Figure 1.--Finnish living standards in the early-20th century were comparable to the rest of the Russian Empire. Here we see rural children in Finland eating turnips in front of a family barn. Condutiins imprioved significanyly as a result of indeoendence wguch resulted in kland reform (1920s). Today Finland even though it has few natural resources has one of the highest living standards in the world in sharp contrast to resource rich Russia. Source: Photo Archive of the Museum of Central Finland.
What is now Scandinavia, Finland, and northern European and Asiatic Russia was originally populated by the Finno-Ugri Tribes. They appear to have migrated from the East inyo the area (some time before 1,500 BC. Gradually the Northern German tribes moved into what is now Scandinavian (Denmark, Norway, and Sweden) and the Slavic tribes into northeastern Russia. The Finno-Ugri tribes continued to dominate the territory between these two groups centered in the much diminished territory of what is now modern Finland and Estonia. The economy of the Finno-Ugri Tribes (such as the The Sami/Lapps, Nenets, Mansi, and Khanty) had an economy based on a nomadic and hunting culture in Arctic regions developing herding skills. Thus proto-Finns probably had a similar economy making a transition to a settled agricultural and fishing people. As the proto-Finns are related to the Sami People (Laplanders) we suspect that they may have been an Arctic hunting/herding people who were settling down to becoming farming people with some fishing. The proto-Finns were largely outside the developing European cultural area. The Sami seemed to have been vaguely known to the Romans, but not the Finns, perhaps the distinction was not yet definitively developed, although Roman knowledge was very limited. Their primary economic and cultural contacts were with the Swedish Scandinavians (northern German tribes). These involved both trade and Viking raiding activities. We read more about Viking raiding into Western Europe because the West was more prosperous and had written language. There does not appear to have been any major Scandinavian settlement in what is now modern Finland. The Swedes conquered Finland (12th century). The Swedish conquest and Christianization were part of the Northern Crusades which was also conducted against the Balts to the south. Finland continued as a largely agricultural people. The traditional livelihood was agriculture supplemented with fishing. The Finns used slash-and-burn methods to open up more lands for farming.
Agricultural was, however, primarily limited to the south for climatic reasons which is why Karela seized by the Soviets was so important. It is also why so little of northern and central Finland was settled. The peasantry like the Scandinavian peasantry remained a free peasantry and was never enserfed like the German and Russian peasantry, even after the Tsarist conquest. Substantial mortality from wars and famine limited population growth between (16th-19th centuries). The Russians seized Finland from Sweden by Russian during the Napoleonic era (1809). At the beginning of the 20th century was still a Grand Duchy within the Russian Empire. As a Grand Duchy, Finland relatively broad autonomy in its economic and many internal affairs. It was a basically agricultural province of the Tsarist Empire. Unlike some parts of the Empire, there was little industrial development. Income levels were about half of the Unites States, but comparable to the rest of Eastern Europe. The peasantry was not prosperous in material terms. Much of the land was held in large estates own by the mobility. Part of agrarian problem as in Russia was the level of agricultural technology. Many ambitious Finns emigrated, many to the United States. Finns fought with the Russians in World War I, but the fighting never reached Finland itself. The country was involved in the Civil War and emerged as an independent republic. Finland at the time was still a largely agricultural country based on a free peasantry. Finnish independence was a huge achievement beyond areas normally understood. One of the most important was that the Finnish peasantry survived and was not destroyed by Stalin like the Ukrainian peasantry. And they gained ownership of the land. The Government undertook lad reform (1920s). The large estates controlled by the old (non-Finish) nobility. The land was sold at advantageous conditions to the Finnish peasantry. The peasantry thus became ardent supporters of the Government an rejected Communism. 【Jörgensen】 The country was involved in World War II when the Soviet Union invaded--launching the Winter War (1939-40). The country's small population and still small industrial base made it difficult to resist the overwhelming Soviet power. Finland joined the NAZI German invasion of the Soviet Union, with much more limited objectives. Considerable damage was done to the country's infrastructure during the War and some of the best agricultural land was lost in the territory seized by the Soviets. The country rapidly industrialized after the War. A factor here was integration with the West and trade liberalization. This had to be carefully managed with diplomacy so as not to cause a Soviet reaction. As a result, Finnish living standards steadily improved. Finland first joined the Outer Seven with Britain, but joined the European Union (1995) and the European Economic and Monetary Union (1999). Finland at the beginning of the 21st century was classified as a small, but highly successful industrialized country. The population shares a standard of living among the top twenty in the world. It has a highly industrialized, basically free-market economy. Per capita statistics are similar to Sweden. The core of the colony is the manufacturing sector, including the wood, metals, engineering, telecommunications, and electronics industries. Nokia is one of the world's leading high-tech companies, specializing in cell phones. The country is a major exporter, about a third of the GDP is based on trade. Finland does not have extensive natural resources. The primary resources are timber and minerals (especially tin). The country has to import large quantities of raw materials and energy, especially petroleum. Agricultural is limited by the country's northerly climate, but basically supplies the domestic market. The forestry sector does contribute to exports.
