The result of the Great Depression of the 1930s was visible in economic policy and societal development. This meant increased protectionism and state intervention in the economy e.g. in the form Keynesianism, increased public spending in the New Deal policy in the U.S. or an anti-democratic alternative in the Nazi ... (Show more)
The result of the Great Depression of the 1930s was visible in economic policy and societal development. This meant increased protectionism and state intervention in the economy e.g. in the form Keynesianism, increased public spending in the New Deal policy in the U.S. or an anti-democratic alternative in the Nazi Germany. Instead in Finland, earlier research does not find similar turning point in the role of the state during and after of the Depression. One important explanation is the rise of right-wing hegemony after the 1918 Civil War, and this movement intensified during the Depression years. It seems that Finland was falling behind in general government expenditure in relation to GDP especially in the 1930s. This is interesting because of the political self-understanding of a ‘strong state’ based on earlier autonomy in Finland and the fact that in the latecomer countries, despite political ideologies, the state could create preconditions for development.
In this paper we analyze the Great Depression and the state (public sector) development in Finland in the comparative context of its neighbors, the Soviet Union and Sweden. After c. one hundred years period of autonomy in the Russian empire Finland received its independence (1917) with the collapse of the empire in the World War I, after which the Soviet Union seemed to become the challenger of capitalism by building a socialist command economy. Finland had also a longer common past with another neighboring country Sweden, as part of the kingdom for almost six hundred years. After the global crisis of the 1930s, the long-lasting period of the welfare state construction (the ‘Nordic Model’) intensified in Sweden, and the construction of a state-owned socialist system began in the Soviet Union during the interwar years. Therefore, a new independent state, Finland, was between the two economies, where the state played an increasingly strengthening role.
We concentrate two different aspects of state development: 1) state planning and political discourse and, 2) fiscal policy and the extent of public expenditure. The extent to which economic and societal policy was recognized as a means for state-building varied in these three countries, but it is important to take into account, however, that the development was still cautious in Sweden in the 1930s and the Soviet Union was not immediately and totally a command economy. Our preliminary results indicate that considering the stage of social development, the various dimensions of the public sector and the ‘real development of the state’, Finland appeared less exceptional as often interpreted. (Show less)