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RESEARCH PRODUCT

Regional Policy Lessons from Finland

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The Finnish economy and society has long been dominated by primary production. Post-war economic development was rapid and welfare gaps between the much more developed economies and Finland narrowed and were even partly reversed. Rapid economic expansion together with structural change has had the effect of centralizing both economic activity and population. The trend has been towards the southern and central regions where the metropolitan area of Helsinki and most of the other larger towns and urban centres are located. Together with vigorous technological progress in agriculture and forestry the rapid urbanization and industrialization of the 1960s and 1970s the fastest in Europe altered the status of the primary industries, creating enormous challenges for regional policymaking. Early regional policy based on building up infrastructure, decentralization of manufacturing industries and the creation of a welfare state was fairly successful, although it could not prevent huge out-migration from rural areas in the 1960s and early 1970s. While regional development was fairly even in the 1970s and 1980s, the 1990s were a time of great economic flux and drastic structural change. Finland was hit by a severe recession in 1991-93 and both production and employment fell sharply. Rapid economic recovery was based on export and knowledge-based industries. The investment in know-how turned out to be successful: several parallel analyses of international competitiveness show that Finland was one of the most dynamic and competitive economies in the world in the late 1990s and early 2000s. Although Finland as a whole flourished in the late 1990s, this was not true across all its regions. The positive aggregate development experienced by Finland was based on uneven regional growth, especially after the severe recession of the early 1990s. Regional competitiveness varied greatly, the most competitive regions being those containing an urban centre and especially those with a university (Huovari et al. 2001). Migration into the major centres of population accelerated in the late 1990s, and many of the smaller urban areas even saw a net loss in population. In recent