Eliminating Denmark’s top tax bracket (60%) would pay for itself
Found this article from one of the most interesting new blogs out there, Scandinavian Finance, hosted by Finland for Thought reader Väinämöinen - From The Copenhagen Post…
Lowering taxes leads to higher state income. It sounds like every Liberal’s mantra, but the recommendation comes from one of the nation’s most respected research institutes, the Rockwool Foundation Research Unit.
The conclusion, to be published Friday in a report titled ‘Tax, work and equality’, is the first time scholars in Denmark have documented that eliminating the nation’s top tax bracket - a dizzying 60 percent - would pay for itself. According to the report, for every DKK 100 tax reduction for the highest earners, tax revenues would increase DKK 120, a net DKK 20 gain for the state.
‘The high levels of taxation are not effective. That’s something that should be of interest even to those who believe that people who earn more should also pay more. Right now we’re shaking extra money out of them. Maybe we should try to find that money someplace else,’ said Torben Tranæs, Rockwool research director. According to calculations made by the Confederation of Danish Industries (DI), eliminating the top tax bracket would give an extra DKK 2 billion in taxes.
[...]The top-heavy tax structure has also been a political tool for ensuring a more level social structure. But the report concluded that the social equality ensured by progressive taxation means fewer tax revenues and fewer funds for Denmark’s cradle-to-grave social welfare system.
One only needs to think about all the Finns that have left Finland over the past decades, due to both, our restrictive income tax climate and our government’s public disclosure of our private income tax information. It’s sickening to think about how much talent we’ve lost.
I know dozens of Finns who own successful businesses abroad, that employ many non-Finnish people. In fact, most of my family has left for better opportunities—and found them. It’s unfortunate for us, because we could benefit from both, their professional abilities as international business managers and their potential contribution to our tax base. Along with the tax-contribution of those whom they employ.
When you ask these people—including my family—if they’d ever come back to Finland, they just laugh. To them Finland is a joke………at least, financially speaking and in terms of privacy laws regarding personal financial data.
Nice to have a summer cabin here though.
Comment by Kristian (in Espoo) — Thu, Nov 30th, 2006 @ 12:32 pm
Often on this blog, all we ever pay attention to are Finland’s bottom 10-20% - they’re doing better than most other countries’ bottom 10-20%…so everything is fine in Finland.
But it’s the middle class who really seem to struggle. They’re working long hours for little pay, they share one crappy station wagon, live in a tiny little house, borrow their parents summer cabin, and live close to month-by-month.
Students have it good, the poor have it good, the rich have it good. The middle class are hurting.
Comment by Phil — Thu, Nov 30th, 2006 @ 1:04 pm
It’s sickening to think about how much talent we’ve lost.
Most highly educated Finns return, about 60% within ten years. Slightly more highly educated foreigners are moving to Finland than highly educated Finns out of Finland. So, the balance sheet probably isn’t worth getting sick over. And in my humble opinion, those who laugh at (the idea of getting back to) Finland should indeed stay away. And this wasn’t a patriotic but a practical evaluation.
They’re working long hours …
I happen to agree that the younger middle class isn’t doing as well as it should, financially at least. But where did you get the long hours? It’s hard to find a country in the whole world where people would be working less than in Finland.
Comment by Tomi — Thu, Nov 30th, 2006 @ 1:32 pm
“…hosted by Finland for Thought reader Väimonen…”
That’s Väinämöinen, Phil! I see I need to buy you a copy of the Kalevala for Christmas.
And thanks for the plug!
Comment by Väinämöinen — Thu, Nov 30th, 2006 @ 1:32 pm
…all we ever pay attention to are Finland’s bottom 10-20% - they’re doing better than most other countries’ bottom 10-20%…so everything is fine in Finland.
Finland’s poor are doing better than in most countries? Sure, Africa maybe. Consider that our poor pay some of the highest consumer prices in the world. And their net incomes are quite tiny.
The benefit to lowering income tax rates, is that it lowers consumer prices and broadens the tax base. Initially, state revenues might be lowered. But, in the longer-term, it allows money to flow more freely in the economy. When there’s more private money available—to us as consumers—then businesses have a reason to invest and expand.
Hence, there are two effects: The competition, generated by increased number of businesses, causes consumer prices fall. And the increased business volume creates a broader tax base. We benefit from both.
Comment by Kristian (in Espoo) — Thu, Nov 30th, 2006 @ 1:35 pm
It’s hard to find a country in the whole world where people would be working less than in Finland.
I’m talking about middle class WHITE-collar people. Sure, blue-collar workers have their unions and short working hours and strikes and all sorts of excuses to leave work, but the white-collar situation is very different.
Comment by Phil — Thu, Nov 30th, 2006 @ 1:40 pm
I’m talking about middle class WHITE-collar people. Sure, blue-collar workers have their unions and short working hours and strikes and all sorts of excuses to leave work, but the white-collar situation is very different.
Exactly. These people with academic degrees are working their asses off for a salary that’s crappy compared to most other European countries, not to mention US. Yeah, it’s good that plumbers and paper factory workers are not exploited, but it’s just wrong that they make so much money compared to people who have studied years in university. I blame the fucking Social Democrats for this.
Comment by Passer-by — Thu, Nov 30th, 2006 @ 1:55 pm
Most highly educated Finns return, about 60% within ten years. Slightly more highly educated foreigners are moving to Finland than highly educated Finns out of Finland. So, the balance sheet probably isn’t worth getting sick over.
Tomi—I don’t think you understood my point. The idea that “highly educated” people return or immigrate to Finland is no surprise. We have reasonable corporate tax rates, which induce many large, foreign corporations to move here and employ people.
However, to live here and ‘own’ such a business is a completely different story.
And in my humble opinion, those who laugh at (the idea of getting back to) Finland should indeed stay away. And this wasn’t a patriotic but a practical evaluation.
It’s not due to lack of patriotism. In fact, every Finn I’ve ever known has patriotic and sentimental feelings for Finland, including me (who doesn’t?).
The reason they can’t move back, is that it doesn’t make financial(tax) sense, and Finland doesn’t really have a professional governmental atmosphere for entrepreneurs (legally speaking). In that way, we’re still seen, internationally, as the “naive drunks in jogging suits” at the edge of the world.
Remember, these expats invest their own money, with hopes of growing successful businesses that employ many people. There is substantial risk, since they could also lose their investment. I’m describing a very different type of person than whom you describe. Whom you describe is a job-taker; whereas I describe a jobs-creater. Finland could use more of the latter.
Do you have a better solution?
Comment by Kristian (in Espoo) — Thu, Nov 30th, 2006 @ 2:08 pm
I’m talking about middle class WHITE-collar people.
I see, but I’d guess that it’s as easy to become middle class by working in blue-collar jobs, often easier, in fact.
And the whole picture is of course much more complicated. Some blue-collar workers, like in transportation, work long hours and get low salaries. In tele-communications the hours tend to be short and the salary low (believe it or not). In forest industry the hours short and salary high. The upper middle class whit-collar employees, indeed, work long hours but get paid well. And so on.
Sure, blue-collar workers have their unions …
Ever heard of AKAVA?
Comment by Tomi — Thu, Nov 30th, 2006 @ 2:31 pm
“Exactly. These people with academic degrees are working their asses off for a salary that’s crappy compared to most other European countries, not to mention US. Yeah, it’s good that plumbers and paper factory workers are not exploited, but it’s just wrong that they make so much money compared to people who have studied years in university. I blame the fucking Social Democrats for this.”
- I guess that university education was not so ‘free’ after all.
Comment by Fred Fry — Thu, Nov 30th, 2006 @ 2:53 pm
Finland doesn’t really have a professional governmental atmosphere for entrepreneurs (legally speaking).
According to The Heritage Foundation’s Index of Economic Freedom Finland ranks 12th in the world. Not bad, taking into account that it’s a quite ultra right-wing think-tank.
Do you have a better solution?
I think you’ve got a wrong problem.
Take a look at the upper left-hand corner under:
“OECD: Finnish Economy To Grow 5%”
I’d say that Finland’s main problem is not how to create new jobs but how to fill the ones the baby-boomers will leave vacant.
But, agreed, any amount of brain drain won’t help. And yes, I tend to think along the same lines as those, like Soininvaara, who think that upholding welfare-state structures isn’t getting any easier because of the global competition. And the proportion of people who aren’t productive enough to find a job within the current main idustrial sectors will increase while the overall productivity keeps rising. I hope that the solution is not creating a class of working poor, but rather some sort of a citizen’s income combined with tax cuts on small service-sector firms and self employed people. But there seems to be very little movement to that direction within the big parties.
Then again, 5% growth, not bad, why fix something so long as it’s working?
