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Sept. 18, 2010 - Freedomain Radio - Stefan Molyneux

35:25

1750 The Hell-fare of the Finnish State -- A Freedomain Radio Interview

Is Finland, recently voted the best country in the world, a social democratic paradise? An interview with Kaj Grussner - http://mises.org/daily/4655

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	Hi, everybody. It's Stefan Molyneux from Freedom Aid Radio.
	I have on the very lengthy, nay, international line, Kai Grosner, who is a fine professional in Finland, who has written an article which caught my eye, nay, both of them, called The Bankrupt Finnish Welfare State.
	Now, why should we be interested in Finland?
	Well, first of all, Monty Python's song about it, which is not unimportant.
	But secondly, It is held up as a paragon of socialist paradise.
	So people, particularly on the left, the right doesn't like it so much because it's a little less imperialistic than they prefer.
	But on the left, it's held up as quite the model of what a positive government involvement in the economy can do.
	And Kai, you've written about this sort of topic.
	I know that you're not putting yourself forward as an expert on the Finnish state slash private sector economic shenanigans, and neither am I. But I think you have some very interesting arguments in your article, and I was wondering if you could just talk a little bit about what drove you to write the article, a little bit about what's in the article, and what sort of reception you've got.
	Yeah, thank you, Stefan, for that kind introduction.
	Honored to be on your show.
	I've listened to many of your interviews, and it feels a bit surreal, actually, to be on here.
	Regarding the article, the reason for writing it, I had been thinking about it for some time.
	I had written an article on Mises once before, and with the healthcare debate in the U.S. intensifying with Obamacare and a challenge to it, I thought that It could be relevant to point out that all the great examples pointed to by leftists are not always that great.
	I had already begun writing it when Newsweek declared Finland to be the greatest country in the world to live in.
	So I thought, well, now I really have to finish it and get it to Mises to see if they want to publish it.
	I was really surprised, to be honest, by the reaction I've got.
	I would have thought that nobody would really have noticed it, but I've got quite a lot of feedback, both positive and negative, obviously, and I hear that Free Talk Radio mentioned it in one of their podcasts, and so did the International Forecaster in one of its news bulletins.
	Why I wanted to write it was that the things that I write, I've been thinking about them for a long time, and I'm far from alone in thinking them.
	Since it is the educational system and the healthcare system of Finland, which are usually the main elements, or the main talking points when promoting Finland, I thought I should say a thing or two about them.
	Mind you, I didn't even write and say very strongly that we should privatize healthcare and should privatize education.
	I just pointed out some of the structural problems of the current systems and that it could be better even if they would remain in a government regime.
	Right. If I remember rightly, what you talked about in terms of the educational system, there were a number of problems.
	One, that it was entirely politically or largely politically motivated to dump all of these, what is it, dozens of colleges and dozens of universities in a population of a little over 5 million that results in an excessive overtraining of people in really nebulous fields like art history and religious theory and Dare I say history as a history major myself,
	but jobs have a strong career path, and so the unemployment among the highly educated is very high, and there's a corresponding undersupply of people in the trade, carpenters, electricians, and plumbers, and so on.
	Is that a fair assessment of what you were talking about?
	Yes, it is, and the trade union for highly educated people, both last year and this year, We've said publicly that unemployment among higher educated people, more educated people, is reaching record levels.
	And it's no coincidence why it is like that.
	We have, as I said, we have 20 universities and 27 polytechnics, which in Finland are basically the same, but at least that is what politicians are trying to make them.
	And also it's been, if not an official government policy, then a well-known goal on part of the state and on many others to have as many educated people as possible.
	And with educated you mean people who went to universities or polytechnics, 60%, 70%.
	It has been touted as a target.
	We want to at least have at least 70% of the population going through the university.
	I just wanted to mention this is very typical of status thinking.
	Status thinking is all a push economy.
	Obama, I think, has the same goal of getting some percentage, I think 25% of people having college degrees within a couple of years, which is ridiculous because it should be a pull market.
	In other words, there should be a demand for certain people with certain kinds of education, and that should stimulate The supply.
	I mean, you don't just build all these cars and push them out on the road.
	You see what sort of market demand there is for cars and try and build to that.
