The theme chosen for this seminar - the future of the welfare state - concerns all of us. Our Nordic welfare society is beset by a crisis that threatens its survival. We must now ask ourselves whether we shall have to abandon the welfare state, or whether we can reform it to meet the needs of the 21st century.

Our economic prosperity has been achieved thanks to natural resources, ability, hard work and, to a significant degree, comprehensive social accords between interest organisations and governments. Those agreements have defined divisions of labour and relationships of trust, in addition to stipulating goals and specifying modalities of action.

We have now entered a new era. Mass-unemployment and uncertainty have been just as much distinguishing characteristics of this change as have good corporate results. The blame for our difficulties has often been assigned to the welfare state.

Several factors lie in the background to the change in which we are living: the end of the Cold war, globalisation of financial and capital markets, and the technological revolution, to mention but a few. Finland is now part of this change. Remaining on the sidelines, isolating ourselves, would have been problematic, perhaps even of fateful consequence. As a member of the European Union, we are stronger defenders of our own interests in this respect.

The municipal and European Parliament elections revealed that many people are bewildered in this situation. However, our economic problems do not derive from the European Union nor from preparations for so-called EMU discipline. They stem largely from times predating those solutions. Our biggest problems result from our economy's production base changing too slowly, the sudden collapse of our eastern European markets in 1990-91 as well as the indebtedness attributable to our inadequate savings rate in the latter half of the 1980s. The welfare state's decision-making model also came, in the traditional sense, to the end of its road during that period, and too little preparation had been made for the changes that were needed.

Failure in integrating Europe would create new setbacks for us in the spheres of both the economy and security. The European Union's competitiveness would regress relative to ascendant economic regions. The foundations of welfare states would be further weakened. We would have to rebuild the foundation supporting our continent's security system.

Unemployment, and above all its costs, is upsetting the social equilibrium. The plight of the long-term unemployed and of their families is difficult. For growing numbers of people, secure employment is being replaced by part-time or trial-basis work. We speak of society being divided into new living standard classes: the successful, the majority living in insecurity, and those who fall by the wayside. A society with big differences between standards of living meets the definition of a welfare state only poorly.

A decline in paid employment, mass-unemployment and longer periods of joblessness are not peculiarly Finnish problems, but rather universal ones. Unemployment is said to be the tip of the iceberg of a major and profound transition. In Finland, unemployment rose exceptionally fast and to an exceptionally high level as a result of, among other factors, the collapse of our trade with the Soviet Union/Russia, which meant the permanent loss of as many as 100,000 - 150,000 jobs. Unemployment is at a higher level in Europe than in, for example, the United States, although the many differences between the two regions mean that a comparison between them is not quite uncontroversial. But that does not detract from the fact that the Americans have been able to create jobs more effectively than the Europeans.

Political researchers are concerned because faith in the ability of the economic-political system to create jobs has weakened. That faith has been a characteristic feature of our century. Persistent unemployment gnaws at the foundations of social stability and democracy. A study of the political attitudes held by young people in the Helsinki region revealed that one in three would like to see problems solved in an authoritarian manner by curtailing democracy. Reports of support for extreme-right racism in some parts of our country are worrying.

A global market economy has been a reality since the Cold War ended. About 90 per cent of the global economy is now governed by market competition. What is involved is a transition, out of which we shall have to steer ourselves onto a course of stable development. In this context, I could refer, say, to the debate on the need for some form of regulation or control of global financial markets.

It is our common task to ensure the welfare of those in society who are outside the scope of traditional wage-relationships. The market economy must be developed in pursuit of this goal, in a spirit of common responsibility. That calls for a new relationship of trust between all parties, both on the national level and especially the regional and local levels.

The welfare state is no longer capable in the way that it used to be of assuming social responsibility for the livelihoods of all as opportunities for paid employment dwindle. However, constantly rising productivity on the part of companies provides an opportunity to alter the principles on which welfare is "preliminarily" distributed, thereby creating the wherewithal to look after those excluded from paid employment. However, it seems to me that the principles, criteria and considerations on which such a division of income would be based have not been discussed outside the research community.

If industry continues to downsize its labour force and the traditional service sector fails to grow, the situation will be difficult. However, the absolute disappearance of jobs is partly an illusion, because many large companies have hived off units to provide them with the services they need. In addition to that, large-scale industry has hollowed out, transferring production to smaller companies; it has thereby reduced its own labour force, but new jobs have been created in the smaller companies.

In any event, new jobs are being created more concentratedly in industries that require high levels of knowledge and expertise, especially the high-technology sector. It appears, however, that those jobs in industry and services are for the highly-educated. That group accounts for a relatively small proportion of the working-age population, but its significance and impact as a motivating force is nonetheless central.

