“Finland is slowly but steadily sinking into increased economic hardship. The lack of growth combined with increased unemployment is fought off by increased public spending and debt, with the implicit assumption that growth is just around the corner. It is hard to avoid the mental picture, where we stand on the deck of Titanic listening to a string quartet – instead of looking for a life boat.
The crisis that our nation faces is often quite correctly described as a structural crisis. It is however important to understand, that “structural” does not necessary translate into “unavoidable” in this context. Depicting the crisis at hand as structural, includes an implied assumption that we produce the wrong products, but at the right price. However, anyone who has studies basic economic theory – or attended Black Friday for that matter – knows that prices have an effect on demand.
Before we joined the euro zone, prices in Finnish markkas (FIM) could evolve differently from for instance prices in Deutschmarks (DM). When prices in FIM increased faster than prices in DM – as often would have been the case – the FIM/DM exchange rate reacted to counterbalance the relative price increase in FIM. Hence, the competitiveness equilibrium was maintained by demand and supply in the currency markets. A freely floating currency regulates the competitiveness of an economy in a much similar way to the centrifugal governor in the Boulton & Watt steam engine of 1788.”