Comment by Tomi — Thu, Nov 30th, 2006 @ 3:23 pm
in terms of privacy laws regarding personal financial data
I think somehow that would be the least of my problems. Yeah, moving abroad to make the money to buy the house, get a new car, that makes sense financially of course.
Then again I wouldn’t enjoy living in the country where theres poor children begging in the gutter, so I’d rather live in Finland.
I do agree though about the enterpreneurial thing. in Finland you open the shop door - and there is a meter of snow…
Comment by Hank W. — Thu, Nov 30th, 2006 @ 3:58 pm
According to The Heritage Foundation’s Index of Economic Freedom Finland ranks 12th in the world. Not bad, taking into account that it’s a quite ultra right-wing think-tank.
And Economist Intelligence Unit -possibly not the most soc-dem player either- ranks Finnish business environment usually the third best in the world.
http://store.eiu.com/index.asp?layout=pr_story&press_id=1020000702&ref=pr_li
So if there’s a problem it really can’t be a “lack of professional governmental atmosphere”, in spite of all the mubling from Suomen Yrittäjät and other whiners. They’ve learnt that mantra some twenty years ago and indoctrinated their kids too, but it doesn’t mean they’re right. What about if the policy-maker is already doing its part (i.e. keeping its hands off), and it’s the firms and enterpreneurs who should think out of tbe box?
Anyway I certainly agree that taxing in this country is twisted. The tax on property is minimal and the income tax progressed very harshly -it strongly favours inherited wealth over of the people who’re trying to get rich by working. But don’t confuse it for business-hostility or bollocks like that, or you risk ignoring the problem.
Comment by Aapo — Thu, Nov 30th, 2006 @ 4:10 pm
Oh lord. Reaganomics just needs to die, die, die.
the nation’s most respected research institutes, the Rockwool Foundation Research Unit.
Respected by whom?
According to calculations made by the Confederation of Danish Industries (DI), eliminating the top tax bracket would give an extra DKK 2 billion in taxes.
When asking for objective, impartial analysis regarding income tax progression, be sure to ask a club of fatcats earning 7-9 figure salaries.
But it’s the middle class who really seem to struggle. They’re working long hours for little pay, they share one crappy station wagon, live in a tiny little house, borrow their parents summer cabin, and live close to month-by-month.
I couldn’t agree with you more. Of course, libertarian paradises such as Victorian England - which we seem to be progressing toward - have no room for a middle class. After all, it is a product of socialism.
Passer-by:
Yeah, it’s good that plumbers and paper factory workers are not exploited, but it’s just wrong that they make so much money compared to people who have studied years in university.
If you think that it’s so wrong that plumbers make a decent living whereas doctors of fairology might struggle, what’s stopping you from becoming one yourself? Is such work beneath you? Newsflash: People all over the world value not having to deal with their own shit.
I blame the fucking Social Democrats for this.
If you’re looking for someone to blame, blame the spineless and useless AKAVA unions, whose bosses seemingly don’t want to upset their EK buddies. Hell, they might be excluded from the hunting club.
Comment by Freeridin' Franklin — Thu, Nov 30th, 2006 @ 4:28 pm
AS for the subject itself, I wonder if anybody has studied how those tax cuts work in the long run. My gut feeling is that a tax cut may give people an incentive to work harder for a while. But in the long run people usually “lapse back” to certain, quite fixed working hours, especially if they have a family with kids. And work-a-holics work what they work regardless of taxes.
Comment by Tomi — Thu, Nov 30th, 2006 @ 4:56 pm
A 60% tax bracket is ludicrous. It chokes off economic growth. The people with the money are the ones that drive the markets and the economy. Turning more than half of it over to the government makes zero sense.
Comment by PoliticalCritic — Thu, Nov 30th, 2006 @ 5:30 pm
A 60% tax bracket is ludicrous. It chokes off economic growth.
When ideology and reality collide, adjust reality. Denmark doesn’t really seem to be choking here in the real world.
The people with the money are the ones that drive the markets and the economy.
Actually, it’s the people who work and innovate that do. The overlap with people with money is surprisingly small.
Comment by Anonymous — Thu, Nov 30th, 2006 @ 5:40 pm
in terms of privacy laws regarding personal financial data.
Hank W.: I think somehow that would be the least of my problems.
It would be the least of your problems, until you, Hank W., a Finnish business owner, go to a foreign country to negotiate a work contract, so that your employees here in Finland can remain employed for the next 12-months.
And your prospective foreign customer, with whom you are negotiating said contract, presses a few buttons on his mobile phone. Within seconds, the foreigner will know how much you earn and your net worth. Now he knows exactly how badly you want (or need!) that contract.
It’s sort of like a game of Poker. And you, the Finn, have drunkenly displayed all of your cards in advance. It fits our naive and foolish reputation very well.
I don’t mean to pick on you Hank W., and I know you’re not a dumb guy. But THAT’S what I meant about having a “professional governmental atmosphere.” Government needs to stand ‘with’ us, and not ‘against’ us, in the global competition environment. This is clearly against us.
Comment by Kristian (in Espoo) — Thu, Nov 30th, 2006 @ 6:21 pm
#17 Oh, and did I mention that the foreigner, with whom you are negotiating the aforementioned business contract, also knows your debt?
Comment by Kristian (in Espoo) — Thu, Nov 30th, 2006 @ 6:43 pm
My gut feeling is that a tax cut may give people an incentive to work harder for a while. But in the long run people usually “lapse back†to certain, quite fixed working hours
Macroeconomically speaking, it’s not the tax cut that matters on an individual basis (though that does matter to the individual), but how much aggregate money is freely available for allocation by the marketplace, and how much of those monies are removed from circulation through taxation.
It’s that supply of money in the marketplace that determines economic growth.
Comment by Finnpundit — Thu, Nov 30th, 2006 @ 7:13 pm
I see Phil has managed to spark the usual cod-economic nonsense with his post.
1) The idea that taxes reduce government income comes from Laffer who said there was a curve. Too little taxation and you get less revenue and too much and again it reduces revenue. Sadly, he didn’t specify what the rates were and serious economists continually debate what the actual levels are.
2) Finnpundit is always an easy target but his post is beyond absurd. Obviously the amount of money in the marketplace is a factor in economic growth but so are a million other things and he also fails to question where the money comes from. The US has been growing (until recently) on money in its marketplace lent to it by the Chinese among others. Additionally money taken in taxation is not removed from the marketplace it is reallocated. Governments invest or spend spare cash in just the same way that banks do, except that banks ofteninvest it abroad whereas governments tend to spend it on the domestic economy.
3) There is no long-term brain-drain from Finland as Tomi points out.
4) On what planet can you say the Finnish middle-class are squeezed? If you take home €2,000 a month after tax you have a decent life. You can have a house, a car, five weeks holiday, an ipod, a flat screen TV, broadband, a Summer and Winter holiday abroad. If you choose to get a €300,000 mortgage then you can’t but then you’re an idiot.
5) I’ve never got the impression that white collar workers work especially hard in Finland.
Comment by finnsense — Thu, Nov 30th, 2006 @ 7:33 pm
19. Finnsense is spouting more nonsense, as usual.
Obviously the amount of money in the marketplace is a factor in economic growth but so are a million other things
If you want to expand on a single-faceted statement, then yes, of course, there’s going to be a million other things involved.
and he also fails to question where the money comes from. The US has been growing (until recently) on money in its marketplace lent to it by the Chinese among others.
And? So? Chinese money is still money. It has no bearing at all on the subject. It actually only shows how strong the economy is, as the Chinese have no choice but to lend it to the US marketplace.
Additionally money taken in taxation is not removed from the marketplace it is reallocated. Governments invest or spend spare cash in just the same way that banks do, except that banks ofteninvest it abroad whereas governments tend to spend it on the domestic economy.
This view is founded on the belief that government bureaucrats are more qualified to know as to how to use society’s aggregate wealth. There’s no way that a bureaucracy is better positioned than the free market in assessing how to best allocate resources.
Moreover, the fact that American banks often invest capital abroad should not be construed as a problem, since the increased returns more than justify those investments, add value to the banks and shareholders as a whole (and most Americans are shareholders, one way or another), and increase economic performance through reinvestments.
If you take home €2,000 a month after tax you have a decent life. You can have a house, a car, five weeks holiday, an ipod, a flat screen TV, broadband, a Summer and Winter holiday abroad.
There’s very little more to life than that, in Finland. You can’t aspire to greater, bigger, more innovative things, since you’ll never be able to accumulate enough capital. Some may say they prefer it that way, but why must all suffer the same fate.
I’ve never got the impression that white collar workers work especially hard in Finland.
Well, that’s one true statement. There’s no need to work hard in Finland, as you’ll never get anywhere in life to begin with.
But it must be remembered that a welfare state guarantees comforts, yet others need to be exploited abroad to ensure those comforts. Without that exploitation, the welfare state would collapse.