Pre-history
What is now Scandinavia, Finland, and northern European and Asiatic Russia was originally populated by the Finno-Ugri Tribes. They appear to have migrated from the East into the area (some time before 1,500 BC. Gradually the Northern German tribes moved into what is now Scandinavia (Denmark, Norway, and Sweden) and the Slavic tribes into northeastern Russia. The Finno-Ugri tribes continued to dominate the territory between these two groups centered in the much diminished territory of what is now modern Finland and Estonia. The economy of the Finno-Ugri Tribes (such as the The Sami/Lapps, Nenets, Mansi, and Khanty) had an economy based on a nomadic and hunting culture in Arctic regions developing herding skills. Thus proto-Finns probably had a similar economy making a transition to a settled agricultural and fishing people. As the proto-Finns are related to the Sami People (Laplanders) we suspect that they may have been an Arctic hunting/herding people who were settling down to becoming farming people with some fishing.
Ancient Eras
The proto-Finns were largely outside the developing European cultural area. The Sami seemed to have been vaguely known to the Romans, but not the Finns, perhaps the distinction was not yet definitively developed, although Roman knowledge was very limited.
Medival Era
Their primary economic and cultural contacts were with the Swedish Scandinavians (northern German tribes). These involved both trade and Viking raiding activities. We read more about Viking raiding into Western Europe because the West was more prosperous and had written languages. There does not appear to have been any major Scandinavian settlement in what is now modern Finland. The Swedes conquered Finland (12th century). The Swedish conquest and Christianization were part of the Northern Crusades which was also conducted against the Balts to the south. Finland continued as a largely agricultural people. The traditional livelihood was agriculture supplemented with fishing. The Finns used slash-and-burn methods to open up more lands for farming.
Agricultural was, however, primarily limited to the south for climatic reasons which is why Karela seized by the Soviets was so important. It is also why so little of northern and central Finland was settled. The peasantry like the Scandinavian peasantry remained a free peasantry and was never enserfed like the German and Russian peasantry, even after the Tsarist conquest.
Swedish Early Modern Era (12th-18th century)
Finland during the late middle-ages and early modern era was controlled by Sweden. Sweden was a major European power duringb the late-medieval and early modern period. Just when that was initially etablished is unclear because of the lack of historical documentation. Actual historical evidence of Swedish rule only exist (late-13th century). Swedish rule bgan as part of the Northern Crusades. The established Finnish upper class lost its contol of the population and land to the invading Swedish and German nobility and to the new Catholic Church. There was elevated levels us mortality from wars and famine which limited any population growth (16th-18th ceturies).
