Rethinking the system
A research project on how Finnland reacted to the economic
crisis of 1991
Forbundsseminar NlS
©0Capacent
© Capacent
The scope of the project
The projects initial scope was as follows:
• Evaluate Finnlands reaction to the economical crisis and
bank crisis of 1991
• Analyze governmental decision making and evaluate
their effects
• What decisions weakened society in the long rung
• Emphasis on the collection of subjective data
1
© Capacent
Data Collection
• Data was collected through conference calls with key
players and correspondence
• Assisted by Anders Rusk General Secretary of the
Nordic Teachers Union
• The Finnish Ministry of Education appointed a liaison
to assist in the collection of data
2
© Capacent
The Finnish Crisis
Main Findings
3
© Capacent
Finnland‘s Economical Crisis in the 1990s
Two main factors created the crisis:
Governmental Policy 1980-1990
Collapse of bilateral trade with the USSR
• Financial market deregulation
• Foreign financing
• Fixed exchange rate
• High interest rate
– foreign capital influx
• Overinvestment
• Credit and Real Estate bubble
• Flight of Capital
• Higher interest rates
•
•
•
•
•
Collapse of bilateral trade (20% of exports)
Banking system collapses
Bank refinancing
Dependence on foreign financing
Enormous unemployment (high of 18,4%)
Economical and financial crisis in Finnland
4
© Capacent
Measures to combat the crisis
• Analysis of the Finnish governments response towards
•
•
•
•
5
the crisis shows that its actions did not rely on a single
coherent strategy, action plan or indicators.
Instead a multitude of smaller strategic decisions and
actions served to form the final strategy.
Luck, correct timing, the right emphasis in educational
and innovation policy
What action was taken to preserve quantity and quality
of education?
Policies to protect education and general living standard
during crisis
© Capacent
Reorganization of Public Finances
• Foreign debt reached a high of 68% of GDP
• Cost of bank refinancing was 7,5% of GDP in 1994
• GDP shrunk some 10% in 1991-1996
6
© Capacent
Resolvment of currency crisis and EU membership
• First response: Get control of the currency
• Dismantling of fixed exchange rate policy
• Inflation targeting. Floating of the Markka until 1996.
• Interest rate down to similar level as in Germany in 1993.
Increased competiveness
• EU membership approved in 1994 referendum.
• Membership in 1996
7
© Capacent
Unemployment and downsizing of public finances
• Unemployment has become a long-term problem in
•
•
•
•
8
Finland
Financing problems in welfare system
Drastic budget cuts in education, health and social
services
Discussion with social partners
Broad societal consensus on main economical goals
© Capacent
Education policy changes in 1991-1994
• Finland consists of 10% water, 69% forests and 8%
•
•
•
•
•
•
9
agricultural area
General agreement that utilization of natural resources
would not resolve crisis
Preferred solution was a new finnish knowledge society
Telecommunication and Biochemistry new core
competences in Finland
Educational budget cut by 20% in 1991-1995
Ambitious policy initiatives and budget cuts. Paradoxal?
But how was it done?
© Capacent
Systemic changes and decentralization
• Decentralization of government system
• Increased power and responsibility of school managers
• Decision-making moved closer to recipients of services
• No centralized testing
• Central curriculum becomes „framework“ for schools and municipalities
• Flexibility, innovation and solving problems on a lower administrative level
• Freedom for teachers to choose curricula. Progressive use of IT in teaching
• Systemic changes create a new finnish knowledge society.
• External revision to evaluate performance of individual school units. Action to
increase performance if needed.
10
© Capacent
Financing of R & D
• Systemic changes and increased innovation in education
system only part of the solution
• Heavy investment in R&D to create new knowledge
society
Finland
Japan
USA
11
© Capacent
Economical consequences of the crisis
• Social consequences not fully evident until 1996
• It is clear that the full consequences of a deep recession on the societal
structure take time to develop
• Unemployment peaks in 1996
• Many individuals „trapped“ in
the educational system suffer
when the economy recovers
• Emergence of a „lost
generation“
12
© Capacent
Conclusions from the Finnish crisis
What can we learn from the Finnish experience?
13
© Capacent
Consensus on action
• Consensus on necessary action and long term vision. Government, social
partners and interest groups agree on common interests.
• Emphasis on investing in human capital and education in spite of
downsizing of the government budget.
• Decision are reached through a democratic process. Broad consensus
makes implementation easier.
• Of course there was dissent, but clear understanding on how conclusion
were reached and how decisions were taken.
14
© Capacent
Decentralized system of education
• Icelandic schools enjoy substantial independence but we could learn from
Finland about the use of teaching methods and flexible curricula.
• Finlands experience of a decentralized system suggests that it promotes
innovation both in the system and on an individual level.
• The finnish system might prove an interesting case for Icelandic authorities and
interests groups to study further.
• Increased authority and responsibility of individual schools must be subject to
external revisions.
15
© Capacent
Supporting those without employment
• Where Finland did not succed was in supporting certain societal groups.
• Various educational programmes for the unemployed.
• Participation in the programming was seen as just another form of benefits. The
authorities did not counteract these sentiments decisively enough.
• In retrospect these educational programmes should have been linked more
directly to the labor market.
16
© Capacent
Educational Institutions
• Social remedies for children of the unemployed should have been more decisive.
• This has been a topic in Iceland. The Welfare Watch is an example of learning from
the finnish experience.
• Schools were able to improve efficiency on their own terms and create an
environment that suited local conditions.
• Specific and locally specific decision taken in most schools. Flexibility used to utilize
local strengths and fulfill local needs.
• The finnish methodology in external revisions of schools could be an example for
others. Emphasis on improvement and support.
17
© Capacent
At last...
• Finlands experience characterized by the ability to find common solutions through
discussions.
• Finland was able to find a solution that ensured generational equality. Present
generations in the educational system should recieve education that is at least as
good as the education recieved by previous generations.
• The group at risks consists of at least five school years in each school stage.
• The challenge that government, the general public and interest groups are faced
with is how to rethink the system when facing a new reality.
18
© Capacent
Questions or comments?
19
© Capacent
Rethinking the system
[email protected] // [email protected]
©20Capacent
© Capacent