Welsh economic lessons from Finland

Dylan Jones-Evans says the Welsh Government should take a leaf out of the Finnish playbook and establish an arms length innovation agency

Last week, I attended a conference organised by the Massachusetts Institute of Technology (MIT) to examine the future of manufacturing. It was a timely event, as I am currently undertaking research into the development of advanced manufacturing in Finland during the last thirty years and the lessons that other small economies can take from this experience.

We heard from a range of experts in the field, including Professor Martin Schmidt of MIT, who has been advising President Obama on a new emphasis on manufacturing within the US economy.

The report from his review is fascinating, mainly because of the differences in the philosophy regarding economic development as compared to most parts of Europe. In fact, the conclusions to the report to ensure American leadership in advanced manufacturing comprehensively rejected a picking winners policy, either in terms of individual companies or specific sectors. Instead, it proposed pursuing an innovation policy for advanced manufacturing that would provide the best environment in which to do business, ensure that the most powerful new technologies are developed in the USA and that technology-based enterprises have the infrastructure required to flourish.

Given the way that manufacturing in the USA and many other advanced countries has been ignored in the last decade as financial services became the favoured sector and there has been a rush to move production to low cost countries such as China, this report is long overdue.

Yet, during the two days in Brussels discussing the future of advanced manufacturing, there seems to be little appreciation of an example within Europe that could also act as a model for developing a more innovative and competitive economy.

During the last fifty years, Finland has changed itself from an economy that was based largely on primary production and an unskilled agrarian workforce to one that is recognized as one of the most competitive in the World, particularly in the field of high technology manufacturing within key sectors such as information communications and telecommunications (ICT).

Most of this change took place during the early 1990s when the Finnish economy endured a major economic recession that included a major banking crisis, unemployment rates of 15 percent and high levels of government debt.

In response to these issues, the Finnish Government took a bold long-term view to focus its strategy on innovation and promoting, in particular, the development of high technology sectors such as ICT. Since 1995, the Finnish economy has been one of the fastest growing in the developed world, with an average growth rate of 3.5 per cent. Unlike other rapidly growing economies, most of the growth within Finland has been generated by the development of domestic companies.

Therefore, through indigenous growth in a number of key sectors, Finland has become recognised as one of the most innovative and competitive nations in the World and the World Economic Forum’s Global Competitiveness Report 2012-2013, which assesses the competitiveness landscape of 144 economies, ranked Finland third in the World in terms of a range of different factors driving productivity and prosperity.

And one of the main driving forces behind this success has been a specific government body that has driven and developed innovation throughout the Finnish economy.

Established in 1983, TEKES is responsible for administering public support for private and public sector R&D and innovation in Finland. Its mission is to promote the development of industry and services by means of technology and innovations. Its impact has been tremendous, being responsible for supporting more than half of Finnish innovations during the last thirty years.

Whilst its programmes have been focused very much on supporting technology within companies and public institutions, there have been additional positive effects such as increased networking between companies and R&D organisations in targeted clusters and increased collaboration between researchers across different disciplines. Simply put, the focus on the innovation policy that the US Government now recognises as being critical to its own manufacturing sector has been one of the key successes in turning a small peripheral nation into one of the most competitive economies in the World.

And there are certainly lessons for Wales from this experience.

Indeed, whilst there are those who still hanker for the return of the Welsh Development Agency, it is clear that during its existence, its focus on attracting large foreign direct investment did little to support the long-term innovation performance of our nation. Its subsequent integration into the Welsh Government has also had a minimal impact on ensuring that Wales becomes the “small clever nation” which politicians have been calling for since the advent of the National Assembly.

As the Minister for Business is currently examining the development of an innovation strategy for Wales, one option in creating a more competitive Welsh economy would be to consider establishing a Welsh TEKES that would be an arms length organisation that would focus on developing the innovative potential that exists within this nation.

If we were to get only a fraction of the success that the Finnish economy has enjoyed during the last three decades, then it would be one of the more astute policy decisions that the Welsh Government will have made in developing the economy.

Professor Dylan Jones-Evans is Director of Enterprise and Innovation at the University of Wales and Chairman of the Welsh Conservatives' Economic Commission.