Finland was a poor part of the Swedish domains, almost etireltv agrarian, but except for the southern areas, pimarily Kareliza, crop yields were very poor. There were some iron works in the southwest to process Swedish iron ore (17th century). there was also tar burning, sawmilling, and fur trading. Firestry was important, but exports were almost enturely raw lumber and boards. Swedish regulations adversely affected Finland. The small towns in the coastal areas benefited from trade. Sweden enacted regulations requiring that all imports go through Stockholm. Swedish control ended in stages. Swedish control of Old Finland (south-eastern Finland) ended with the expansion of the Tsarist Empire--spcifically the Great Northern War (1721). Therestb of Old Finland was lost in the Hat's War (1743). The lasst stage of Tsarist expansion occurred during the Napoleonic Wars. the Treaty of Hamina ended the Finnish War (1809). All of the eastern third of Sweden was ceded to the Russian Empire and became the autonomous Grand Duchy of Finland. This ended Sweden's role as a major oower leading to Sweden adopting a neutral fireign policy.
Tsarist Era (18th-19th centuries)
The Russians seized Finland from Sweden by Russian during the Napoleonic era (1809). At the beginning of the 20th century was still a Grand Duchy within the Russian Empire. As a Grand Duchy, Finland had relatively broad autonomy in its economic and many internal affairs. It was a basically agricultural province of the Tsarist Empire. Finland agricultural economy almost guaranted national poverty. Its northern latitudeas meant permanet poor climatic conditions. Grains like wheat were developed for warm, dry climates, the oppoite of Finnish conditions. and only a small souther portion of the country like Karelia were suitable for agruiculture at all. There were technological advances. Finish farmers finally moved away from slash and burn methods to field cultivation. This even included the eastern regions. Despite reaiveky poor yields, 70 percent of the population was employed in agriculture and forestry and anout half of the value of the economy's production came from these primary industries at the turn of the 20th century. In contrast to agriculture, large areas of the country were suitable for forestry. There was some industrial develoopmenbt in the Russian Empire during the 19th century, but little of this occurred in Finland.
Part of this resulted from Finland's geographic location, set firmly in the remote northeastern corner of Europe, distant friom the more vibrant western countries. There was some development of paper mills give the country vast forests. Until the late 19th century timber was mostly exported in a raw form with no value added. Other industrial develoopment included textile mills using importedv cotton (1830s-40s) and a few machine shops. The first steam engined power thec rextile mills (1840s). At the same time we see the first rag paper machine. A seam poer plant appared in a swamill (1860). The first railroad was built (1862). It was a line from the coastalm ports to he interuiorv towns. This was also hen the first telegraph asppeared. Other techimogical advances like electricalm power and the telephone Appeared (1880s). Of course it was some ime before theseinnivationsd became widely used.
The country's limited development and weak agricultural sector left in vulnerabke to economoic shock The Great Famine (1867–68). Adverse weather result in a crop failure. It may have killed about 15 percent of the populastion. 【Jörg, p.23.】 Other sources are closer to 10 percent. It was the last Finnish famine and one of the last in Europe.
Income levels were about half of the United States, but comparable to the rest of Eastern Europe. The peasantry was not prosperous in material terms. Much of the land was held in large estates own by the mobility. Part of agrarian problem as in Russia was the level of agricultural technology. Many ambitious Finns emigrated, many to the United States. Finland had a small population, it was not an imprtant as a percentage of the massive wave of European migration to America, but it was of some importance to Finland.
Finland benefitted from the increasing demand for paper products dring the 19h cebntury. This of course offered anique opportunity for a countrhy that had a virtually unlimited supply of raw material (timber) from the vast northern forests. Finland built new, modern paper mills for the export market. The mills produced far beyond the needs of the small domestic market.