Comment by Finnpundit — Thu, Nov 30th, 2006 @ 8:10 pm
#20 Earth to Finnpundit, earth to Finnpundit, come in Finnpundit. I think we lost him major Tom
Comment by Anonymous — Thu, Nov 30th, 2006 @ 8:58 pm
With regard to the anonymous poster’s comments (#16), your statements are not factual. Finland’s real rate (inflation adjusted) rate of growth as measured by GDP is remarkably low.
The unemployment rate is also very high at 7.2%, which is indirectly correlated with the tax rate.
I’ve been working in economics and invesments for some time now and I can tell you that the first thing you learn is that a 60% tax rate helps nobody but the government.
That is not to say the country or economic system will deteriorate. It simply means that growth is substantially limited. It’s just bad economic policy.
Comment by PoliticalCritic — Thu, Nov 30th, 2006 @ 10:26 pm
#22
“The unemployment rate is also very high at 7.2%, which is indirectly correlated with the tax rate.”
You have to take in account the people employed (68.7%) which is quite good compared to some other countries.
“With regard to the anonymous poster’s comments (#16), your statements are not factual. Finland’s real rate (inflation adjusted) rate of growth as measured by GDP is remarkably low.”
And that is complete bs. Even with the inflation rate (which is low by the way) adjusted real growth GDP figures for Finlands growth is very good for a “commieland”
“I’ve been working in economics and invesments for some time now…”
I doubt that you have or else you wouldn’t spout this crap from your mouth (or you could also just be bad at what you do).
Comment by Anonymous — Thu, Nov 30th, 2006 @ 10:57 pm
On what planet can you say the Finnish middle-class are squeezed?
Just curious, are you a Brit, Finnsense?
5) I’ve never got the impression that white collar workers work especially hard in Finland.
Okay I guess you don’t work the same place I work.
Comment by Phil — Thu, Nov 30th, 2006 @ 11:16 pm
Finland’s real rate (inflation adjusted) rate of growth as measured by GDP is remarkably low.
Yeah like #22 I’d itching to know what the hell does that mean? I mean, PolCrit, could you give some numbers? Or did you mean to reflect it with the budget deficit instead? Well, that’d wouldn’t prove your point any better.
I just sometimes don’t get these kind of wanna-be politicians. What’s so über-argumentative about ignoring simple facts? If I’d be a liberalist (as I’m actually are, up to a point, or to the moment when I read rubbish like that) I would use a different tactic.
Say, I’d underline the fact that Finnish governments have continued to deregulate the economy and lowered taxes -though modestly, that latter one, because at the same time they’ve had to practice a solid budget discipline, keep reducing the public debt and curb inflation.
I would point to this Index, which Tomi already mentioned:
http://www.heritage.org/index/country.cfm?id=Finland
To show that the trend has been towards more deregulation.
And then, even if repeating myself, used also this one:
http://store.eiu.com/index.asp?layout=pr_story&press_id=1020000702&ref=pr_li
To show that the Finnish business environment score has jumped from the place 8 (1998-2002) to 3 (2003-2007).
Then I’d simply conclude how Finland has been doing rather fine because it has liberalised its economy and kept its macroeconomics healthy. That way I might even convince someone that further liberalisation wouldn’t be probably such a bad idea.
But I certainly would not go on raving how comparatively high taxes automatically mean lower growth rates and how hostile Finland is for running business.
Though on the other hand, I’m not a politician. Not even a wanna-be one.
Comment by Aapo — Thu, Nov 30th, 2006 @ 11:29 pm
PoliticalCritic: A 60% tax bracket is ludicrous. It chokes off economic growth. The people with the money are the ones that drive the markets and the economy. Turning more than half of it over to the government makes zero sense.
You know, as I drive around Helsinki and Espoo—usually in public buses—I look at all the names—Oracle, Cap Gemini, Heulet Packard, Microsoft, etc.—and I wonder what percentage of corporations, that reside in Finland, are owned by Finnish citizens vs. people in other lands.
I won’t profess to know the answer, but I suspect that a very large portion are owned by shareholders in other countries—presumably in low-tax countries. I’d also suspect that Finnish citizens (who reside in Finland) own very little capital outside of Finland.
We’ve reformed our corporate tax structures and induced companies to settle here and employ us. And our tax-base benefits from their presence. But, in many ways we are just the workers, whereas shareholders somewhere else own the factories. That means they take the profits with them, and we are left with only the hourly wage.
Meanwhile, the foreign shareholders take the profit derived from our labor and re-invest it to create more value for themselves and their respective societies. So, is a 60% tax bracket ludicrous?
Probably not, if we want to remain ‘the workers.’ But, to eventually become ‘the owners’, then it’s more than just a little bit high.
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 12:32 am
#27 Hewlett Packard
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 12:33 am
#23 was done by me
Comment by Blah — Fri, Dec 1st, 2006 @ 12:51 am
Cut the taxes, increase your populations GDP.
Wow, they finally get it.
Comment by winter — Fri, Dec 1st, 2006 @ 2:22 am
“in many ways we are just the workers, whereas shareholders somewhere else own the factories. That means they take the profits with them, and we are left with only the hourly wage.”
- Yes, since I am not resident in Finland, I pay not tax to Finland for any profits I get through that ownership.
- Then again, if that was not the case, I would not have any money invested in the Helsinki Stock exchange. So it is a double-edged sword.
- Also keep in mind that dividends are distributed AFTER a corporation has paid taxes on it’s profits. So the question is whether or not to tax the money a second time, and by how much.
Comment by Fred Fry — Fri, Dec 1st, 2006 @ 3:41 am
“But it must be remembered that a welfare state guarantees comforts, yet others need to be exploited abroad to ensure those comforts. Without that exploitation, the welfare state would collapse.”
How is it possible that a tiny country like Finland can exploit anyone? Why do other countries put up with it?
Comment by Anonymous — Fri, Dec 1st, 2006 @ 4:47 am
Fred—It’s crazy. People will debate whether 60% is too high. I’ve spent time in Denmark and can tell you it’s a very expensive country, similar to Finland. And their income doesn’t justify the high cost. Again, similar condition to Finland.
But, as soon as you mention it, Finns will whip-out their OECD report and proclaim: Look! Our purchasing power is only 10% above (or below) the EU average! Everything is A-OK! Nothin’ broken, nothin’ to fix.
But, what some might not realize, is that the OECD only compares a narrow selection of mainstream products—specifically, those that are commonly available in all countries. And for mainstream products, even a high-tax country like Finland can achieve economies of scale to a reasonable degree. Things like milk, produce, basic clothing, etc. are all relatively affordable.
But, it’s not very difficult to step outside of the ‘basic’ realm. And that’s when the price suddenly rises quite high in the Nordics, compared to other more consumer-oriented economies. So, if you want a broad range of products at competetive prices, don’t bother with Finland, Sweden or Denmark.
Instead, go straight to Germany. Their income tax rates are less progressive than ours, they have no VAT on food, and the regular VAT is only 15% (although they plan to raise it). Also, no 100% effective car registration tax, like ours. The extra money creates a major stimulus to their economy. And, you can get many products—including food—for about 1/3 less than here in Finland. In fact, I don’t even buy anything here in Finland.
I go to Germany every second month for work, so I buy everything there and bring it back—hardware, wood and building supplies, specialty foods and clothing, etc. I also get my hair cut there for 11e; here in Finland, it costs 20e. Plus, I go to dinner with my colleagues for 16e—a real dinner with huge schnitzel, saurkraut and a many biers
Same price here in Finland is 35e, at least 
There’s really no comparison. And that’s only Germany. Estonia is even closer.
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 5:27 am
The extra money creates a major stimulus to their economy.
Oh yeah? About which decade are you talking about? Or which part of Germany? Doesn’t take a genius to notice that today Germany’s main worry is the ever-lacking domestic demand. Firms have restrained pay rises and taxes haven’t been touched, so the net salaries have been in fact decreasing. And as you reminded, the general VAT will be raised to 19% in January, with a small hope of getting the public deficit under control.
What makes it cheaper than Finland is the level of competition, especially in the retail sector. If there’s a lesson to learn from Germany then it’d be this, but for heaven’s sake no taxation. Income tax is arguably milder, but that’s because it’s based more on families than individuals. So kraut women can afford staying home and be hausfraus. But this has distracted the government from creating decent child-care facilities and the women, increasingly many these days, who’d like to work can’t combine it with their karriäre, which then has led to low fertility rates…and this is when the age structure takes its role.
Adding the most unfavourable demographics in Europe, after Italy, and it’s a safe gamble to except Germany seeing more taxes in the future, rather than less.
So I would never mention Germany, a permanent member of Europe’s sick men club, and Estonia, a world harbinger of flat-rate tax, even within the same sentence.