19 thoughts on “Welsh economic lessons from Finland

  1. Last May Dafydd Wigley used Norway as an example or a model how to make Wales prosperous but Dafydd failed to see that Wales had nothing in common with Norway and the article he wrote was quickly forgotten. This time Dylan Jones-Evans is focused on another Scandinavian country which again is of little or no relevance to Wales.

    If we are going to look for examples how to make matters better in Wales perhaps the focus should shift to the Far East. Impoverished countries have made huge strides in attracting worldwide investment and manufacturing jobs by using education as a tool to achieve their aims and specifically made a huge effort to achieve excellence in English language teaching throughout their education system and promoting science and technology at every step of the way and again in the English language.

    In Wales the principal focus in education is the Welsh language. Primary schools are packed to the rafters with Welsh speaking teachers from the Fro Cymraeg world with little to offer to the young minds other than a single minded mission to make them ‘Welsh’ through their own language and at the expense of quality education and if anyone who may need persuading that this strategy is wrong just look at the abysmal state of literacy and numeracy of Welsh children.

    For us to become ‘A Small Clever Nation’ as the author of this article calls for we need to look again at the ‘Road to Bilingual Wales’ as under any definition this is a ‘Dead End Road’ and the longer it stays on the WAG’s agenda the longer it will take for Wales to recover if ever.

    We are not only damaging education of most Welsh children but equally we are making Wales unattractive and hostile to any meaningful inward investment and doomed to perpetual destitute of most people living in Wales.

  2. Ah yes, the success of small nations. Let us not forget, of course, that we are talking about small nations that are politically independent. Autonomy? Now that’s the future! I’m sure Dylan Jones-Evans and Jacques Protic would concur.

  3. Jacques – another anti-Welsh language rant, full of prejudiced opinion and empty on facts.

    Wales would do well to emulate Switzerland. The majority of its population speak several languages fluently, and it has one of the strongest economies in the world. If the Welsh language is the cause for Wales’ economic woes, then why are large parts of England, the Midlands, the north and the south west suffering in the same way? It would be a lot better if we had more reasoned debate, and less bigoted opinion.

  4. Dave, It’s easy to be dismissive and you are entitled to call my contribution an anti Welsh language rant but if you do so at least you should come up with valid arguments. As it happens I do have considerable experience of Switzerland too and it may surprise you that they are not as multilingual as general conceptions prevail and often in commercial meetings they use English as the common language.

    Leaving Switzerland aside and coming back to your main point of my ‘prejudiced rant’ as you call it I am also a parent of two children being educated in North Wales. My daughter, aged 8, goes to a school within the Conwy LEA and classed as a category B teaching establishment (75% English / 25% Welsh in theory but in practice 60% Welsh). All teachers and support staff are 100% Welsh speaking. My 14 year old son attends Anglesey school and has chosen English medium education as have 90% of pupils in his school. Again all staff are 100% Welsh speaking and absolutely committed to Welsh language.

    In my opinion neither of the schools are representative of the local community and the policy of only employing Welsh speaking teachers is wrong, unnecessary and divisive. Children in Wales need best possible teachers irrespective whether they speak Welsh or English or both and especially in primary schooling.

    Ten years or so after the Road to Bilingual Nation has been introduced and Education used as tool to achieve this aim there is more than enough evidence in the public domain to see that this initiative is not working and the reason is that children do not want to learn the Welsh language, can’t see any point of doing so and find it boring and irrelevant.

    Don’t shoot the messenger and listen to the children. In spite of all the immersion and Welsh language prioritising my kids and most of their mates do not have any Welsh language skills and can’t put a simple sentence together in Welsh and this will never change. Therefore, back to my earlier argument that for Wales to prosper we must have separate English and Welsh medium education staffed by the best possible teachers in each sector and leave it to parental choices to decide which language their children should be taught in.

  5. Mark Jones, No, I do not concur that ‘Welsh independence’ would make any difference in the context you used and if anything would make it worse. In my view and for many thinking people even under a partial independence the Welsh Government is there for the nation’s minority. Welsh people do not have a desire for independence and the call for it comes mainly from those with nationalist leanings. We are also faced with huge misinformation and manipulation of statistics and by no other than the Welsh Government and the mainstream Welsh media (BBC & ITV Wales).

    A few days ago according to a Welsh Government survey 90% of Welsh people are satisfied with Welsh education in spite of the dreadful state of literacy and numeracy here and the Welsh Government’s ‘evidence’ simply does not stack up!