	But this is very much a push economy.
	Like, if we just have people coming off the conveyor belt of education, whammo!
	Magically, our economy is going to become strong and healthy.
	But without the market demand, it's all just nonsense.
	Yeah, that's exactly true.
	And that's typical also of sort of central planning, in this case, in education.
	That it doesn't matter what degree they get in what they major in, as long as they major in something at the university.
	And we can say that we have had dozens or so many doctorates or masters degrees or bachelors this year.
	Nobody cares what they study and if they will get a job once they're done.
	And of course, since it is free, or we don't have tuition fees in Finland, many go for this.
	I'm sorry, it's not just free, but it's also subsidized.
	There was 400, was it, I'm sorry, Krono over Finland?
	We have euros. Sorry, of course, euros now.
	But it's 400 euros. You get paid per month to go to school, and the schools are all paid for by, well, national debt and taxpayers and so on.
	So you're actually subsidized.
	And of course, when the job market for intelligent people seems to be rather scant, and you get paid to go to school, and frankly, going to school is a lot more fun for the most part than going to work, there is a great temptation to take that track, to just stay on the government educational teat, so to speak, and just keep sucking until...
	The collapse hits or something.
	Yeah, that's true. I mean, the figures go...
	When you go to school, you get a student grant.
	I think that they raised it a bit, but I think it's about 250.
	And then you get a housing allowance.
	So you get up to 80% of your rent paid.
	Or you get that subsidized from the government up into a certain euro limit.
	So if you max out that, it's a bit more than 400 euros a month.
	And that is, of course, in addition to subsidized lunches and the government, not subsidized, but guaranteed loans, low rates and so on and so forth.
	But one thing that is often overlooked, which I try to bring up every now and again, is that when you have from the government and from the state and through the outside, this push for having people go to university, isn't that this push for having people go to university, isn't that kind of a slap in the face of everyone who's chosen to educate himself within the trades?
	I mean, isn't that saying to all people who don't have university degrees that you are slackers or you are not as productive, you are worth less than the people who get the degrees?
	I mean, it's such a strange contradiction in a country that is very egalitarian in all other respects, like most Nordic countries are.
	We're very aware of the fact that everyone is equal and everyone has an equal value.
	You can see that in everything, but not here.
	Here is the complete opposite.
	Well, I think that comes out of a number of factors.
	The first and, to me, most blatant one is that Young people who are out of high school vote, and so if you give them subsidized education and free room and board and free meals, and so if you take over from mom and dad, a lot of them will be kind of happy because it's a lot more fun than...
	I mean, a career is great fun, and I had a very enjoyable and I think somewhat successful career.
	But the first couple of years of any career suck.
	I mean, they just suck.
	I mean, the first couple of years of being a doctor suck because you're up for 30 hours straight.
	The first couple of years of being a lawyer suck because you're articling and you're just there for 80 hours a week.
	The payoff in a career tends to be down the road.
	And so people who want to have a gravy train called, sitting in a library and typing into a notebook and reading books and going to classes and playing hacky sack on the lawn, I mean, they love all of that stuff, so they'll vote for that kind of stuff.
	I think the other factor is that universities shape the thinkers, particularly the intellectuals of the coming generation, and so the government wants to pay as much money into the educational system to make sure that the educational system never turns against the government, never shows the immorality and inefficiency at the core of status thinking.
	So they shower all of these goodies on the intellectual classes to make sure that the intellectual classes won't ever criticize the state and they'll criticize it a little bit here and there like these policies or that policies or this leader or that leader but they won't go for the real core of the morality and inefficiency of the state so I think it serves everyone except for the people in school for the long run and the people who have to pay for it either presently or down the road.
	Yeah, that is correct.
	I agree with you on that one.
	The more you think about it, the easier it is to think of reasons why the system is not good.
	And if you go to the standard argument for free education, or this tuition fee less education, it is that if it would cost money, then only the rich would get educated.
	But that's a sort of strong argument, because If we go all out and privatize education, then it would be in the interest of the universities to get hold of the best and the brightest.
	And they would scout intellectual and academic talent the same way headhunting companies scout for talented employees or sports teams scout for talented athletes.