PS. German VAT on food is nine, not zero.
Comment by Aapo — Fri, Dec 1st, 2006 @ 12:35 pm
But, what some might not realize, is that the OECD only compares a narrow selection of mainstream products
Do you think they’re dumb or what? Here’s your narrow selection:
“It [the basket] includes consumer goods and services, government services, equipment goods and construction projects. More specifically, consumer items include food, beverages, tobacco, clothing, footwear, rents, water supply, gas, electricity, medical goods and services, furniture and furnishings, household appliances, personal transport equipment, fuel, transport services, recreational equipment, recreational and cultural services, telephone services, education services, goods and services for personal care and household operation, repair and maintenance services.”
For a Finnish consumer energy and telecommuncations (excluding internet, I suppose) stuff are much cheaper, water too - and gasoline even. Thanks to competition (yeah, the energy sector is more competitive here than in rest of Europe!). There are others of course.
And sure in the OECD they are dumb enough to include “specifically, those items that are commonly available in all countries”. Instead they should compare what bratwurst costs in Greece and Finland.
Comment by Tomi — Fri, Dec 1st, 2006 @ 1:37 pm
Kristian - I, too, wonder why the people of Berlin - it’s after all bigger than Finland - don’t produce themselves the computers, printers and what not they use. There must be something terribly wrong with their economy. I wonder if their savings are as low as in Finland, too (referring to your strange idea that Finns would not invest).
And Aapo #27, Finland seems to be among those (quite rare) countries where you actually can rapidly deregulate, lower taxes and so forth without having strong counterproductive “side effects”. Why that is so, is an interesting question. Anyway, Finland could be used as an example of the all good “liberalization” brings about “anywhere”. But I wouldn’t buy the argument. Every economy is a special case, finding the right kind of a recipe is much tougher than shouting “liberalize!” in every opportunity. Hell, the countries that have stepped up from poverty, or are in process of doing so, are usally those who have not followed that war cry, like South-Korea, India and, of course China.
Comment by Tomi — Fri, Dec 1st, 2006 @ 2:06 pm
Could people please stop comparing the price of goods in Finland the the US as if the price you pay is all you get. We have VAT in Europe and that is one reason why many goods are more expensive here than in the US. VAT is a tax used to pay for other stuff, like health and education. Thus, for the average person who uses health or education you should not think “this TV is really expensive” but rather “this TV seems expensive because when I buy it I also have to buy some education and some health insurance”.
Obviously if you’re rich this applies less but anyone here rich?
Comment by finnsense — Fri, Dec 1st, 2006 @ 2:19 pm
Finnpundit’s idea that tax cuts necesserily increase money supply and that again economic growth, is well know - hoh-hoijaa, from the 80s. Ah, what nice things that brought about. The idea has been debunked so many times (it’s like saying that those firms that just sell are superior to those that produce something) that I won’t go into it here, Okey?
Comment by Tomi — Fri, Dec 1st, 2006 @ 2:23 pm
“So kraut women can afford staying home and be hausfraus. But this has distracted the government from creating decent child-care facilities and the women, increasingly many these days, who’d like to work can’t combine it with their karriäre, which then has led to low fertility rates…and this is when the age structure takes its role.”
- Finland has great child care but that does not make Finnish women that much more fertile. To think that a woman would not have a child because they don’t know what to do with it when they run off to work sounds like a stretch of the imagination to me. I can see how this would apply in whether to get a dog or not, but not a child.
“VAT is a tax used to pay for other stuff, like health and education. Thus, for the average person who uses health or education you should not think “this TV is really expensive†but rather “this TV seems expensive because when I buy it I also have to buy some education and some health insuranceâ€Â.”
- Yes but all the taxes are higher in Finland than the US. Why not just have an education tax to fund education and a health insurance tax to fund health insurance. Why tax airplane tickets to fund low cost drugs, for africa?
“Obviously if you’re rich this applies less but anyone here rich?”
- Ask a socialist/democrat what his definition of rich is. I think many of us here would fit into their catagory. How dare any of us treat ourselves to broadband internet when there are poor people in Finland…..
Are they taxing the internet yet?
Comment by Fred Fry — Fri, Dec 1st, 2006 @ 4:49 pm
Tomi—the prices are much lower in Germany. I live there part of the time. Take any item in that ‘basket of goods’ and you will find many manufacturers for that same product type. Each has a different price point.
If you decide to buy a specific product that falls outside of the comparison, then, almost invariably, you’ll find it much cheaper in Germany. Like, you’ll get it for 1,50e in Germany, but the same thing will cost 4,50e here in Finland. I see that all the time.
Certain things like appliances and electronics are competetively priced here……..usually. And probably also utilities, although it doesn’t make a big difference for me overall. So, I’m not saying that every single thing is cheaper there. Although, in no cases, is it considerably more expensive.
I did build a substantial part of my summer cabin and renovate my flat from materials bought in Germany. It was well worth the savings and increased selection—especially for wood materials, roofing shingles, cabinets, etc.
During our trips, we always bring back food, beer, more building materials, etc. Also, we don’t go out to dinner here in Finland because it’s not worth the high cost. My business trips to Germany are like mini-vacations, so we splurge on restaurants there.
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 5:31 pm
Aapo—
Oh yeah? About which decade are you talking about? Or which part of Germany?
Prices in Germany have always been cheaper. Then and now. If you go to the more remote regions of Germany, it’s much cheaper than the cities. In Finland, the remote regions cost nearly as much as Helsinki. But, I’m talking about areas around main cities for sake of this discussion—Berlin, Munich, Dresden, Bielefeld.
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Doesn’t take a genius to notice that today Germany’s main worry is the ever-lacking domestic demand.
Germany’s main worry is unemployment among the 17-million former East Germans. Generally speaking, the west pays for the east. Remember that when you look at your OECD reports. To accurately compare, you need to only include the western part……….and keep in mind that even the west is diluted, due to contributions toward the east. But generally, conditions in the west are better than here in Finland, with high employment and high salaries. In fact, conditions for employed blue and white collar workers in eastern Germany are better than here in Finland; slightly lower salaries, but much lower cost of living.
The only thing they don’t have is lots of land……and too many people!
We really need to keep those OECD reports in context. Or maybe we can reintegrate Karelia into Finland and then do the comparison again. It would be a much more accurate comparison.
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….What makes it cheaper than Finland is the level of competition, especially in the retail sector.
Exactly. And how are we supposed to increase OUR competition when we snuff demand with an effective 100% car tax, 17% food VAT, and 24% regular VAT?
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Income tax is arguably milder, but that’s because it’s based more on families than individuals.
Yes, that’s probably true. Although I think it’s slightly less progressive, even for individuals. However, the poor pay MUCH less than in Finland. In fact, a poor person in eastern Germany has better conditions than someone here in Finland. You’ll find the poorest ones actually ‘drinking’ a beer in a pub, rather than picking bottles out of the trash to collect the deposit like here in Finland.
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So kraut women can afford staying home and be hausfraus.
Generally, I’m more in favor of traditional family structures. But, to keep fertility high overall, then one-income families need to be possible. For Germany, much depends on the productivity of eastern Germany. It’s not easy to integrate 17-million Arbeiter-Typen. It should be made more possible here too.
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PS. German VAT on food is nine, not zero.
According to wiki, it’s 7%. But, you’re right, it’s not 0%, like I originally stated. I probably assumed that because food prices are so much lower than here in Finland. Again, over a ‘broad’ selection base.
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 5:48 pm
38. finnsense: Thus, for the average person who uses health or education you should not think “this TV is really expensive†but rather “this TV seems expensive because when I buy it I also have to buy some education and some health insuranceâ€Â.
A ludicrous statement, as no average person thinks that way. Furthermore, a product is measured qualitatively by the buyer. Why is it necessary to force the buyer to buy something he doesn’t want? And why not have education and insurance measured qualitatively in the same way, instead of forcing the buyer to only buy a “one-size fits all” kind of service?
39. Tomi: The idea has been debunked so many times (it’s like saying that those firms that just sell are superior to those that produce something) that I won’t go into it here, Okey?
The idea hasn’t been debunked at all, and your refusal to provide any arguments puts in doubt whether you have any worthwhile arguments to begin with.
Comment by Finnpundit — Fri, Dec 1st, 2006 @ 6:24 pm
#40 & 41
I just outlined my experiences of life in consumer-oriented Germany. I spent many years there as a child and adult, so much of it is quite obvious to me. But, my point isn’t to say that any particular country does everything right. That includes Germany. And Finland actually doesn’t do everything wrong; it’s not a complete disaster. And, I’m convinced it can be improved….
On the topic of lowering the top rate, why can’t we, in Finland, institute a competitive top rate that would induce really wealthy people to stay here—and even move here!