    Tomorrow ITV Wales will produce another gem in as much that most people want more Welsh Government intervention in their life and according to ITV Wales some 1,000 people in Wales say so and therefore it must be right! But for anyone to form a meaningful opinion one needs to look at both sets of raw data and then a different story emerges, spin and more spin but to what purpose and for whose benefit?

  6. Well Dave:- “Wales would do well to emulate Switzerland. The majority of its population speak several languages fluently, and it has one of the strongest economies in the world.”

    I don’t think that you can link bi-lingualism with strong economic performance. The point about Wales’ bilingual education system is important. We in Wales don’t have a “Department for Science in Schools” or a “Department for Mathematics in Schools” but we do have a Department for Welsh in Education and we do have a minister with joint responsibility for the expansion of the Welsh Language and Education in general. The question is; does one activity get in the way of the other.

    For decades the Welsh Langauge Board produced propaganda that purported to show that Welsh Medium Education was superior to English Medium education. Slowly it is dawning on Wales that this was a falsehood… In fact the only reason WM schools appeared to have better results was that they didn’t have pupils from severely disadvantaged home backgrounds. It is now evident that, when a comparison is made of schools with a similar socio-economic profile, WM schools are underperforming EM schools… particularly in the vital core subjects.

    Is there a National outcry of “Why did you lie to us?” – of course not! Middle class parents from Cardiff dutifully trundle their children to WM schools where they will often underperform their potential and all because neither the Welsh Government nor Estyn can bring themselves to admit that the WM schools are failing to deliver.
    What is the outcome? Well take a look at the Wales adult literacy and numeracy study published in 2011:


    You will notice the lower levels of literacy for the 16-19 age group… some still in school, others recently left.

    The Welsh Literacy rates are worse still. Look particularly at those people from Welsh speaking homes who have Welsh as their first learned language. These people almost always went to WM schools; their English literacy is poor but their numeracy is poor too. Is this an indication that WM schools have done them any favours?

    Look at literacy and numeracy rates for people who have moved from elsewhere in the UK to Wales…much better that the home grown individual.
    We have got to stop fooling ourselves; our future depends on education but first we must face up to the reality that the bi-lingual system is failing us.

  7. Jon Jones. “The reality is that the bi-lingual system is failing us”. It is currently inconceivable that any objective assesment is made as the whole purpose of the Welsh Government/BBC Wales/S4C is to drive the Welshification process forward at what ever costs to the Welsh people. This process is being driven through devolution and undue influence of people from the north west who seemingly all Welsh speaking, and wish to inflict that on us people in the south east, and more damningly on our children. The south east was always attuned to the English economy and in competition with Bristol, and in reality we knew little of the remoter areas, and in fact cared even less. In Wales we have the PRICELESS asset of first use of the English language, which should give us a head start, however this is being diluted by missionaries from the north/west. In the long run there is only one option for us: either a) separate from the UK and live on our own income and without a penny from ‘over the border’, b) shut down devolution/Welshification as public policy and get back to basics in order that our children are able to compete in globalised world, and not just Welsh-speaking Wales.

  8. Jon & Jacques,
    Clearly bi- and multi-lingualism have been no barrier to Switzerland’s economic success. It was Jacques who asserted the negative link between the two in Wales, I was merely responding to his comment. I wouldn’t dream of asserting that the Swiss economy is successful because many there are multi-lingual. Neither you nor he has explained why other parts of the UK are suffering in much the same way as Wales, and where language is not an issue. The length, content, and nature, of both your responses suggests to me that an agenda exists. I’ve no doubt that there are children who don’t want to be taught Welsh, but that might be as much to do with their parents’ attitude to the language as anything else.

  9. Prof J-E makes some interesting and valid observations and it’s good to see an academic with interest in the ‘real world’ and above all that he recognises and values the importance of innovation in the field of science and technology.

    Many years ago as CEO of a major German Company I worked with the WDA. We were looking for a manufacturing base in the UK and I was certainly impressed with their professionalism and dedication to attract investment into Wales.

