The Finnish Model of Information Society

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Helsinki, 5 November, 2002 — The Finnish Model of Information Society

Finland has developed information society consistently over the years. The first explicit strategy for information society was published in 1995. The updated strategy was created by Sitra, the Finnish National Fund for Research and Development, some years later and published in 1998 under title “Quality of Life, Knowledge, and Competitiveness”. The development has been quite fast and in the beginning of 21st century Finland is one of the most developed information societies in the world. Our innovation system is working well and the competitiveness of Finland’s economy is at high level.

Finland has developed information society consistently over the years. The first explicit strategy for information society was published in 1995. The updated strategy was created by Sitra, the Finnish National Fund for Research and Development, some years later and published in 1998 under title “Quality of Life, Knowledge, and Competitiveness”.

The development has been quite fast and in the beginning of 21st century Finland is one of the most developed information societies in the world. Our innovation system is working well and the competitiveness of Finland’s economy is at high level.

The basis for that development was laid down over decades. Public and private R&D organizations have invested heavily in electronics and telecommunications long before the Internet and the very concept of information society existed. One reason for the rapid development of information society in Finland is that Finnish people are curios and eager to adopt new technological innovations in their work and daily life.

So far so good. However, what is really essential in information society is the impact of information and communications technology on the entire economy and civil society. In taking this view, we not only start to see some real strengths, but also weaknesses of our society. Let us follow the analysis provided by Mr. Manuel Castells and Mr. Pekka Himanen who have recently published a book The Information Society and the Welfare State - the Finnish Model (Oxford University Press 2002).

In the Finnish model the role of the state has been considerable. State provides free education as well as funds for research and development, thus strengthening our innovation system. State is also strongly redistributing wealth by progressive taxation and universal social security. Public services are extensive including good public health care and day care for every child. Also the regulatory environment has been open to free competition in telecommunications.

What is interesting in the analysis of Castells and Himanen is the way they combine information society and national identity. They emphasize that information society is a new survival project for Finland and - even more - it is a project of building the Finnish identity. May be so, but then a crucial question arises: how firm is that project? Can we really bas our survival and identity on information society?

I want to point out some obstacles. The productivity of the Finnish industry is very good in electronics as well as in some major fields of our traditional industry like, say, forest industry. But the productivity in services, including public services, is not that high. One reason for that is that the application of ICT in services is not yet well elaborated. Of course, we do have some solid in services as well as, for example, the banking sector. However, a huge challenge for Finland is to learn to apply information technology in the service sector in areas like retailing and health care. This is especially important in public services because they must be produced more efficiently to reduce costs and lessen the tax burden.

The degree of penetration of information technology to civil society is a crucial factor in benefiting of it. Although Finns are heavy users of mobile phones, the Internet connections from home still are not that common (about 40% of house holds). This explains partly why BtoC commerce has not really taken off. The access to the Internet is dividing the population. Students and people employed have easy access to the net in schools and in working places. Older and unemployed people, however, do not have that (regardless of the fact that the net is available in public libraries). In these groups also the skills needed to use the Internet are lacking. Of course in this Finland is not alone, every country has similar problems.

One of the main conclusions Castells and Himanen presents is, that there are different models for information society. The Finnish way to develop information society is to emphasize the role of the government and the welfare state. Finnish case demonstrates that it is possible to combine the welfare state and good competitiveness of economy. Other models the authors mention are the Silicon Valley model and the Singapore model. The research to compare the different models is going on in the Berkeley Center for Information Society (BCIS) situated in International Computer Science Institute (ICSI) in the University of California at Berkeley.

During this fall (2002) I serve as a visiting scholar in Berkeley working in BCIS. One of my interests is to study the Silicon Valley model. Based on my observations I like to present some most challenging facts. One is the dynamics of Silicon Valley business environment. In Silicon Valley people are open to new ideas. When the idea proves to be promising, the needed resources to create a new business can be gathered without a delay. Clearly the networks of people and different partners are working together extremely well. Another feature is the entrepreneurialism: the strong incentives to establish new companies. What is important to Silicon Valley is that immigration provides a huge potential of talents and entrepreneurs. Silicon valley is attracting immigrants from China, India, Taiwan, and other Asian countries.

What is lacking in Finland are the very same aspects: dynamic networking, entrepreneurialism, and immigration. I think that we are moving towards more dynamic networking, especially in high tech and multimedia fields. Also the younger generations are more willing to establish their own businesses. What is needed, in this respect, is to develop taxation to provide more economic incentives. The taxation of labour is too high in Finland. The hardest lessons to be learned from Silicon Valley is immigration and multiculturalism. Our culture is homogeneous and it’s a big challenge to open our country to meet multiethnic world.

When we in Finland emphasize mobile communication, people in the USA trust the Internet. The Internet is used strongly in BtoB and BtoC relations. eCommerce is well developed and largely adopted also in house holds. Services in the Internet are easy to use and people seem to have confidence in them. Some services are very innovative, like eBay, which is a general market place in the Bay Area. Also commodity business can be based on the Internet from which Cisco is a well known example. The Internet will be even more efficient in the future when the Internet access is provided by wireless local area networks. WLAN seems to be a promising solution to mobile Internet access. I think that we in Finland can learn very much from the people in Silicon Valley about the innovative applications of the Internet to services and to the daily life.

Antti Hautamäki
Research Director
Finnish National Fund for Research and Development Sitra

More information
antti.hautamaki@sitra.fi
http://www.sitra.fi