperatives create employment for more than 90,000 workers and generating annual revenues of $40.9 billion. In addition, cooperatives constitute the majority of many industries. An example highly relevant to the potential of agricultural cooperatives in Maine is Valio, a consortium of dairy cooperatives that includes 85% of dairy farmers in the country.
Another example of the scale and impact achieved by cooperatives in Finland is the S Group, a network of 28 regional and local consumer cooperatives that together make up the largest cooperative in Finland. With their 270,000 members, they control a 44% market share in daily goods through ownership of hotels, restaurants, petrol stations and banks. They also have operations in other Baltic countries and Russia with total annual European sales of 12 billion EUR. Their benefit to Finland goes beyond the direct economic impact in terms of employment and revenue. Research shows that the S Group is a very socially and economically responsible organization in the way they conduct their business and interact with communities. This includes an “even spread” policy of investment in communities that are often sparsely populated and are at risk of having money drained from their local economy. In addition, they have strong local procurement policies that support the development of local industry and self-sufficiency. Despite its national federation structure, these policies help to ensure the bulk of its economic activities remain within the operating areas of local branches of the network. These policies have ensured that the S Group remains not only part of Finland’s economy but also part of its society as an active socially oriented stakeholder that is willing to put the interests of its members and their communities first.
Kalmi, P. (2011) Catching a Wave: The Formation of Co-operatives in Finnish Regions. University of Vaasa. Department of Economics. November 25, 2011.
Iiro Jussila Ulla Kotonen Pasi Tuominen, (2007),"Customer-owned Firms and the Concept of Regional Responsibility: Qualitative Evidence from Finnish Co-operatives", Social Responsibility Journal, Vol. 3 Iss 3 pp. 35 - 43.
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