    On occasions they did go OTT in terms of lavish and expensive social events where Ambassadors to the UK from major countries especially Japan and Germany, together with their Economic liaison officers would be invited to meet the Welsh based captains of industry and always within impressive stately homes and given a warm reception and hospitality – WDA called it proactive marketing and mingling opportunity with the purpose of promoting Wales to potential inward investors.

    Their proactive approach has extended throughout the developed world and elsewhere where WDA would be at every major international exhibition involving technology and manufacturing, promoting Wales and flying the Welsh flag in a prominent way with the full support of the British Embassy network and their Economic Development Officers.

    Contrary to Prof’s opinion WDA did not neglect innovation and they did have a huge input into Welsh SMEs either helping them to reach overseas markets or helping to find for them the expansion and growth capital and I can write an essay on this aspect alone if I had the time.

    Yes, WDA has gone and since then we have had devolution and the new regime (The Welsh Government) which sadly has a different agenda and priorities and meaningful and tangible help to any budding entrepreneurs in Science and Technology is no longer available.

    There is so much that can be done by the Welsh Government only if they had the right vision and the will to make Wales a multicultural society and a Wales that is based on equality and fairness as a priority.

  10. Various parts of China, Korea, Singapore, Germany, Finland ….one could go on… have all done better than England economically in recent years without the PRICELESS asset of first language being English. Their commercial classes have all learned English without abandoning the study of their native tongue and its literature and, so far as I know, they are not being told that clinging to an ‘obsolete’ language is holding them back from learning engineering. Welsh is as badly taught in Welsh schools as everything else. Our politicians are in hock to the teaching unions and don’t hold them to account. That is the problem. Blaming the Welsh language is not only ridiculous it is getting really boring.

  11. Well then Tredwyn, be prepared for years of boredom because the fight for endless spending on the Welsh language was never ‘won’ in the first place, it was sneaked in through the backdoor while nobody was looking!

    Now it’s one thing to be beaten by sound reason in a democratic environment but cries of “boring”, “anti-Welsh” and “bigot” (and whatever other tricks Welsh language activists have been using) are no longer going to pacify the questions from the 80% of us who have no interest in the Welsh language and the inorganic and expensive social engineering project of an entirely bilingual Wales.

    It’s no secret that the Welsh language industry has benefitted from a shift in attitude in this country towards political correctness and that was a good thing. However, we are currently undergoing another shift in attitude ensuring that difficult political subjects are no longer sacrosanct, particularly if they relate to budgets etc.

    Perhaps the first example of this in relation to the Welsh language was when Martin Shipton/Western Mail highlighted (quite innocently) a proposal to increase the Assembly’s translation budget. What this called for from your side of the fence was a reasoned argument as to why this increase was justified. However, what we got was a viscous orchestrated smear campaign against Martin Shipton trying to discredit the character of the man rather than the content of his article. I can assure you that people will soon get irritated by this sort of behaviour and the questions are going to continue to come.

    You must remember that although the Welsh language is an essential part of daily life for everybody in some parts of Wales, it is absolutely not in the majority of the country and as the cuts come it will be more, not less, questions that will be asked. Admittedly, it doesn’t cost a penny to speak and pass on the language but it was the language activists themselves who politicised the Welsh language and enshrined it in law. This may yet prove to be a problem as anything enshrined in law with a budget and minister responsible for it can now be compared directly to any other public service.

  12. It’s a great shame that a sensible, constructive and thoughtful contribution on addressing the single most important issue facing Wales – the economy – has resulted in a series of unedifying quarrels over the language; important though the future of the language is.

    Dylan makes important points but then falls in to the usual trap of not discussing what “innovation” actually means. He is entirely correct in saying that any policy aimed at picking winners is a mistake and should be rejected. Sadly, the Assembly with its study groups and specific sector policies is once again ignoring substantial evidence and steaming off in the wrong direction. He is also correct in pointing out that the success in Finland is due in no small part to the encouragement of an appropriate environment that encourages business and enterprise. Interestingly, although Dylan makes no mention of it, Finnish policy has eschewed the idea of clusters.

    Where I take issue is with the idea that innovation must mean ICT, high technology, advanced manufacturing, every current buzz word and (again..) “growth sectors.” For example, £50Million has been allocated by the Assembly to encourage life science research, although how that will contribute to the economy (other than fund a few new university chairs) remains unclear.