	Same rule would apply.
	Yeah, I just wanted to reiterate that.
	My father is a geologist, and he got his degree partly subsidized by the company that he ended up working for, as it turns out, for a good portion of his career.
	And what happened, this was very much a poor economy.
	They needed a geologist to have his particular specialization, and so they subsidized his education in return for a work commitment after graduation, which meant that he knew that he had a job, he knew that he was getting educated in something that was economically relevant to the future, And this probably would not have been the case if he was into Mayan architecture or basket weaving PhDs, but it did occur because there was a poor economy requiring this kind of talent.
	The same thing would happen with people who had a talent for medicine.
	They would be subsidized. You make so much money as a professional that people will loan you, people will advance you the money in a much cheaper way.
	Because what happens here, of course, is that, as you pointed out, Free, quote, free education is simply a transfer of wealth and money from the poor to the wealthier, because it's the poorer who tend not to go to college, and certainly the less intelligent tend not to go to college.
	So taxing those people to subsidize the frenzy book-reading lifestyle of the rich and talented just seems like...
	Socialism, from the rich to the poor, we can at least understand from an egalitarian standpoint, but from the poor to the rich, from the less able to the more able, just seems like a complete mutation of a bad idea to begin with.
	Yeah, that's always what happens when you have central planning in any area.
	It turns into a complete circus, and even those who advocated it Don't understand what happened.
	But the sorry thing is with that is that even when they're confronted with these obvious injustices, they don't care because they are so committed to the idea that even if it's demonstrably false and leads to the very opposite than what it was intended to lead to, they don't care because the idea is more important than the results.
	Yeah, or the existing flow of money is more important than the efficient flow of money, for sure.
	Now, I'd like to sort of make sure that we have a chance to drop into healthcare, because that's, of course, a very big topic for the U.S. Now, in our conversation before this show, you said, and I agree with you, that this is not to, you know, take a long, slow mental dump on Finland as a whole.
	Finland is a great country. I live in Canada.
	Canada, you know, as far as tax farms go, this is one of the best.
	I would rather have I just wanted to point out that although we are taking a very critical view towards the Finnish state and its activities, this is not meant to say that I would rather go and live in Uganda or something.
	I just wanted to point that out ahead of time.
	These are criticisms of status policies, not of the society as a whole.
	I just wanted to make sure we got that caveat in there, because whenever I put these kinds of things out, or criticize Canada, or criticize Finland, or criticize the United States, people are like, oh, so you'd rather live in Somalia, would you?
	It's like, well, no, I'm very white, and I burn easily, and I think I'm getting a sunburn even from these lights.
	So I just wanted to point that out before we dove into healthcare, but perhaps you'd like to talk a little bit about...
	Because I didn't quite follow. It's all municipal, so there's no universal standard of healthcare.
	I wonder if you could talk a bit more about that.
	It's a peculiar system.
	We don't have a state-run healthcare system like you perhaps would expect when you talk about universal healthcare, and certainly...
	It's what Obama seems to be advocating in the US. We have many services that are mandated to the municipalities.
	They have been given a list of services that they are forced to provide or that they have to provide to the citizens.
	And the funding, in most cases, comes from the state.
	When it comes to schools, And especially healthcare, which is the case that, informally, it's the responsibility of the municipalities to make sure that healthcare services and educational services are available to the citizens.
	But, as Finland still has very, there are several hundred municipalities, and most of them, many of them are very small, either geographically or they don't have many people in them.
	So, We can't have a hospital in every municipality, which then has led to the creation of healthcare districts, which consist of several municipalities with one hospital in one of the municipalities, and then there are health centers in the others, or in some cases there's nothing.
	But the people who live in a certain group of municipalities belonging to one district are then served by that district's hospital and health centers.
	And again, the aim is that only the people who live within the district use that district's services.
	Which, of course, creates its own administrative problem.
	Obviously, if you fall ill, you have an emergency or something like that, you are entitled to treatment, but you're not supposed to utilize the services of another district more than absolutely necessary.
	I remember, again with this, I got some heat for this because people didn't really understand what I'm trying to say.
	And I had just one anecdote in my article to show what kind of situations these systems like this produces.