Finalnd also ecortedc a variety of both industrial and artisan products to Russia. This began to become imortant (1840s). There were shipments to Russia. The growing British market bagan to open up, escpeailly shipments of lunber from new saw mills (1860s). Wood pulp and paper products became a major export items (1870s). Much of this was shipped to the Russian market. Something like a-third of the Russian Empire demand for paper and wood pulp was filled by Finnish mills. Finland became an increasingly open free market economy (late-19th century). Exports became an important part of the Finnish GDP 920 percet), a much higher percentgevyjan ever before. Fortunterly for Finland, terms of trade improved. Forest and other export prices increased reloative to imprt priucts like grain and industrial products. Finland was on its way to deveoping a modern economy. It was able to import the grain and other food stuffs it needed duty free. A half of its imports were food beverages and tobacco. Finnish farmers turned to dairy farming, emoploying Danish methods. Theresukltys were less rewarding, primarily because of climatic cinduitions. Finland joined the develooing gold standard with its currency, the markka (1878). The Finnish Senate borrowed money atvfvirable rates becuse of its stable economy from Western banks. This financed the building of railroads, scholls, and other infrastructre. The investment rate was estimated at about 10 percent of GDP (1860s-early 1910s). There were some early steps toward industrialization, but labor productivity continued to be relatively low. This was low compared to the leading nations. Much of the economi growth resulted from added labor inputs and expanding the cultivated area as a result of the growing population.
Finns fought with the Russians in World War I, but the fighting meaning the Germans never reached Finland itself. So Finland was kess srriously affected than other areas of the Tsarist Empire. 【Hjerpp】
Independence (1918-40)
Finland following World War I became involved in the Russian Civil War The Finns organized a disciplined force and were able to resit Lenin's efforts to restablosh control over the various non-Russian aeas if the Tsarist Empire. Finland emerged as an independent republic. Finland at the time was still a largely agricultural country based on a free peasantry. Finnish independence was a huge achievement beyond areas normally understood. One of the most important was that the Finnish peasantry survived and was not destroyed by Stalin like the Ukrainian peasantry. And they gained permanent ownership of the land. The Government undertook land reform (1918). The large estates controlled by the old (non-Finish) nobility. The land was sold at advantageous conditions to the Finnish peasantry.
The peasantry thus became ardent supporters of the Government and rejected Communism. 【Jörgensen】 A factor here was they learned what was happening in the new Societ Union, in part because the Soviet retained areas of Karelia.
Finnish independence resulted in the loss of the Soviet market for exports which had an iniial devastating impact. The most immediate impact was food shortages. Finland was not self sufficent in food prduction, much of it had came from Russia. Despite the problems, recovery was fairly rapid. The food shortages were dealt with on an emergency basis as in other countries by American food aid.
The strong demand for forest products enabled the Finns to rapadily reestablish export markets. As a result, the Finns were able to rapidly develp an economy more ike that in the Sandanavian countries. The economy expanded at a more rapid pace than ever before: GDP (nearly 5 percent) and percaoita income (nearly 4 percent). Investment levels al increased resulting in improved labor productivity, further closing the gap with Western standards. Finland was affected by the Great Depression (1930s), but not as badly as most countries. The demand for forest products (pulp and paper). On the other hand, Finnish industries went into depression at different times, which made the downturn milder than it would have been if all the industries had experienced their troughs simultaneously. The Depression, however, had serious and long-drawn-out consequences for poor people.
World War II (1939-45)
The Soviet Union was a NAZI ally for nearly 2 yeras. Afterv invading Poland along withb the NAZIs, Their next victim was Finland. The country was one of the many neutral countries forced into the War by brutal totalitarian agressor nations. Finland was involved in World War II when the Soviet Union invaded--launching the Winter War (November 1939). The country's small army bravely resisted the Soviet invassion. But after inflictung serious lossess to the Red Army was forced to yield. The tiny population and still limited industrial base made it difficult to resist the overwhelming Soviet power. Finland joined the NAZI German invasion of the Soviet Union, with limited objectives--to regain the land loss in the Winter War (June 1941). This was known as the Contunuaion War. Considerable damage was done to the country's infrastructure during the War which included another war to drive the Germans out of northern Finland. These wats were a diater for Finland, resulting in massive destruction, casualties, and loss of territory. In the resulting peace, Finland lost in northern port, valuabke nickle mine, and much of the best agricultural land was lost in the territory seized by the Soviets--Karelia.