    Michael Porter (another, different American professor with interesting things to say) points out (as have I on many occasions) that innovation is actually about looking at what businesses do and finding ways of improving what they do; often in small, but significant steps. It’s a process of iteration – what do you do and how can it be improved? It is not about earth shattering new products; developing an environment that encourages existing businesses in Wales to think laterally and take small steps in improving the product or service, would contribute far more to the Welsh economy than grand plans – including so called advanced manufacturing or specific sectors.

    I have had the privilege of visiting and teaching in Finland on many occasions and will be doing so again next year. What is striking in this small, peripheral country – economic success apart – is their fierce pride in being Finnish; in their language, culture and contribution to the world.

  13. It is always good and interesting to take notice of other people’s economies/social systems and learn what we can, however you can only take lessons so far as our whole cultural attitude seems to be anti-business, anti-elitism (except for rugby football), anti-discipline etc so how can we succeed? It is perfectly possible to succeed without the English language, i.e China. So far, however it MUST be accepted that it is the current world language. The fact we in Wales ALL speak English must give us some marginal advantage, however this opportunity is being eroded by the constant thrust of the Welsh language industry. The Swiss have had one great advantage – no matter how many languages they speak, i.e location/location, neutrality in World War 2, hundreds of billions of money appropriated from Jewish people by Germans. They have had very secretive banking system and first class education system. With regard to the WDA it wasn’t perfect, but its work did attract companies to Wales, however even that didn’t satisy the nationalists as they were ‘branch factories’ in their minds, no matter that they employed working class people like myself. It’s called CULTURAL SNOBBISHNESS, and unfortunately those attitudes now prevail amongst top opinion formers in this region of UK. It must be the first time in history that a succesful organisation, and operating on global basis was transferred into the Welsh civil service to make it more efficient! In my humble opinion we in Wales are now entering a fundamental and crucial part of our history, what with much less public money available for forseeable future, demographics and growth of major social problems in signicant parts of population which will all require huge sums of money to put right. Plainly we need to change much, and need people of knowledge/integrity to help, however there is a major structural fault in Welsh society as between the 10-15% of Welsh speakers who wish to ‘Welshify’/nation build, and the 85% of us, mainly English-only speakers who want to get on in the real world and were perfectly happy with the status quo prior to devolution. We are currently stuck with a deeply flawed system, and fundamental issues need to be addressed as stated by Mr. Jeff Jones on radio this morning, however such matters do not seem to concern the Welsh language fanatics, who like all single issue groups are never prepared to accept a rounded totality.

  14. I’m sorry that you found my criticism of Welsh Medium education “unedifying”. I happen to think that the failing education system is a major part of the reason for the failing economy of Wales. WM schools now account for about 23% of pupils and these high status schools are not delivering the standard of education that could be expected of them, considering that not one of the 56 WM secondary schools in Wales has more than the average number of pupils on Free School Meals.

    I am not alone in being concerned about Welsh Education, and linking it to the economy:

    “Wales is not attracting high quality inward investment due to ‘appalling’ skill levels and a poor education system, an academic has told MPs.

    John Ball told the Welsh Affairs Select Committee a key plank of the Assembly Government’s economic strategy was ‘cloud cuckoo land’.”

  15. ‘the failing education system is a major part of the reason for the failing economy of Wales’ Could not agree more. And that is a problem in both languages. Moreover the token bit of Welsh inflicted on English-speaking kids in secondary schools is probably pointless but is no more responsible for the low standards than a token bit of RE or PE that kids get. We are a country run by English speakers where the mass of electorate is Englsih speaking who don’t mind a token bit of expenditure on the Welsh language. Despite that fact, some members of the majority manage to feel oppressed by the minority. I have tried to explain it in terms of psychological mechanisms but I give up. You can never convince a paranoiac they are being paranoid and I shall try no more.

    I do however disagree with Professor Ball. It is neo-liberal orthodoxy that government should not try to pick winners but all successful industrial policy has not been afraid of picking winners. I agree the Welsh Government is just following fashion in going for bio-tech and other trendy businesses. But if as a result of talking to business it identified a real opportunity for Wales in bringing in foreign companies to work with existing Welsh businesses and develop an industrial cluster it should go for it. Most success is based on getting down and dirty and cutting good individual deals not remaining aloof while proclaiming you are business-friendly ‘open for business’ or any of the other cliches.