I mean, there are countless people in this world who earn hundreds-of millions of Euros in worldwide income. But, they really have no incentive to live in Finland. In fact, if you earn a mere 100K, then you have no incentive to live here.
So why not make it possible for them to reside in Finland, so that we can benefit from their talents and also increase our tax base. Maybe then, the poorest in our society don’t get stuck paying such a huge bill.
Naturally, there needs to be a financial incentive, that is competitive with other places. And we’d also need to overhaul some of our privacy laws (which we should do regardless, for our own safety).
And to boot, the rest of us can continue to be socialist just like before. But, maybe we’ll have some extra money to spend on things—schools, hospitals, medical care, pensions. Just to name a few.
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 6:57 pm
Kristian:
I have quite many friends in Germany, most still university students, from East and West, and somehow they don’t -to put it mildly- share your optimism. Many are planning to emigrate.
Germany’s troubles have become so deep-rooted that you just can’t blame Eastern Länder on all of them. Just think about Ruhrgebiet, with all those mines and ironworks.
Germany can’t handle globalization. Manufacturing jobs disappear -or are kept in the country by wage constraint, which then directly undermines demand- but nothing is created to replace them, mostly because hiring & firing is costly. So Germans are getting creative destruction without creativity.
Education system, something pretty essential for knowledge-based economy, is also lousy. Schools are generally bad and universities underfund.
The age structure, as mentioned, is very unfavourable. Babyboomers are plenty and fertility rate even today damn low. Mostly this is due to lack of those day-care facilities and some small things, like that kids don’t get meal at school so they, and at the same their Muttis, are forced to go home in the early afternoon -though this may slightly differ from Länder to Länder.
Ageing population would need a lot of financial breathing space, something that Germans don’t have. Public debt has ballooned to almost 70% of GDP and won’t be coming down without fiscal austerity, which in turn will undermine demand and growth further -since it seems that the Grand Coalition won’t be able to deliver any serious market reforms. And that’s because it would make them unvotable: I guess you’ve noted, by talking to ordinary krauts, that reform, market economy and globalization aren’t exactly their favourite buzzwords nowadays?
In my very humble opinion, even France is better prepared to face the future than Germany. My guess is that it’ll be a real land of contrasts, in 15 years or so. Some Länder, namely Bavaria and the south-east, will certainly prosper, as will do many Germans, but the rest will be most likely much worse off than today. Those who’ve been lucky or connected enough to land in well-protected, well-paid permanent contracts (like your colleagues, I take it?) will be mainly enjoying the same easy, secured life than today…but the others? Nicht so gut, I’m afraid.
In a smaller scale the same problems (like the threat of a two-tier labour market) also bug Finland, but at least we’ve been trying to do something about them. And I don’t really think we have got our examples from Germany.
Their food and beer and literature are all of the highest standard though, I give you that.
Comment by Aapo — Fri, Dec 1st, 2006 @ 7:32 pm
@43 Some Länder, namely Bavaria and the south-east
The south-west, even. Not Saxony.
Comment by Aapo — Fri, Dec 1st, 2006 @ 7:46 pm
Aapo:
I have quite many friends in Germany, most still university students, from East and West, and somehow they don’t -to put it mildly- share your optimism.
I’ve never met a German with optimistic demeanor. Sich beschweren is a national art form
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Many are planning to emigrate.
Yes, the grass is always greener somewhere else.
I, for one, find German society intolerable sometimes and hate calling someone I’ve known for 10-years, Herr Krautmeister, instead of his first name Jürgen. For young people, it’s somewhat awkward, because traditional German social customs don’t fit the modern world.
The reason to move depends on selected career path too. Some things, like medicine, have strict hierarchies—old doctors want to keep their power. I’ve heard of many German docs moving to Norway these days.
I can keep listing reasons for why one WOULDN’T want to work and live in Germany, but I don’t think Phil has enough server space.
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Germany’s troubles have become so deep-rooted that you just can’t blame Eastern Länder on all of them.
It’s not really the Ossies who are to blame. The Wessies are the ones who botched the reunification. In many ways the situation is still self-defeating.
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Just think about Ruhrgebiet, with all those mines and ironworks. Germany can’t handle globalization.
True, very inflexible.
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So Germans are getting creative destruction without creativity.
Creativity is verboten in Germany
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Education system, something pretty essential for knowledge-based economy, is also lousy. Schools are generally bad and universities underfund.
Not sure. I found it pretty easy. Just enroll and attend. But, maybe certain areas, like medicine, are more restricted than Finland? In any case, education costs nothing in Germany, books are cheap and living costs for students are very reasonable. I don’t find it so reasonable here in Finland.
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The age structure, as mentioned, is very unfavourable.
Yes, Germany could use about 40-million less people. It’s seriously overpopulated. But hey, I’m a Finn, so I consider Kirkkonummi overpopulated.
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….like that kids don’t get meal at school so they, and at the same their Muttis, are forced to go home in the early afternoon…
I’m favor meals with Mutti. I don’t favor full-time daycare. Daycare is good for extra social interaction—a few hours-per-day maybe—but I don’t support the idea of full-time working mothers. Not at all.
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…by talking to ordinary krauts, that reform, market economy and globalization aren’t exactly their favourite buzzwords nowadays?
Depends on the industry. Change always brings satisfaction for some and dissatisfaction for others. I think the main part of this is cultural inflexibility, not economic. But, for the industrial workers you mentioned, it’s also very difficult, economically.
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Their food and beer and literature are all of the highest standard though, I give you that.
But the service sucks
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Despite all of this good and bad comparison, I still buy most consumer goods and services in Germany. Better selection and lower prices over a broad range of products. I don’t see why we can’t take the good parts of our Finnish system and combine them with the best parts of the German system—or the best parts of any other country’s system, for that matter.
I mean, why can’t tourists from everywhere come to Finland to enjoy, say, tax-free shopping?
Comment by Kristian (in Espoo) — Fri, Dec 1st, 2006 @ 8:25 pm
Alright, Kristian: one more round of Germany..
Not sure. I found it pretty easy. Just enroll and attend.
Well, my point exactly. There are too many students and too little resources. Higher education is free (up to date though, from this autumn term onwards the Länder have been allowed to charge modest tuition fees) and it’s easy to get in, but at the same time the government can’t provide the money. Lecture rooms are crowded and uni libraries don’t have enough books.
That’s nothing extraordinary in Europe anyhow. The bigger worry is their bad schools. I guess you know how the system is divided to three parts: from Hauptschule you get the workers, from Realschule the lower white collars and from Gymnasium those who’ll go to uni.
Simple, class-based and very very feudal. Worked maybe wunders when cars and big machines were the name of the game, but not anymore. German kids don’t learn adequate skills and German employers don’t get professional labour force -that knowledge-economy, see, is not only about computers and coding, but also today’s metal industry is much more sophisticated than it was in 80’s when you just needed to have a manager who gave the worker a hammer and told him to bash there and there and there.
Yes, Germany could use about 40-million less people. It’s seriously overpopulated.
Huh? It’s definitely not the size of population that makes a difference, but its age composition. It has just got far too many Opas and Omas and far too few Ihre Junge. This is a worry for Ossies and Wessies both, and would be haunting them without the unification.
I’m favor meals with Mutti. I don’t favor full-time daycare. Daycare is good for extra social interactionâ€â€a few hours-per-day maybeâ€â€but I don’t support the idea of full-time working mothers. Not at all.
And here’s the beef. Not taking a stand on what is a suitable amount of social interaction (???) for women, I just underline that this is the way how you go fiscally under. Your idea of the family’s and mother’s role in society is of course nice and neat and surely charming as a matter of values, but there’s a bit more about it.
The female participation rate is around 60 (65% in Finland) so it’s easy to reason that German women want to work. And because they can’t combine it with the idea of having children, they have decided not to have them. Very simple. Sounds blunt, but the traditional family structure just is hopelessly out-of-date, and has been for quite a while.
Here’s a good blog about demographics -an issue of which relation to economics is still pretty much underestimated:
http://demographymatters.blogspot.com/
Their newest post actually seems to be about how Sweden got it right.
Change always brings satisfaction for some and dissatisfaction for others.
With this one I can only agree. Potential losers always shout louder than potential winners.
Comment by Aapo — Fri, Dec 1st, 2006 @ 11:04 pm
Aapo—
Bad schools? Depends on the environment. In Germany’s case, it mirrors the culture. I wouldn’t call it bad necessarily. But, perhaps it’s too German. And maybe there are too many immigrants in some places—many more than in Finland.
Universities might be overcrowded in chic western cities, but it’s very easy in eastern Germany.
And government can’t provide money for what? Sure, our government provides money, but our living costs are considerably higher. It’s very cheap in eastern Germany. You can still get a small flat for 200e—split with a roommate for 100e/each. Kebap for 1,90e, beer at the disco for 2e/.5l. What more do you need as a student?