	And I said, well, that's anecdotally.
	You can't really prove anything to that.
	I agree. You can give...
	I can list tens if not hundreds of anecdotes illustrating the problems with the system we have.
	I have many personal experiences.
	But that's not the point.
	The point is that when you have a system...
	Like, such as this, it inevitably leads to ridiculous problems over and over and over and over again.
	And the fact is that even when they are united together, very few districts can afford to provide services which are up to the government set standards, so they need money anyway, and they get money from the government, so the government basically wants it, but it just...
	Formally, it's on the municipalities.
	Right, right. And I think all of these seems to have combined into a similar kind of problem with deficit spending and national debts, as is maybe not as severe, but as is faced by a lot of the EU countries.
	And it's interesting. It just sort of reminded me that in Atlas Shrugged, I think Ayn Rand, 60 years ago, predicted that it was going to be Europe before North America that hit the crunch.
	But it seems to be somewhat accurate, though not perfectly.
	One of the criticisms, of course, of statist philosophies of statist approaches is that the government always has great incentive to increase spending because that's how it buys more votes, but almost no incentive to cut spending because the benefits that come from cutting spending accrue years down the road in tiny dribs and drabs to taxpayers scattered all over the country.
	So if they cut some government department, you might get $100 off your tax bill two or three years from now.
	Whereas when you cut a department, everybody who works for that department, you know, they cry out like howler monkeys in a blender to keep their jobs.
	So this criticism seems to be appropriately leveled at Finland, where you say that the national debt and increases in the deficits have been quite alarming, particularly over the last nine or ten years.
	Yeah, and just a few weeks ago, even this week, the speaker of Our Parliament blasted the Minister of Finance.
	It looks like the Finnish national debt will hit an all-time record very soon.
	It will happen in just a matter of time.
	So, it's not looking good.
	Let's go back to the Finnish system, just for a second.
	The municipal system, just a second.
	Because that is not of the one thing that some libertarians try to criticize me for, because they sort of imply that, well, since I'm against that, I would prefer a state-run system, and that would be equal to be in favor of one world government, which is a rather stupid argument, no offense to anyone, but...
	It is a classic misunderstanding of the real issue.
	It's not, you know, how our leaders are elected or how a government is set up.
	It's how much it governs.
	That is the question. So, a very sort of libertarian tyrant is much, much better than a democratic government like the one Obama.
	And when it comes to this healthcare system in Finland, I would much rather have it, if you have to be universal healthcare, I would much rather have it completely state-run, when every hospital and health center is run and funded by the central state, because that would eliminate layers and layers of bureaucracy and bureaucrats.
	Because that is what we have anyway.
	So this way we would get rid of all that.
	So that would be more efficient and more cheaper.
	And it does not mean I'm in favor of one big government.
	It just means that when you have municipalities within a central state that are completely dependent on central government funding, Then they don't serve the purpose they are supposed to serve, i.e.
	acting as independent political areas.
	They don't do that. It's just a scam, basically.
	It's an illusion. And it's a dangerous illusion, an illusion that many, many libertarians fall for.
	Because they confuse that with the way Europe was in the 19th century, when it was very decentralized and split up in many small city-states.
	That was a good thing.
	But then the split was on a national level.
	There was no EU then.
	There was no super state.
	So that was a good thing.
	But to divide a central state, which still controls and funds everything, into smaller and smaller administrative areas, which does nothing but add bureaucracy and bureaucrats, then that's not a good thing, and that's not something a libertarian should advocate.
	People do get confused by that argument.
	I think it's not a tough argument to follow.
	It's like if I'm grabbed and thrown in a van with a Potato sack over my head, driven to a dark basement, lashed to a chair, and there's a swinging light bulb over my head, and the guy says, would you like me to cut off one finger or two fingers?
	And I say, I'd really like you to only cut off one finger.
	That doesn't mean that I want to have one finger cut off.
	It just means that given the choice between one fingers and two fingers, I'll take the one.
	But that doesn't mean that I'm a big fan of having fingers cut off.
	So yeah, you can talk about improvements within a status system without agreeing with the status system as a whole.
	I mean, Anyway, that's an argument perhaps for another time, but I quite follow you.