  16. I hope people won’t mind if I ignore the langauge debate which seems pretty irrelevant to this discussion, to me.

    The biggest structural problem with the Finnish economy is its over-reliance on Nokia, a compnay whose fortunes are waning. This piece demonstrates how the Finnish economy is unusually reliant on a single firm: http://www.economist.com/node/21560867

    I have no doubt that there are smaller and more innovative companies out there but it would be useful to know to what extent TEKES has been involved in promoting innovation elsewhere in Finland and to what extent it has been based on innnovation within Nokia. Likewise, I would be interested to know how the Finnish government proposes to stimulate innovation and economic growth in other sectors if Nokia continues on its decline – it’s a similar debate to one we could have had in the Valleys when coal-mining disppeared and was not adequately replace by other industries.

  17. If we are talking about the Finnish economy we are excluding some very large corporations indeed. Stora Enso and UPM-K are the worlds largest and third largest Paper manufacturing companies, Aker Fynnard is manufacturer of the word’s largest Cruise ships and Wartsila is a maker of large shipping engines. All massive export businesses. There are also very large presences from ABB, Siemens and Carlsberg as well in Finland. VTT Technical Research Centre of Finland which is owned by the Government is the largest multi-disciplinary Research facility in Northern Europe. It throws out IP which is of course turned into businesses. VTT is all about innovation and technology improvements. These are the things that we should be replicating in Wales. We need more Engineers and Scientist based here and I would propose that the Welsh Government support this by paying for Science and Engineering degrees studied in Wales.

  18. All the Nordic peoples are innovators – when you live on the edge of the Arctic Circle the ability to adapt and innovate confers survival. It comes with the territory! They are also excellent people to do business with because they tend to be completely straight-forward. They say what they mean and mean what they say – I find it very refreshing. Talking heads in Wales please take note!

    The fact that almost everybody in Finland can say what they mean in English is a bonus – but up to about 30 years ago they used to do a lot of technical business in German which was then the second global language for engineering and architecture.

    However, most of the TEKES projects are listed under the heading of ‘Energy Saving and Environment’ – much of which is likely to revolve around unsustainable EU red-green subsidies based on fraudulent carbon dioxide based global warming justifications. A number of countries are now finding that these activities are loss-making and they are being wound down or abandoned altogether. A new sense of realism seems to be taking hold, at last.

    Sadly the Welsh Government remains at the back when it comes to recognising these realities, so they are still trying to enter a blind-alley that several countries are already trying to leave. I think it’s called leading from the back!

    The Finns do have the advantage of being the undisputed world leaders in icebreaker and ice-hardened merchant ship design, so I hope they will see an increased market for these engineering skills as the northern hemisphere is predicted to cool significantly over the next 20-30 years.

    The WDA was fine when it started – it was minimally staffed and put potential investors in touch with suitable advisers/mentors from the private sector, who were predominantly on the same wavelength. In the terms of this article it operated at arms length. Unfortunately, the WDA outgrew its strength and began to believe that people from the public sector with no experience of running a business could provide the same service. Then it started to fail in its prime function and it alienated the private sector. On top of that it morphed into a property development business, buying into development land which it then sought to lease or sell to the private sector. By this time it had become the enemy of the private sector and it had ceased to function either at arms length or as a meaningful business development agency.

    As so many failed public sector driven development projects in Wales, such as Technium, have shown, the public sector in Wales is adept at producing techno-babble and enviro-babble based on white elephants and little else. Big ideas and nothing to back it up with! The best thing the Welsh Government, and academia, can do is to keep as far away from the private sector as possible. In the main, all they have done since the late 80s is cost us money, sap our energy, steal our ideas then waste them! The Welsh Government can’t even provide us with a literate and numerate work-force! A problem the Finns clearly do not have…

    Since the Welsh Government is so obviously in the business of micro-management of things it clearly does not understand, it is difficult to see how an arms length development agency in Wales could operate. It would not be allowed to! In any case it is difficult to see how private businesses can operate in tandem with the Welsh Government’s micro-management mind-set. Frankly, I wouldn’t recommend anybody to invest in Wales as it is currently governed. If anybody in Wales has a good idea I can only recommend that you take it to a country where business is valued – Finland definitely is such a country…

Comments are closed.

Also within Politics and Policy