I don’t know the amount of the tuition surcharge, but when a 60e fee was proposed two-years-ago, students protested massively.
My view of higher education is that you benefit by the amount of personal effort you expend; not by how much someone lectures at you. I wish online education would’ve been available when I was a student. I always felt that going to lectures was a waste of time; instead I learned more from research. I guess I’m more book oriented and don’t require school or government resources.
I agree with your assessment of the three-part system and it’s effect on today’s work environment; it’s outdated.
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Yes, Germany could use about 40-million less people. It’s seriously overpopulated.
Aapo: Huh? It’s definitely not the size of population that makes a difference, but its age composition.
I know what you’re saying and my answer was meant light-heartedly. Seriously though, I think Germany should become more investment-oriented in the future, rather than pension-oriented. That way it can reduce its population by about 40-million. There’s nothing like living in an overcrowded country where you can smell everyone’s armpits.
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….what is a suitable amount of social interaction (???) for women…
I meant for the child!
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The female participation rate is around 60 (65% in Finland) so it’s easy to reason that German women want to work.
You might find it easy to reason that way. But, I believe there should be a choice. In Finland there is not enough of a choice right now; only the better earners can do it. I have hope for the future though……..
I’m not saying that we should become Germany. Only that we should consider its good points and see how we can improve here in Finland. When I think about all the tourist who come here and see our high prices………..and then go onward to Estonia to spend their money…….like we do ourselves. Why can’t people come here for cheap shopping instead?
Comment by Commenter — Sat, Dec 2nd, 2006 @ 2:08 am
#47 Sorry, that was me
Comment by Kristian (in Espoo) — Sat, Dec 2nd, 2006 @ 2:09 am
Phil:
“But it’s the middle class who really seem to struggle. They’re working long hours for little pay, they share one crappy station wagon, live in a tiny little house, borrow their parents summer cabin, and live close to month-by-month.”
Whose to blame for this? The “ever-bad” government, or the one and only party truly having their “call” on “salaries”?
Comment by Thomas — Sat, Dec 2nd, 2006 @ 4:01 am
Phil:
“According to calculations made by the Confederation of Danish Industries (DI), eliminating the top tax bracket would give an extra DKK 2 billion in taxes.”
Does the “Confederation of Danish Industries (DI)” sound like a really independent party in this CASE?
Comment by Thomas — Sat, Dec 2nd, 2006 @ 4:35 am
living costs are considerably higher.
Not according to the OECD. They’re about the same. Eor example the electricity bill is almost twice more expensive in Germany. I wonder whose word I should take for it, yours or OECD’s. And because our GDP is higher, an average Joe can’t be much worse off even if the calculations weren’t exactly right.
Comment by Tomi — Sat, Dec 2nd, 2006 @ 10:40 am
Why can’t people come here for cheap shopping instead?
You gotta be kidding. Honestly.
Comment by Tomi — Sat, Dec 2nd, 2006 @ 10:46 am
Bad schools? Depends on the environment. In Germany’s case, it mirrors the culture.
To Germans themselves it mirrors merely that pupils aren’t learning enough. Themselves they consider their schools very bad and the PISA results in 2003 caused a massive debate about what they’re doing wrong. Not only were the learning results poor, but they correlated with family background more than basically anywhere else -more than in USA, more than in Turkey.
Kebap for 1,90e, beer at the disco for 2e/.5l. What more do you need as a student?
Good teaching, mayhaps? A place to sit down in lectures. Interaction with the teachers. Books in the library so I don’t have to buy them. Easy access to internet while I’m at university. Possibility to print out my papers. It’s great that government subsidies my boozing, but that boring stuff comes first after all.
Learning by reading of course suits many students better, but then you must provide possibilities to do that. Asks money, and if Berlin doesn’t let universities to collect adequate tuition fees it must pay them itself. School books in Germany aren’t exactly cheap if you must buy a dozen for a term.
How many students do you know personally? Goddammit, my friend, their everyday finances depend pretty much on the support from their parents. And the eroding net salaries mean that they find it harder and harder to spare money for their studying offsprings. And don’t point to the East this time -it’s surely cheaper but with those unemployment levels there are very many families are struggling to make ends meet.
Germany has a student benefit scheme, but it works badly. The government secures your loans up to 300 euros or so a month and once you graduate they’ll pardon the half. But in order to qualify your parents net income must really be low, and since the job opportunities for graduates aren’t too bright currently the student loans include a bigger risk than for example here.
what is a suitable amount of social interaction (???) for women…
I meant for the child!
Point taken. Just see how narrow-mindedly we childless ones can think.
I don’t know if you’re a reader but The Economist had a big survey of Germany in winter. Since you’re that interested in the krautland, I bet you’d find it interesting -it was titled Waiting for a Wunder. And in case you can’t get it, I can copy-paste you a couple of articles if you tell to which email.
Comment by Aapo — Sat, Dec 2nd, 2006 @ 1:35 pm
Well, Norwegians come to Finland for the cheap booze…
Comment by Hank W. — Sat, Dec 2nd, 2006 @ 1:37 pm
living costs are considerably higher.
Tomi: Not according to the OECD. They’re about the same. Eor example the electricity bill is almost twice more expensive in Germany. I wonder whose word I should take for it, yours or OECD’s. And because our GDP is higher, an average Joe can’t be much worse off even if the calculations weren’t exactly right.
Tomi—I agree that utilities are cheaper in Finland. If you have a big house, then it is relevant. Mobile phone is cheaper here too—about 5e/month cheaper for me.
But, I already explained that the OECD comparison is only valid if you purchase mainstream items that are in that ‘basket of goods.’ In practice, nearly everything you buy is considerably more here in Finland.
For example, my cousin wanted a backpack (reppu) that costs 380e at the outdoor store here in Helsinki. I bought it for him in Germany for under 200e.
Could he have chosen another backpack, that would have been priced equally in Germany vs. Finland? Probably, but his selection would have been much more limited.
Could he have gotten ‘any’ backpack cheaper here in Finland? Doubtful.
I can also tell you about my kitchen cabinets, flooring and paint supplies, and how I saved over 1000e by purchasing them in Germany.
I’m not saying that every single thing is cheaper there, but I can keep listing things that I’ve purchased, for less, over the years.
And you can keep reading your OECD reports.
Comment by Kristian (in Espoo) — Sat, Dec 2nd, 2006 @ 4:01 pm
Tomi—About that German vs. Finnish GDP, remember that eastern Germany lives largely on transfer payments from the west. There were 17-million people there in 1990—most were proletarian factory workers. It’s still a big problem significantly many.
And then you have areas of Westfalia that not only suffered from industrial collapse, but they also have huge numbers of Turkish (and other) immigrants.
Dispite all of this German stupidity and poor planning, Germany is still able to keep it’s GDP on-par with ours. And to boot, whereas our poor go around collecting deposit bottles, their poor can actually afford to buy a 2e schnitzel w/bread at the butcher shop, along with an 85ct/.5L bottle of beer.
What do we offer our poor? A 7e hamburger at the kiosk and 2,75e beer at the market. Better for the Finnish poor to keep picking deposit bottles out of the trash.
Comment by Kristian (in Espoo) — Sat, Dec 2nd, 2006 @ 4:26 pm
Tomi—About that German vs. Finnish GDP, remember that eastern Germany lives largely on transfer payments from the west. There were 17-million people there in 1990—most were proletarian factory workers. It’s still a big problem significantly many.
And then you have areas of Westfalia that not only suffered from industrial collapse, but they also have huge numbers of Turkish (and other) immigrants.
Dispite all of this German stupidity and poor planning, Germany is still able to keep it’s GDP on-par with ours. And to boot, whereas our poor go around collecting deposit bottles, their poor can actually afford to buy a 2e schnitzel w/bread at the butcher shop, along with an 85ct/.5L bottle of beer.
What do we offer our poor? A 7e hamburger at the kiosk and 2,75e beer at the market. Better for the Finnish poor to keep picking deposit bottles out of the trash.
Comment by Kristian (in Espoo) — Sat, Dec 2nd, 2006 @ 4:26 pm
Just as many pointed out here is the secret behind a growing economy a population that has got money to buy products and that way keep the economy growing and developing.
At a time of growing populations and diminishing resources combined with the fact that there will be billions more people in countries like China and India (who have already started pulling with them countries like Pakistan, Bangladesh, Indonesia who have a combined population of half a billion people) who will participate in the “growing welfare” race, isn’t a completely uncontrolled consumeralism an admirable goal.
I would like to see the government reduce or drop the taxes on products like cars that can take you over 100 km on less than 5 liters, alternative energy sources, vegetables, fruit etc and costs for employers plus reducing the money being spent on the unemployed, who are completely fit o work, and on students.
