(check against delivery)
The hard times in the world economy have continued for several years now. The situation in Europe is difficult. We have experienced a financial crisis, a debt crisis and a banking crisis, back to back and one on top of the other. I am afraid that in certain cases the situation has already evolved into a social and political crisis as well. Managing the crisis has demanded leadership from us all, both governments and the corporate sector. Leadership is also needed to guide us into the post-crisis era.
During the recent years, we have understood the extent to which all European countries, Russia, the United States, and the other great world economies are dependent not only on each other, but also on the international capital market. Our interdependence is deeper than ever and extends to various sectors of the economy: trade, investments, capital market and energy. Nowadays an increasing number of countries are part of this system. It is also valuable that all are present when decisions are made, for example, on trade rules. It is therefore excellent news that Russia is joining the WTO.
Interdependence emphasises the responsibility of each country for its own economy. As one takes care of one’s own economy, one automatically prevents problems from spreading. Under the single currency responsibility becomes even more important. This responsibility cannot be outsourced.
We still talk about the period of current economic crisis as if we could go back to the pre-crisis world and situation after the economy has begun to grow again. This is not the case, of course. Some of the economic phenomena observable around us are exceptional and will pass, but many issues are both new and permanent. What used to be self-evident is no longer true, and no tickets are sold to a country of the past.
For some time to come we will be in a situation where the emerging economies have the highest rate of economic growth. We will also see the focus of investments shifting increasingly towards the faster-growing economies. Many Western industrial countries, on the other hand, will experience slower economic growth or even economic recession. Most, but by no means all, Western industrial countries are relatively heavily indebted.
Over the past few years, we have observed that the capability for economic growth, or the capability to manage the public economy in a sustainable manner, is not a sole competence of certain economic systems. The lines between the groups of countries that have succeeded or ended up in trouble do not follow the traditional division lines, neither within the EU nor in the world at large. For example, the two EU Member States with the lowest debt rate are Luxembourg and Estonia. And the two countries in the world with the highest economic growth in 2011 were Qatar and Ghana. Economic and social systems with very different starting points have generated economic growth even if the situation around them has been difficult.
I believe this is a permanent phenomenon. No one is doomed to one’s former destiny. In an open world economy, growth is on offer to everyone perhaps even better than ever before. Naturally, it does not come free or without any effort. Belonging or being admitted to a certain group of countries – the EU, NAFTA, OPEC, ASEAN or WTO – is not a guarantee for favourable economic development. At the same time, growth is not automatic for anyone, nor is the continuity of the economic well-being at its current level self-evident anywhere. These will be the key features of the world in which we will be living after the crisis.
Difficult economic times have not only tested economic systems but more broadly societies and social models. The share of the public sector of the gross national product is not the decisive indicator of a stable economy and success, but more important is HOW a state manages its affairs. An efficient, responsible and transparent administration is essential.
Are economic miracles really miracles? Seldom they are. Brisk economic growth is often preceded by decades – or at least years – of hard work. Sustained economic growth and climbing to the top in technology and production requires a longer period of successful economic policy. The real success of many of the countries that have experienced rapid growth in recent years will be judged when they have caught up with those who have been running ahead of them and will have to compete in a new economic league. This requires that the state and the social system are able to adapt and develop as well. The most advanced countries are relatively similar in terms of their political systems.
In other words, at the moment, we need to be concerned not only about the short-term decisions aimed at managing the crisis, but also conscious that decisions being made today are wise with a view to economic growth in the long run. This applies to both the world in general and each country separately. Due to our mutual interdependence, the fallout of bad economic policy decisions does not stop at the state border.
Right now, the circumstances may not necessarily favour making wise long-term decisions. If we want to have an economy based on competence and innovations within 15 years, it will require investments in education and research now, and the opening up of the economy for influences and ideas. If we want a healthy, competent and skilled labour force within 25 years, it will require investments in health care and education right now.
In all countries, political decision-making is put to a market test every day. When decision-making is evaluated on a daily basis, it can lead to short-sighted decision-making. The temptation to seek short-term goals is high. All those who have served as finance ministers know that the responsible management of finances is not always easy.
The Nordic countries are a good example of how growth and economic well-being have been based on economic openness and a capacity to operate in a competitive manner. In an open world economy, small countries and their companies are not predestined to remain small, but can operate anywhere. I would underscore the importance of economic competition in particular as an incentive for economic agility, flexibility and innovativeness. Closed markets produce national-level innovations – open markets produce international-level innovations.
Our Nordic societies are based on rule of law, democracy, openness, and equal opportunity, including equality between the sexes. Equality is the leverage or force multiplier by which all the resources are used to the maximum. By the way, I am the first man elected president in Finland during this millennium.
The Nordic Countries have taken care of their international responsibilities. We have kept our economies in order. We offer our competences on a global scale and earn our livelihood from this. If the Nordic Countries were a single country, at least in terms of the size of our economy we would be a member of G20. Only very few G20 members are as dependent on the world economy and exports as the Nordic countries.
In an interdependent world growth, competence, good efforts or economic policy are not something that benefit or harm any country alone. This is worth remembering as a more comprehensive target for this Economic Forum. An economically strong and technologically advanced Russia is one of the drivers of global growth, benefiting all of us present here. Finland being the largest foreign investor in Russia per capita and Russia being our greatest single trading partner, we in Finland are convinced of this.