Stalin turned the Eastern European countries occupied by the Red Army into brutal Communist police states. The three Baltic republics were acually annexed into the Soviet Uniom. Finland was, however, different. And it is not clearly known why. Stalin could have treated Finland like the Baltics. The Western democrascies could not have prevented it. But Stalin chise not to don so . Thev major concession he got along with more Finnish territiry was that the Finns wouod have to drive the Gernans out of the northerrn part of the country, thus relaeasing the Red Arny to concentrate on the drive to Berlin (1944-45). But the Finns had to pay a price and that price was Findlandization. For several decades, while Finland survived as an independent and unoccupied democracy, it did so under the looming shadow of Soviet Union and the NKVD. It gave the Soviets real influence over the country's politics, especially foreign policy. While Finnish neutraility largely meant Soviet infkluence in political and fireign policy, there were also economic consequences. Integration with the West brought trade liberalization. This had, howeever, to be managed with small steps diplomatically so as not to bring about a Soviet reaction. The steps had to be carefully calculated while Stalin lived. His death (1953) meant that great engagement with the West was possible. Finland's Cold War neutrality dance meant retaining more economic and trade relations with the Soviets than it might have liked. The Finns, for example, were not allowed to accept American Marshall Plan aid (1948). Bilateral trade agreements with the Soviet Union started in 1947 and continued until the Soviet Union was disolved (1992). On the other hand, the Finns were allowed to join imprtant Western economic bodies: the World Bank, the International Monetary Fund (IMF) and the Bretton Woods agreement (1948), Finland becanme a member of the General Agreement on Tariffs and Trade (GATT) (1950). Finland participated in European trade liberalization. The first step was an agreement between the European Free Trade Area (EFTA) and Finland (Finneft) (1961). Finland eased tariffs in trade with Western countries. Of course, NATO was out of the question, but neither was Finland forced to join the Warsaw Pact. While Finlandization enabled the country to avoid the painfuln fate of Central and Eastern European satelite states which becamev part of the Soviet empire, Finland’s independence came with a large dose of self-censorship and accepting a substatial degree of Soviet controls. Finland after the War was still not fully industrialized. Many Finns despite losing Karelia were still involved in agriculture as well as mining and forestry. And the process of indutrilization was slowed by limits the Soviets placed on engagement with the West. The country did industrialize and unlike the Soviets created efficent profit making companies that could compete in Western markets. And as a result, Finnish living standards steadily improved, much more rapidly than in the Soviet Union.
Economic Independence
Finland’s economy is is primarily capitalistb based on private ownership. In afew sectors sectors the government plays an imprtant roler and inn some cases erercising a monopoly.
Finland first joined the Outer Seven with Britain, but eventually joined the European Union (1995) and the European Economic and Monetary Union (1999). Finland at the beginning of the 21st century was classified as a small, but highly successful industrialized country. The population shares a standard of living among the top twenty in the world. It has a highly industrialized, basically free-market economy. Per capita statistics are similar to Sweden. The core of the economy is the manufacturing sector, including the wood, metals, engineering, telecommunications, and electronics industries. Nokia is one of the world's leading high-tech companies, specializing in cell phones. The country is a major exporter, about a third of the GDP is based on trade. Finland does not have extensive natural resources. The primary resources are timber and minerals (especially tin). The country has to import large quantities of raw materials and energy, especially petroleum. Agricultural is limited by the country's northerly climate, but basically supplies the domestic market. The forestry sector does contribute to exports.
Sources
Baten, Jörg. A History of the Global Economy. From 1500 to the Present (Cambridge University Press: 2016).
Hjerpp, Riitta. "An Economic History of Finland," EH.Net Encyclpedia (2008)
Jörgensen, Hans. "The Inter-War land reforms in Estonia Finland and Bulgaria: A Comparative Study," Scandinavian Economic History Review (April 2006), Vol. 54 Issue 1, pp. 64-97