In other words give consumers a chance to buy “wise” products tax free and make it harder living on welfare.
I think that we still can afford to those “less wise” products if we really, really want them.
Comment by Mikael — Sat, Dec 2nd, 2006 @ 4:52 pm
“Just as many pointed out here is the secret behind a growing economy a population that has got money to buy products and that way keep the economy growing and developing.”
This is just the latest in a raft of peculiar sweeping statements made on this blog about what the secret is to a growing economy. Money in your pocket is both a consequence and a cause of a growing economy just as almost everything else mentioned is. The most important factor behind economic growth is increased productivity per hour. If you just get better at doing what you do,so you can do more of it and if there is a market for what you are doing, your economy will grow.
If you want the economy to grow you can also just work more like the Americans (though obviously this only results in “growth” if you increase your hours but will plateau albeit at a higher level). You can also just increase your population. This will not improve GDP per capita will it will grow your economy.
Comment by finnsense — Sat, Dec 2nd, 2006 @ 6:25 pm
Yes, but it is the consumers themselves choose the products, and normally we choose the cheap or the ones of high quality or a combination of both. It’s then the companies who must push their workers and try to get raw-materials cheaper and in the end make the whole process more effecient so that they again can provide us with good and cheap products. The companies are the ones who of course try to get as much out per hour as possible.
Comment by Mikael — Sat, Dec 2nd, 2006 @ 6:41 pm
About that German vs. Finnish GDP, remember that eastern Germany lives largely on transfer payments from the west.
Yeah, I have to remember all kinds of things, like when in the late 80s Finland was among the richest countries. Interestingly enough Kekkoslovakia enjoyed growth rates much faster than about any other country. And so did Manuslovkia. Finland was among the very richest, even with or without strong markka. Then the depression hit, a depression that was among the worst, if not the worst, any country in the western world has ever experienced. Over ten per cent of the GDP vanished.
It will take some time, till Finland is once again the richest country in the world. Yeah, hehe, but it’s not a mission impossible, taking into account the history.
Anyway, make a list of those countries which suffered the most after the collapse of the SU. Is Finland the first - or second just after Germany? Don’t you come telling me (älä kuule tule minulle kertomaan) about hardships
Well, yeah, it’s pretty unlikely that Finland, this remote country full of drunks will ever regain its glory as the richest country in the world.
Comment by Tomi — Sat, Dec 2nd, 2006 @ 7:01 pm
That’s true Mikael. Markets are consumer-driven. In Finland, we do a nice job getting large corporations to move here and employ us, because we have low corp tax rates.
But, that which drives our domestic economy is severely lacking. You can go to a restaurant and easily spend over 100e for a family of 4. Perhaps that’s why we don’t see many families in restaurants—at least not compared to other lands in which we’ve lived.
In fact, we won’t even go to dinner here in Finland, unless it’s something really cheap like Iguana or Chicos. But, even then, it’s not worth buying drinks. Water is better. Drinks can wait until we get home.
Tourists know this too. They come to Stockholm and Helsinki to look at the nice scenery. But, then they go onward to other countries and spend their money. Even tourist brochures recommend this approach.
Comment by Kristian (in Espoo) — Sat, Dec 2nd, 2006 @ 7:06 pm
Kristian:
“Perhaps that’s why we don’t see many families in restaurantsâ€â€at least not compared to other lands in which we’ve lived.”
Or perhaps its just a cultural thing? I’m actually not very interested in going out to restaurants with my family. I much more prefer cooking (cooking is really fun) myself, instead of eating at the restaurant.
Of sourse this affects e.g. GDP, but I rather cook myself. I like it.
“Tourists know this too. They come to Stockholm and Helsinki to look at the nice scenery. ”
I’m sure tourists EAT SOMETHING, while in Finland.
But in general, e.g. the price of a pint of beer (which used to be something everybody complained about, and referred to cheap america, or cheap Italy,… whatever) in a typical “pub” in Helsinki, is rather cheap, when you compare to e.g. Rome, Berlin or Montreal (these are the cities I’ve visited most recently).
So, I don’t believe you are really truthful. I think this is “politically-driven whining”. Of course, I could be wrong, but then again, I don’t think so. Dining out - especially if you prefer “trendy” restaurants - is expensive, all over the globe.
In New Zeeland I noticed that there is a habit of restaurant visiters bringing their “own bottle” (this is - I believe - common in Australia as well), which is a habit that could well be imported here as well. I remember the first day I was in Wellington, wondering about all those people running around with wine-bottles in their hands. I thought there was some kind of “festival” going on. But they were just regular restaurant clients. In Finland this could well be put in practise.
Comment by Thomas — Sun, Dec 3rd, 2006 @ 4:04 pm
Thomas:
Of sourse this affects e.g. GDP, but I rather cook myself. I like it.
My theory is that going to restaurants not only affects GDP, but also mental health due to increased social contact—especially in the winter. In some countries, people eat at restaurants nearly every day. It’s affordable.
.
.
“Tourists know this too. They come to Stockholm and Helsinki to look at the nice scenery. â€Â
I’m sure tourists EAT SOMETHING, while in Finland.
The question is how much the price influences the duration of their stay—or their decision to even come here. Naturally, restaurants aren’t the only thing they consider: Our hotels are expensive too….so are cabs, shopping, etc.
As I mentioned in the other posts, the breadth of choice (and corresponding price points) is missing in Helsinki/Finland. Perhaps it’s difficult enough to get people to come this far, but to greet them with high prices too……………?
You can do a quick word search on “expensive” to see what others think about us.
http://wikitravel.org/en/Finland
By the way, I lived in Berlin recently, albeit temporarily over a period of about 1.5-yrs. If you spend more than one day there, you can go outward from the Ku’Damm and find family restaurants with
Comment by Kristian (in Espoo) — Sun, Dec 3rd, 2006 @ 8:55 pm
#66 got chopped…
By the way, I lived in Berlin recently, albeit temporarily over a period of about 1.5-yrs. If you spend more than one day there, you can go outward from the Ku’Damm and find family restaurants with
Comment by Kristian (in Espoo) — Sun, Dec 3rd, 2006 @ 8:57 pm
#66 got chopped……
By the way, I lived in Berlin recently, albeit temporarily over a period of about 1.5-yrs. If you spend more than one day there, you can go outward from the Ku’Damm and find family restaurants with less than 10e entrees and 2,5e biers…….if you don’t mind the German service
Comment by Kristian (in Espoo) — Sun, Dec 3rd, 2006 @ 8:59 pm
It mistook the ‘less than’ symbol for a tag, that’s why it got chopped
Comment by Kristian (in Espoo) — Sun, Dec 3rd, 2006 @ 9:00 pm
finnsense:
You can have a house, a car, five weeks holiday, an ipod, a flat screen TV, broadband, a Summer and Winter holiday abroad. If you choose to get a €300,000 mortgage then you can’t but then you’re an idiot.
For surprisingly many people, a council flat in Jakomäki is not an element of the good life. 300k€ doesn’t buy you a decent family apartment in Helsinki if you plan on having more than 1 kid. Prepare to spend 500k€.
But I agree, as long as you live under a bridge, life’s good.
Comment by Freeridin' Franklin — Sun, Dec 3rd, 2006 @ 10:54 pm
P.S. I’ve had a two week holiday this year and the Lutheran God alone knows when, if ever, I’ll be able to have the rest.
Comment by Freeridin' Franklin — Sun, Dec 3rd, 2006 @ 11:07 pm
Kristian:
you can go outward from the Ku’Damm and find family restaurants with less than 10e entrees and 2,5e biers
The nightclub Lady Moon, which was mentioned in the Depeche Mode entry, has 1€ pints and free entry. So Helsinki must really be heaven by your standards.
Unfortunately, the price of beer determines the level of the clientele. How proper of them to serve the Louis XIII-tonic or whatever at around 250€ to keep up the standards. Ugh.
Comment by Freeridin' Franklin — Sun, Dec 3rd, 2006 @ 11:13 pm
The nightclub Lady Moon, which was mentioned in the Depeche Mode entry, has 1€ pints and free entry.[...] Unfortunately, the price of beer determines the level of the clientele.
Exactly! And cheap beer == sticky floor. Never been to Lady Moon, but generally, I’m afraid of places like that……..at least looking at them from the outside. Actually, discos/nightclubs aren’t my thing at all. I’d rather sit-down somewhere and have a nice dinner and some drinks—with no loud music pounding in my ear!
Comment by Kristian (in Espoo) — Mon, Dec 4th, 2006 @ 1:39 am
Franklin,
You can get a brand new 4 room house in Masala for €220,000. It takes 23 minutes on the Y train to get to Helsinki from there. If you choose to live in Punavuori, that’s really your problem.
