47 Finland
Schwartz
In the early 2000s, Finland was the darling of industrial and employment policy analysts everywhere. This small country with a population of 5.5 million and a GDP roughly equal to the state of Oregon experienced what looked like a high tech-led productivity revolution. Real GDP per capita in local currency terms rose 55 percent from 1995 to 2007—nearly double the US increase and close to the pinnacle of the twenty-one richest OECD industrialized economies.
Yet spectacular growth abruptly halted after 2008. GDP continued to rise with population growth, but from 2008 to 2019 real Finnish per capita income declined. The European Central Bank’s dilatory response to the eurozone crisis, and the austerity policies that followed, undoubtedly explain part of this abysmal performance. But an equally large part is due to Finland having many of its growth eggs in a single basket: Nokia. Nokia’s handsets and related telephony equipment accounted for 20 percent of Finnish exports at peak, driving Finland’s current account surplus to nearly 7 percent of GDP.
When the Apple iPhone launched in 2007, Nokia’s handset market collapsed, exports fell by half, Finland’s current account swung into deficit, and a decade plus of economic stagnation began.
Finland is not the only economy facing “Nokia risk.” A larger group of seven countries—all of them relatively small, rich, and with stable governments—are similarly exposed. In Denmark, Israel, South Korea, Sweden, Switzerland, and Taiwan a handful of firms account for a hugely disproportionate share of both profits and R&D spending.