	Though I would caution you, I did an interview on the Canadian healthcare system, which you might want to have a look at, where your efficiency ideas may not be followed as much as you like.
	The government is not immune from economic realities, but it does tend to be pretty good at keeping them at bay with the blood, sweat, toil, and tears of the unborn generations of the future through debt.
	But universal health care is just one of these words or these phrases that is used because it's easier than describing the real thing.
	So in the U.S. you're limited by access due to money perhaps.
	In Canada you're limited by access simply due to waiting lists.
	So there is no universal health care system in Canada.
	We have waiting lists of one to two years for some pretty important operations.
	So it's not universal and it's not available.
	What happens when you get larger control over the health care system is that there's much less regional responsiveness.
	So in order to control the healthcare costs in Canada, in the 1990s, the government severely restricted the number of doctors who were at a number of medical school placements that were available.
	Because, of course, that saves them money fairly quickly.
	And then down the road, of course, by the time the problem shows up, all those people are out of power, and it's now going to take another five or ten years to turn it around, even if they turn it around tomorrow.
	So there's pluses and minuses to either.
	I can certainly understand that looking from a fragmented municipal standpoint, the sort of federal...
	Healthcare system must look pretty good, but it also has its downsides from this end of the spectrum.
	I don't have any illusions about the state-run system being very good.
	Obviously, it would be bad, but the municipal system might work if the municipalities were actually independent as they are supposed to be.
	But as long as they are not, then it will only produce problems and extra bureaucracy.
	The one thing that I was quite encouraged is that you said at the end of the article the degree to which the Finnish people are quite keen on a reduction in government.
	You mentioned that unemployment of 8-9% is considered natural.
	Unemployment statistics, as you know, I'm sure, are really tricky because they count people employed by the government pushing paper back and forth for no purpose other than to drain the treasury.
	They count those people as employed, or they count people in make-work government projects as employed, or they count extra people hired because of restrictions on labor through government unions as employed.
	I don't know if you know any statistics like this, but I would really love one day to see somebody go through all of these...
	Employment statistics and carve out a significant proportion of government workers and carve out those who gained additional jobs through government spending, even outside the economy, like the military-industrial complex.
	Are those people employed in terms of productive economy because they're making bombs and meals ready to eat for the soldiers in Iraq and Afghanistan from the United States?
	I wouldn't consider those people employed.
	So the unemployment rate, the true unemployment rate, is probably much higher than the 8% to 9%.
	But it does sound like the Finnish people are...
	Opening their minds and hearts and in a sense closing their wallets to this massive spending spree called Finnish statism.
	Do you see much evidence of that in politics or is it still mostly showing up only in the polls as yet?
	It's only in the polls but it was an interesting shift anyway because these polls are done quite regularly in Finland and only a few years ago Whenever a similar poll was made, the majority always favored raising taxes.
	They almost always came out number one.
	And now that is no longer the case, at least in the last polls that have been conducted.
	Obviously, it hasn't translated into anything yet, but hopefully it will.
	One must also always be cautious because I I heard about an interview with an English voter who voted for the Conservative Party in the UK general election in May, and he said that he voted for the Conservatives because they pledged that they would do something about the debt, that they would reduce the debt, and he wanted that.
	However, if those debt reducing measures It would lead to him losing out on any of his government benefits.
	He would not be able to vote for the Conservatives in the next election.
	It's tragic, you know, and it takes a government-run educational system to produce people capable of that kind of insane double thing.
	So, in a sense, the governments who are now complaining about the irrationality of the voters, of course, only have themselves and their own policies to blame, but that is really, really quite an amazing thing.
	Now, I'm trying to keep my videos relatively short.
	Is there anything that you'd like to add or any contact information if people have more questions or comments?
	I will put a link to your excellent article.
	And I did just check here.
	Finished data as a percentage of GDP is around 44%, which is not bad.
	It's not catastrophic.
	It's not great. But, of course, it is continuing to increase.
	But is there anything else you'd like to add before we wrap it up?
	You bring up a central point on my whole article.
	I have to admit, obviously, that considering what I was trying to raise, the issue I was trying to raise with my article, and the response I got, mainly from Finnish people, but also the positive response, I failed.