Both OECD statistics and experience in many individual countries indicate that in the future part-time employment relationships will be associated increasingly often with job opportunities. In the Netherlands and Spain, for instance, 33 per cent of jobs are part time, in Norway 20 per cent and in Great Britain all of 40 per cent. In Finland, part-time workers represent only 8 per cent of the labour force. On the other hand, nearly 30 per cent of the working-age population has been jobless for part of the year or has experienced prolonged unemployment since the beginning of the nineties.

According to many researchers studying working life, "just-in-time" employment of this kind will be beginning to play a major role, perhaps even the leading one, in the labour market of the 21st century. They also say that the third wave of the industrial revolution is only spreading into the Third World, a factor that will likewise have an unprecedented impact on employment all over the world.

We must make a realistic assessment of this development - which I have been able to outline only in part. There must be unbiased discussion of the means to be used with the purpose of improving the employment situation. We must look, for example, at the question of shortening the working week. The Italian trade-union movement has the forward-looking slogan: "Let's work less, let's all work". There we hear the voice of common responsibility! However, in developing plans to shorten working time, we must demonstrate prudence and avoid excessively rigid patterns of behaviour and oversimplification. The preconditions for a greater variety of working-time alternatives, which take the situation of both company and employees into account, must be created. Opportunities for a return to working life by the long-term unemployed must be promoted, for example by means of taxation and making the rates of social security contributions payable by employers incremental.

We must determinedly come to grips with the factors in our nation that have a deleterious effect on the speed of job-creation. As the late Pekka Kuusi said in the early seventies: "With tax increases already not only reducing consumption, but also weakening work motivation and reducing productivity growth, increasing social income transfers by levying even more taxes now amounts to eating away at the very foundation of social policy." It is now time to create the basis and goals of a 21st-century social policy that will suit a society of common responsibility and opportunities.

Society has a responsibility to facilitate companies in their operations. Finland needs a new generation of entrepreneurs imbued with a kind of pioneering spirit, operating together and within networks on the basis of their own interests, and thereby being able to fill the enormous gap that exists in the small and medium enterprises sector. That gap came into being during the era of the closed economy. As one example of the obstacles that lie in the way of enterprise, I shall take our corporate tax legislation and the obvious ambiguities inherent in it. Entrepreneurs have to be convinced that the laws on which their decisions are based are not subject to dispute nor elastic interpretations. The state must be the entrepreneur's partner rather than an opponent.

Demands by entrepreneurs, especially those in the service sector, for reform of a tax system that hampers job-creation need to be examined.

At the same time, however, jobs are being rapidly created in sectors that were earlier more unusual. Those part-time employment relationships are an opportunity that should now become the focus of a growing amount of attention. In the United States, new jobs are being created fastest in the community-based, so-called independent sector of the economy. There, community-based services and tasks have been seen as a genuine alternative to the most traditional forms of paid employment. Jobs in that category employ nearly ten per cent of the labour force in the USA and account for six per cent of GDP. In Finland, the equivalent figures are considerably smaller. Yet it deserves to be noted that 1,000 new jobs have been created in Finnish physical exercise organisations and especially sports clubs this year and prospects for increasing that total to as many as 15,000 over the next three years are good. We have the potential in this country too; now we need to get ideas flowing at full spate.

In order to activate the long-term unemployed, we should consider other opportunities alongside existing schemes which have the primary purpose of creating jobs, and which are also distorted by the labour market. Such opportunities would include, for example, facilitating civic activity by persons acting on their own initiative in the third, community-based, sector of the economy.

Researchers have drawn attention to how companies are growing in importance and wielding more and more power in society. It has been calculated that the two hundred or so biggest companies - which, however, represent raw materials production to a significant degree - are gradually enhancing their already strong position in the global economy. In 1982 those companies' share of world GDP was 24 per cent; now it is close to 30 per cent. Yet they employ under one per cent of the labour force. Besides that, growing corporate profits are not reflected in society at large in the manner than one would hope for. Two American researchers, Sarah Anderson and John Kavanagh, have asked why a global economy founded on successful enterprises does not necessarily strengthen the social foundation of societies.

Success brings responsibility. Within the corporate sphere are different kinds of responsibility-bearers, different corporate cultures. The goal of every company is a better result, bigger market shares and a strong capacity to invest. That list does not as such include special responsibility for employment. Unfortunately, a prerequisite for achieving a good result is often rationalisation.

