kari, markus

Pilot to the West - Bank of Finland as a Westernizer of the Economic Policies of the 1980's

During the late cold war period, the external economic relations of Finland were divided into two distinct paths. There was the “Western” orientation towards the market liberalism. Also the “Eastern” route was travelled, based on the Finno-Soviet Treaty of 1948 (Agreement of Friendship, Cooperation, and Mutual Assistance) and following the socialist orientation. The resulting division gives rise to arguments locating Finland “between” the East and the West.

Both economic realities were modeled, analyzed and controlled within the Bank of Finland. BOF was responsible for keeping up the Keynesian control mechanisms and limited capital mobility of the western model. It participated in the western economic co-operation, sending its economists to learn at and import ideas from such western organizations as OECD, IMF and BIS. On the other hand, BOF had a department devoted to the control of the eastern trade and its payment clearing system. Thus, BOF provides an excellent view on both how the two systems were perceived by the Finnish economic elite.

In the early 1980’s, BOF’s ideology in relation to “market mechanism” and “competition” began to change. It is evident, that more weight was put on these western ideas in the planning of economic policies. This paper analyzes the thinking of the BOF economists’, mainly based on the material of the BOF’s 1982 internal seminar. The lighthouse of ideas was seen in the West, as the economic elite wished to position Finland among the OECD club of rich countries. On the contrary, the Eastern model was thought to be something substandard of and secondary to the “real” western economy. As the general political direction began to gradually change from left to right, the steer towards the market oriented and competitive West was piloted by the highly educated economists and civil servants of BOF.

Wednesday 24 October 16:45-18:45 Panels II, Panel 4 Between East and West during the Cold War (Auditorium II)