	Because those who liked the article liked it because there was someone poking holes in this utopia in Northern Europe.
	So they thought that was good.
	And then those who criticized me, they always came up with the same standard argument, saying that the UK or the US have much worse finances than Finland.
	And that may or may not be true, but obviously the US is in worse shape.
	But that doesn't make any difference.
	What I want to point out is that even during the good years, we had a really tough economic crisis in the mid-90s.
	Unemployment, I think, even rose to 20% for a brief time.
	And that is when our debt really spiked last time.
	But once we move past the crisis, or at least...
	That is what people thought we had done.
	We had about a 15-year long period of steady economic growth, called the boom years.
	We could have annual growth of several percent, 20 points.
	However, during that time, supposedly economic growth, economic boom, we didn't really pay off the debt in any way.
	We could have done it, but we didn't.
	And now we hit one or two bad years and it Looks like it's going to increase with 50%.
	Sometimes even get lost in the numbers.
	Sometimes when you look at various sources, you have it at 50 billion when the crisis hit, others have it at 60.
	Now it's supposedly at 70 already with projected debt being 85 at the end of fiscal year 2010.
	And all of those who criticize the article are all the same people who really like the welfare state.
	They want to preserve it.
	They think it's a good thing. Yeah, maybe it is, maybe it's not.
	I don't think it's particularly good.
	But that is no longer irrelevant.
	It's not an ideological question anymore whether the welfare state is good or bad.
	It's purely economical.
	We can't afford it.
	Not only does it cost too much in terms of actual money, how much the government has to spend, it has all these other costs, such as distortions in the job market, making Finland less competitive, even though Some say we are, but we are not.
	The cost of employing people is unbelievable.
	It's prohibitive even.
	And we have all these other related costs which show up more indirectly.
	That makes investment in Finland very risky, even our own companies.
	We previously had a very strong paper mill industry.
	We have lots of forests there.
	But even they are running down their factories and paper mills and moving them abroad.
	Not always to low wage countries, but to the US even, or to Scotland or to Germany.
	If you want to preserve Finland as a good place to live in, you have to start addressing these economic problems.
	Because what we have created since Finland became independent in late 1917, We have had a welfare state from the get-go.
	That's the only thing we know.
	And for every generation, we have become more dependent on the state.
	So what happens to all those people, which will virtually be the entire population, when the Finnish welfare state actually goes bankrupt?
	Which it will, if we don't do anything about it.
	So, I mean, even from a humanitarian point of view, we have to start worrying about these very real economic problems.
	And I would hope that those who Strongly advocate the welfare state for all the right reasons.
	They will start to take these economic problems seriously and not just point out to countries who have it worse.
	It doesn't matter. I mean, if you want billion in debts, you are better off than a person who is two billion in debt.
	But you still want billion in debts.
	You are in a serious problem.
	Right. Yeah, I don't think I've ever had any luck writing to Visa and saying, yeah, okay, I owe you $1,000, but my neighbor owes you $2,000, so I don't need to pay you.
	I mean, it doesn't work on a micro level.
	It doesn't work on a macro level.
	So I certainly hope that people will begin to look at it.
	I generally just have a little card of U.S. debts and the expenses of various departments, and I just hand it to people and say, well, what would you cut?
	You know, the reality is stuff has to be cut.
	And if they can't answer the question, they have no right participating in any kind of civil discourse about the realities of the situation because they're just living in a cloud-based fantasy land where they just can't even process basic realities like number crunching and You know, this number is bigger than this number.
	It needs to come down to less than this number.
	So what are you going to cut? But, of course, the media never asks that of the politicians.
	And a few people who are libertarian or minarchists or anarchists will ask that of people they're having political debates with.
	But I think it's very important. Like, as you say, forget even if you don't think the ideology is important.
	The fiscal reality is stuff has to be cut.
	So what are you going to cut to save your pressure system?
	And people don't want to make those decisions, so it's not flowing up to the politicians as yet.
	But that time is certainly coming.
	Well, listen, Kai, I really do appreciate you taking the time.
	I thank you. I know it was a bit of a struggle for us to coordinate our schedules.
	Thank you. Thank you very much.

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