Against a background of mass-unemployment, however, it has been difficult to understand why one and the same company can sack long-standing employees - giving them only the cold shoulder, so to speak - whilst at the same time giving top executives golden handshakes. This is a problem in the United States especially, and hopefully one that we can avoid here in Finland. Incentive-based compensation arrangements should in principle include all employees in a company or chain of companies, rather than being limited to senior management.

A recent survey revealed, perhaps surprisingly, that 50 - 60-year-olds are often a key intellectual resource at workplaces. That finding suggests that intergenerational harmony in corporate cultures is a resource, and not a burden, as too often seems to be the perception.

A vigorous society of citizens, an open atmosphere in that society and a channelling of resources into expertise and creativity are prerequisites for the emergence of new successful companies, new Nokias. A company casts its net into society; it does not breed its own geniuses in-house. Our educational system's atmosphere of hostility towards both difference and creativity has often been cited as the cause of our failure to avail of much of our intellectual potential.

In the rational development of the market economy, many of the keys to solutions have now been entrusted to companies. I urge them to show responsibility. The intellectual truncation of a closed economy prevailed in our companies for a long time. Professor Matti Pohjola makes that point well in his book "Ineffectual Capital", noting that too many companies have invested their capital without proper deliberation and inefficiently. Too conservatively, one is tempted to say. Of course a contributory factor here was corporate taxation, which was extremely lenient in the way it treated the capital that remained in companies' coffers. Whatever the causes, Professor Pohjola's comment is accurate. Nowadays, a successful company must renew itself every day. What is involved is a company's internal ethics, its managerial skill and its capacity for cooperation with the surrounding society.

In this time of transition, what should we do to be able to create conditions more conducive to building a society of common responsibility and opportunities?

The era when the welfare state had the task of guiding all aspects of life has come to an end. I believe nevertheless that the welfare state can be reformed and that it still has important functions to perform. After the creation of social services, there should be a shift away from compensating for losses and more in the direction of providing opportunities. At the same time, the focus of view in societal policy should be transferred from the past to the future, to new opportunities.

It is no longer possible to thrust all social responsibility onto the state. Companies could also embrace some of the public sector's best principles, and vice-versa.

We need a national consensus and a new kind of partnership as the foundation for the welfare state. Interest organisations and the institutions of representative democracy came into being during the industrial era. They must be developed, and that is not a matter of replacing them, but rather of creating and recognising complementary actors.

The private and public sectors will not vanish, but their relationship to people's lives will change. People will organise themselves in a new way, on the basis of changing interests and ideals. With the help of those new communities it will be possible to provide the society of citizens with a better safety net than has existed in the past. It would be a safety net that neither a competitive economy in which the sole goal is profit nor a public economy with a dwindling resource base could devise and maintain. Thus it lies in the interests of all of us to develop a society of citizens.

In the community-centred welfare society that I hope for, one source of livelihood could be employment relationships concerned with the provision of community services. Those jobs would be an alternative to income transfers and the passive receipt of various welfare services. In the view of many respected researchers, this third sector of the economy has the potential to create such a large number of jobs of totally new kinds that we could substantially reduce mass-unemployment.

What we shall need in the future is both a clearer recognition of the economic sector in which those new jobs will be generated and a strengthening of opportunities to develop it. Professor Robert Putnam of Harvard has suggested that growth and development in society will be supported by three categories of "capital": private-market capital, public capital and finally the community capital generated in the third sector of the economy. He is convinced that without balance between these three capitals it will be impossible to create an enduring society, much less safeguard a welfare society. What we need now is specifically a strengthening of community capital. The new partnership model that I have outlined could rest on the factors comprising this assessment, which must still be considered theoretical.

Change in the structures of enterprise and the principles governing the adoption of technology are not predetermined matters thrust upon us by destiny. Decline in the number of traditional employment relationships, rising productivity and constant growth in production volumes can also be understood from the perspective of a new and more sustainable welfare society. Everything depends on our ability to find a new way of distributing livelihood and of devising social arrangements that are more difficult to shape than anything in the past.

Distinguished Audience,

Six decades ago, T.S. Eliot wrote the following lines in his great poem Rock: "We are dreaming of systems, so perfect that no one will need to be good." The welfare state is a conceptual framework for an ideal in which common responsibility can be combined with freedom of the individual, enterprise and bold creativity in all of its forms. In the welfare state that I hope for, citizens will be imbued with a constant desire for mental growth and the opportunity to achieve it.

We now need more information and fresh-minded proposals regarding possibilities of developing the welfare state. We should accomplish a comprehensive study of the kind of welfare state that will match the needs of the 21st century - the kind of society that rests on the principles of common responsibility and opportunities that I have outlined here.