1. © Capacent 0 A research project on how Finnland reacted to the economic crisis of 1991 Forbundsseminar NlS Rethinking the system

2. © Capacent 1 The scope of the project The projects initial scope was as follows: Evaluate Finnlands reaction to the economical crisis and bank crisis of 1991 Analyze governmental decision making and evaluate their effects What decisions weakened society in the long rung Emphasis on the collection of subjective data

3. © Capacent 2 Data Collection Data was collected through conference calls with key players and correspondence Assisted by Anders Rusk General Secretary of the Nordic Teachers Union The Finnish Ministry of Education appointed a liaison to assist in the collection of data

4. © Capacent 3 The Finnish Crisis Main Findings

5. © Capacent 4 Finnland‘s Economical Crisis in the 1990s Two main factors created the crisis: Governmental Policy 1980-1990 Financial market deregulation Foreign financing Fixed exchange rate High interest rate – foreign capital influx Overinvestment Credit and Real Estate bubble Flight of Capital Higher interest rates Collapse of bilateral trade with the USSR Collapse of bilateral trade (20% of exports) Banking system collapses Bank refinancing Dependence on foreign financing Enormous unemployment (high of 18,4%) Economical and financial crisis in Finnland

6. © Capacent 5 Measures to combat the crisis Analysis of the Finnish governments response towards the crisis shows that its actions did not rely on a single coherent strategy, action plan or indicators. Instead a multitude of smaller strategic decisions and actions served to form the final strategy. Luck, correct timing, the right emphasis in educational and innovation policy What action was taken to preserve quantity and quality of education? Policies to protect education and general living standard during crisis

7. © Capacent 6 Reorganization of Public Finances Foreign debt reached a high of 68% of GDP Cost of bank refinancing was 7,5% of GDP in 1994 GDP shrunk some 10% in 1991-1996

8. © Capacent 7 Resolvment of currency crisis and EU membership First response: Get control of the currency Dismantling of fixed exchange rate policy Inflation targeting. Floating of the Markka until 1996. Interest rate down to similar level as in Germany in 1993. Increased competiveness EU membership approved in 1994 referendum. Membership in 1996

9. © Capacent 8 Unemployment and downsizing of public finances Unemployment has become a long-term problem in Finland Financing problems in welfare system Drastic budget cuts in education, health and social services Discussion with social partners Broad societal consensus on main economical goals

10. © Capacent 9 Education policy changes in 1991-1994 Finland consists of 10% water, 69% forests and 8% agricultural area General agreement that utilization of natural resources would not resolve crisis Preferred solution was a new finnish knowledge society Telecommunication and Biochemistry new core competences in Finland Educational budget cut by 20% in 1991-1995 Ambitious policy initiatives and budget cuts. Paradoxal? But how was it done?

11. © Capacent 10 Systemic changes and decentralization Decentralization of government system Increased power and responsibility of school managers Decision-making moved closer to recipients of services No centralized testing Central curriculum becomes „framework“ for schools and municipalities Flexibility, innovation and solving problems on a lower administrative level Freedom for teachers to choose curricula. Progressive use of IT in teaching Systemic changes create a new finnish knowledge society. External revision to evaluate performance of individual school units. Action to increase performance if needed.

12. © Capacent 11 Financing of R & D Systemic changes and increased innovation in education system only part of the solution Heavy investment in R&D to create new knowledge society Finland Japan USA

13. © Capacent 12 Economical consequences of the crisis Unemployment peaks in 1996 Many individuals „trapped“ in the educational system suffer when the economy recovers Emergence of a „lost generation“ Social consequences not fully evident until 1996 It is clear that the full consequences of a deep recession on the societal structure take time to develop

14. © Capacent 13 Conclusions from the Finnish crisis What can we learn from the Finnish experience?

15. © Capacent 14 Consensus on action Consensus on necessary action and long term vision. Government, social partners and interest groups agree on common interests. Emphasis on investing in human capital and education in spite of downsizing of the government budget. Decision are reached through a democratic process. Broad consensus makes implementation easier. Of course there was dissent, but clear understanding on how conclusion were reached and how decisions were taken.

16. © Capacent 15 Decentralized system of education Icelandic schools enjoy substantial independence but we could learn from Finland about the use of teaching methods and flexible curricula. Finlands experience of a decentralized system suggests that it promotes innovation both in the system and on an individual level. The finnish system might prove an interesting case for Icelandic authorities and interests groups to study further. Increased authority and responsibility of individual schools must be subject to external revisions.

17. © Capacent 16 Supporting those without employment Where Finland did not succed was in supporting certain societal groups. Various educational programmes for the unemployed. Participation in the programming was seen as just another form of benefits. The authorities did not counteract these sentiments decisively enough. In retrospect these educational programmes should have been linked more directly to the labor market.

18. © Capacent 17 Educational Institutions Social remedies for children of the unemployed should have been more decisive. This has been a topic in Iceland. The Welfare Watch is an example of learning from the finnish experience. Schools were able to improve efficiency on their own terms and create an environment that suited local conditions. Specific and locally specific decision taken in most schools. Flexibility used to utilize local strengths and fulfill local needs. The finnish methodology in external revisions of schools could be an example for others. Emphasis on improvement and support.

19. © Capacent 18 At last... Finlands experience characterized by the ability to find common solutions through discussions. Finland was able to find a solution that ensured generational equality. Present generations in the educational system should recieve education that is at least as good as the education recieved by previous generations. The group at risks consists of at least five school years in each school stage. The challenge that government, the general public and interest groups are faced with is how to rethink the system when facing a new reality.

20. © Capacent 19 Questions or comments?

21. © Capacent 20 © Capacent Rethinking the system arnar.jonsson@capacent.isarnar.jonsson@capacent.is // arnar.palsson@capacent.isarnar.palsson@capacent.is