Finland’s economy was driven by the massive wealth of the country’s reserve of national resources. The country was historically endowed with natural resources such as paper and pulp clusters due to the extensive forests. Finland emerged as a key supplier of manufactured merchandise to the United States, Germany, Sweden, and the Soviet Union. Finland gradually developed by following and replicating the model used by its Nordic neighbors, enabling them to invest heavily in public infrastructural development and social welfare.
It was characterized by stable GDP growth, a high investment growth rate, and overall factor production growth. Other main reasons that contributed to its immense success were government policies and regulations. There was a macroeconomic policy that featured fixed exchange rates and a centralized wage bargain. The expenditure for the government kept increasing and taxes were at the peak. Therefore, Finland opted to focus on a quality university system and public education. The country spent more funds on education than other European nations.
Special attention was given to research and development as well as inventions. Research and Development (R&D) expenditure was consistently increased as a proportion of the GDP. In the ’60s, Finland joined EFTA (European Free Trade Association) and EEA (European Economic Area). In the 1990s, Finland, known for its fiscal stability, became part of the European Union (EU). As the opportunities opened in the Westside, Finland’s economy attracted Inward Foreign Direct Investment (FDI). There were new investments established whereby the public sector invested together with the venture capitalists. The developments made Finland competitive in the regional and global markets.
