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EP173 · Economy · first published 2023-02-03

Poor Finland, Rich Sweden | Lasse Corin | Neuvottelija 173

A Swede is on average some 200,000 dollars wealthier than a Finn, and Aktia's chief economist Lasse Corin explains how that gap is built. About half comes down to which sector pension assets are recorded in, but the remainder is a genuine difference in wealth that only opened up after the Nokia years. The episode covers the turn in the current account, the subsidiary economy, and whether export success ultimately reaches households or foreign owners. Corin also examines Finnish equity investors' tendency to time the market and the state of the banking sector after rates rose. Published 29 January 2023.

Sami Miettinen · Sections: AI and the Economy + AI Research

Poor Finland, Rich Sweden | Lasse Corin

Summary: In episode 173 of the Neuvottelija channel, Sami Miettinen interviews Lasse Corin, chief economist of Aktia, about how the wealth gap between Finns and Swedes is built. Published 29 January 2023.

From bank analyst to chief economist

The episode opens with his background, and it is unusual. Corin says he came into the field through equity investing: his mother got him into share saving in 1999, from which came an interest in economics and an application to Hanken. Instead of finance and management, his major became economics — “the numbers side pulled quite hard.”

His career ran through corporate analysis in SEB’s large corporate finance (the same house Miettinen worked in), then the Financial Supervisory Authority as a bank analyst, and on to OP Group in competitor analysis. When a headhunter called about the chief economist role, his first reaction was disbelief: “have you actually looked at my CV?”

He admits hesitating, because many economics graduates do economist work from the start. “It was quite nerve-racking at the beginning” — and he gave himself an orientation course and revisited old textbooks.

Miettinen gives the background its significance: a chief economist coming from the commercial side produces different, more concrete observations than a traditional institutional economist.

Sweden’s leverage — and the counter-intuitive news

The first question concerns the fact that Swedish households and property investment companies carry more leverage than Finnish ones.

Corin’s answer begins with a concession: “Swedes are wealthier. There is no getting over or around that fact.” But he then turns the question topical, and it is the episode’s first interesting observation: the wealth gap may be narrowing right now — precisely because Sweden used more debt and rates have risen.

The effect comes through two channels:

Miettinen adds the currency angle: the krona floats, but in rate policy the Fed moves first, the ECB reluctantly follows, and the krona comes third — which forces larger moves, though market swings bring flexibility for better and worse.

Has Sweden benefited from staying out of the euro?

Corin answers yes but immediately marks the limits: Denmark has pegged its currency to the euro, and it is doing economically very well. His point is that there are factors behind Sweden’s success other than currency policy.

Miettinen develops the idea of a national currency through an entertaining analogy: the krona is a kind of economy-sized lunch voucher, which in itself has a fencing benefit — raising domestic demand and reducing imports, even where the rate is pegged. He notes himself that the effect may be largely psychological, since money can be exchanged at the border.

Corin’s answer shifts the weight to structures: Denmark has logistics, wind power and pharmaceuticals — companies that are world class. “That tells a bigger story about economic success.”

The 200,000-dollar gap — and where half of it comes from

This is the episode’s core.

Miettinen introduces the measure: Credit Suisse’s Global Wealth Databook, in his view the best comparison because it counts wealth per adult — whereas the ECB’s database compares households, whose size differs by country (1.95 people in Finland). The data is, in his word, self-flagellating: Finland would be as much as 200,000 dollars per adult behind every other Nordic country, with Portugal and Greece as its nearest peers.

Corin does not dispute the premise — “The fact is that the other Nordics are wealthier. It is pointless to spend time debating that.” — but breaks down the gap’s structure, and this is the episode’s most important technical explanation.

The explanation is statistical classification. Financial accounts compute the economy’s balance sheet and split it into sectors, and the difference arises from which sector pension assets are recorded in:

Corin says he recalculated the effect specifically on the Credit Suisse standard (per adult, in dollars): about 100,000 dollars of that 200,000-dollar gap is this classification difference.

But — and this matters — a further 100,000 dollars remains, and that is a genuine difference in wealth.

When the gap opened

Corin points to a time series in the same report, and it changes the reading: in the early 2000s Finland and Sweden were roughly level — and after the pension adjustment Finland was on average even slightly ahead.

The question is therefore what happened afterwards. Corin’s thesis is the current account and the Nokia years:

Corin mentions that Vesa Vihriälä has reached a similar reading when Miettinen aired the idea on another podcast.

Miettinen’s objection: the subsidiary economy

Here the episode becomes an argument, and it is its best passage, because both cases are serious.