Comment by finnsense — Mon, Dec 4th, 2006 @ 7:39 am
finnsense:
You can get a brand new 4 room house in Masala for €220,000.
Well, certainly you can!
See etuovi.com, kohde 424684. There’s the lot for you for 191k. A snazzy 4-room tent costs 595€. Alternatively, you could buy a trailer with the remaining 29k, but then you wouldn’t get 4 rooms.
Seriously, if you’re selling a brand new house in Masala (Kirkkonummi, right?) for 220k, I’m VERY interested in your 50% discount of the market rate.
If you choose to live in Punavuori, that’s really your problem.
Nah, I had enough of the ultimate poshness of Punavuori way back in the 70s.
Comment by Freeridin' Franklin — Mon, Dec 4th, 2006 @ 7:07 pm
I’ve been waiting for finnsense to contact me about that 220k house, but alas, the house best be scratched from the Finnish dream, at least without the idiotic loan. We’ll conclude that it takes an idiot to raise a family in contemporary Finland.
Comment by Freeridin' Franklin — Tue, Dec 5th, 2006 @ 7:42 am
Franklin,
We nearly bought one in June but it seems they are all sold now. The address was Puolukkamäki. If you google Puolukkamäki 10 and look at the cache you’ll see which house I’m talking about. It’s €230,000.
Comment by finnsense — Tue, Dec 5th, 2006 @ 11:15 pm
Kristian:
“You can do a quick word search on “expensive†to see what others think about us.
http://wikitravel.org/en/Finland”
You can do quick searcheas ALL OVER the place, and discover that the internet community is FULL of all kinds of prejudices. I remember my first visit to Montreal. The I had heard allt the common misconceptions about bars staying open faaar longer than in Finland the beer being faaar more cheap. Back in those days, these two myths basically covered the globe. Once I got to the metropol Montreal, I discovered quickly, they were both false.
A week after my visit, I was confronted - in a good old nntp-news group - by a Canadian who claimed beer fas faaar more expensive in Finlan than in Montreal. I don’t know from where he got his idea, but somehow I have the feeling, that finns are generally down-playing everything in their own country, whereas people from other countries are generally doing the opposite. Ever heard an italian or french person down-play their local cuisine? I think that if we keep marketing - that is we, typical internet users, tourists in different parts of the world, or generally finns coming in contact with foreigners visiting our country - our country as cold, expensive, and generally shitty, then that is what we will subsequently read in places like “http://wikitravel.org/en/Finland”.
I have no desire to market my country in untruthful ways, but the way I hear fellow finns talk about their country to foreigners, time after time, on different occasions, simply makes me sick.
Comment by Thomas — Tue, Dec 5th, 2006 @ 11:41 pm
finnsense, it appears that YIT is building some new “houses” (erillistalo, i.e. almost like houses but without lots)
Check the prices. What was that about idiots and the Finnish dream again?
Comment by Freeridin' Franklin — Wed, Dec 6th, 2006 @ 12:27 am
Franklin,
They are more expensive than the ones I mentioned because they’re bigger and are detached houses. You don’t know this but they’re also in a nice position with views of empty fields and forest.
I agree that houses are expensive but they aren’t out of the price range of a “middle-class” couple who are working.
Comment by finnsense — Wed, Dec 6th, 2006 @ 11:24 am
I agree that houses are expensive but they aren’t out of the price range of a “middle-class†couple who are working.
Sure they aren’t, as long as you’re prepared to eat pea soup for 30 years, and forget about the iPod and travelling abroad.
Comment by Freeridin' Franklin — Wed, Dec 6th, 2006 @ 4:08 pm
You can also forget about having children. Not that I think it’s a bad thing.
Comment by Freeridin' Franklin — Wed, Dec 6th, 2006 @ 4:11 pm
I posted this in ‘Tobin Tax’ thread, but I’ll also put it here……
Franklin—I agree with you; house prices are too high for first-time buyers. And you’re right, about how the invisible hand created the condition. Over the past two-decades, everyone migrated to the Helsinki area for jobs, because all the big corps moved here. That’s the problem: Bad planning. There’s really no reason for all these companies to keep their ‘knowledge workers’ here in Helsinki, Espoo and Vantaa.
We need a reverse-migrationâ€â€back to Nowheremäki. I’ve read some political ideas about it; one is a telecommuting initiative suggested by the Finnish government. However, I don’t remember how it’s to be implemented or incentivized. It’s a good idea for sure, but it’d probably have only a limited effect. Instead, there needs to be a more large-scale plan: Companies could easily create clusters in Nowheremäki. And they’d probably save operating expenses out there anyway.
American companies have had success moving their operations away from major cities, to places within the ‘heartland.’ Workers benefit because they can suddenly afford homes with ample land. It’s a perfect solution for many people, especially those who don’t like big cities and their crowded suburbs.
I don’t think there’d be much resistance to moving away from Helsinki/Espoo/Vantaa, especially if the Nowheremäkis were to become populated againâ€â€and perhaps more ‘lively.’ I know people who’ve grown-up here in H/E/V, but, as adults, have chosen to live in places like Kuopio instead. In fact, most people out there wouldn’t live near Helsinki no matter how much you paid them
So, whereas the invisible hand created the problem, I don’t see why it can’t fix the problem in a very positive way……..but, maybe with a little cajoling from the state. In my opinion, it would be much more natural than trying to impose artificial measures that might not help us in the long run, due to foreign competition. It’s just a matter of political initiative. I think the idea already exists, but maybe it just needs a little push?
Comment by Kristian (in Espoo) — Wed, Dec 6th, 2006 @ 11:25 pm
Kristian:
“So, whereas the invisible hand created the problem, I don’t see why it can’t fix the problem in a very positive way”
As much as you libertariams love this MYTHICAL invisible hand, that fixes everything, you still have to accept that this hand is INVISIBLE. As in NON-EXISTING, more or less. That is, it doesn’t fix the problems brought upon us via “so called” markets etc. No MARKETS in the sense portraied by the economists, that generally talk about “market economy” in positive manner, exist. They - markets - are just theoretical playgrounds, for exploring “efficiency” in a completetly theoretical - non-existing - fantasy world.
Every time I hear a reporter use the word “MARKET”, I get extremely observant. Mostly they - as can be expected - misjudge the concept, in the same manner as the “happy libertarians” we can read misconceptions from on e.g. this blog.
But all you libertarians, here’s an excercise for you. Give ONE example of a MARKET that is PERFECT in the sense of economic theory. One would assume that this is possible, given the fact the libertarian ideology depends 100% on the assumption that ALL MARKETS are like this.
Comment by Thomas — Thu, Dec 7th, 2006 @ 12:31 am
Thomas—
I’m talking about a specific problem concerning housing-/living-costs here in the H area: Salaries are too low and living costs are too high. My solution is to halt—or even reverse somewhat—the population migration trend which caused the condition.
It’s very much a government solution, at least insofar as incentivizing goes. I’m sure there are other solutions. But this is an obvious one.
Why don’t you like it?
Comment by Kristian (in Espoo) — Thu, Dec 7th, 2006 @ 1:20 am
Thomas—
Re: Invisible hand. I was referring to one of Franklin’s posts. You should know by now, that I don’t subscribe to any particular economic theoretics. I simply want to solve problems in a way that hopefully makes sense, considering the current-day context.
Whereas I believe in the invisible hand (if it is synonymous with natural motivation), I also believe it should be guided. I don’t think it was guided well enough by allowing large-scale migration to the Helsinki area.
Then again, maybe it was unforeseen, considering Finland has never experienced anything similar. Or maybe it was unavoidable for some reason.
In any case, now we’re stuck with an expensive lifestyle down here. And cities/towns up there are apparently shrinking, in comparison. So, what’s the solution?
Comment by Kristian (in Espoo) — Thu, Dec 7th, 2006 @ 1:45 am
In any case, now we’re stuck with an expensive lifestyle down here. And cities/towns up there are apparently shrinking, in comparison. So, what’s the solution?
For the invisible hand, the problem doesn’t exist. The invisible hand owns real estate, you know.
Comment by Freeridin' Franklin — Thu, Dec 7th, 2006 @ 9:19 am
Kristian:
“Re: Invisible hand. I was referring to one of Franklin’s posts. You should know by now, that I don’t subscribe to any particular economic theoretics.”
You were the one who firstly used the concept of the INVISIBLE HAND, in any posting in this thread as far as I found.
“I simply want to solve problems in a way that hopefully makes sense, considering the current-day context.”
Frankly, most your postings have been extremely “phil-like” in their difficulty of marrying social-democracy with full-blown libertarianism. Both of you should take side, one way or another. You can’t be a libertarian social-democrat (as far as I know). It seems like a classical oxymoron.
Comment by Thomas — Sat, Dec 9th, 2006 @ 4:18 am