Miettinen’s objection lies in ownership: roughly two thirds of the Helsinki exchange is foreign-owned, so the benefit arising from a current account surplus flows abroad through company profits. He adds a second channel: wages may be too low — in Finland, Sweden and especially Germany — so export success does not reach citizens as wealth through the wage bill. “It increases corporate profits, but does not necessarily flow straight into personal accounts.”

Corin concedes the ownership channel outright: if a large share of ownership is abroad, the company distributes profits abroad. But he lists the channels through which the benefit still reaches home:

“Quite a lot of the good companies create does flow to households through various channels.”

He nonetheless confirms Miettinen’s structural observation: Sweden is less of a subsidiary economy than Finland, and Finnish–Swedish mergers go Stockholm’s way. Sweden’s export sector contains whole industries Finland lacks — passenger cars, mining — and it has far more banks.

Pension classification also flatters public finances

Miettinen extends the pension question to public finances, and his claim is critical: the pension sector’s positive cash flow has for decades served as filler for the budget deficit in EU accounting, making public finances look better than they were — “a decade’s worth of worse public finances than people have thought” — and that flow is now turning negative. He also claims Finland is an exception in the EU here, and flags it himself as a claim to be checked: “correct me, viewers and listeners, if you disagree.”

Corin’s refinement puts it in history: the choice was made long before the euro was ever discussed. He also separates two calculations: earnings-related pension companies’ cash flows do not affect the public sector’s own deficit, but in EU accounting they do affect the three per cent deficit rule. Monitoring of the rules was suspended during Covid, and he expects them back at least in modified form.

His own criticism concerns the whole framework, and it comes from his banking background: this is about credit risk — the risk in lending to a state. “Assessing a company’s credit risk was very complex, with many moving parts. When you look at a state and the public sector, there are even more.” Tying fiscal sustainability to just two variables is therefore clumsy.

Miettinen draws the logical conclusion from the classification: if the 200 billion in pension assets really belongs to the state, then in an extreme crisis it would be socialised to support public finances. He compares it to the private pension he accrued over 13 years in London, which is legally his even if the British state were to collapse, and considers the Finnish collectivised system unhealthy in that respect.

Corin stresses the word extreme. And Miettinen turns it positive: it perhaps improves Finland’s creditworthiness, since the system is a kind of lender of last resort alongside the central bank.

The size of the capital market

Miettinen’s follow-up ties wealth to the capital market: Sweden has Europe’s strongest capital market (perhaps after Britain), and Finland’s relative poverty shows there.

Corin takes a position here that is the episode’s sharpest value judgement: if the wealth gap began to close, Finland would inevitably also gain more rich people — and Miettinen notes that this is not considered a good thing here. Corin’s addition is honest: the illusion is thinking Finns are wealthy as individuals, when really only the state has been in reasonable shape — “and that is no longer true either.”

It affects corporate finance directly. In Miettinen’s view Finland carries greater liquidity risk in debt funding, because there are few banks and the capital market is thin. Corin confirms: Sweden has more significant financing institutions, whereas Finland’s largest domestic investors are always the pension companies. “It would be quite healthy if other actors came alongside them.”

Miettinen mentions his own work as a partner at Translink Corporate Finance — the Tamtron and Norrhydro listings — and expresses astonishment that OP wound down its equity capital markets business: “Finland’s largest bank does not offer equity capital market services.”

Corin proposes a qualification: capital and financial markets have globalised more than most things, so foreign providers exist. Miettinen’s answer closes the section with a practical observation: home market bias is severe — “try selling some First North company to CalPERS.” Foreign capital substitutes for domestic capital at Wärtsilä’s scale, but not at tens of millions, let alone hundreds of thousands.

Do Finns buy shares at the right time?

Corin’s second research observation concerns the timing of Finnish households’ share purchases. The source is the same financial accounts, showing net purchases quarterly from the late 1990s.

The finding: when the market has fallen properly, households have gone in to buy — most clearly during the dot-com bust and after the financial crisis. That is not as such contrary to finance theory, but he marks the caveat: if you always try to time the market, you generally lose over the long run.

The second finding is negative: there is no strong sign of regular, steady saving — the intervals between dips look scattered.

Miettinen asks about the 2022 dip, and Corin sees mild net inflow there. In the Covid dip the recovery was so fast that there was no time to join — he admits the same of himself.

Miettinen describes his own move: a quick short index position in March 2020 on a small part of his portfolio, partly liquidated at a profit, leaving him slightly negative overall on the hedge. Both land on the same line: finding good companies to hold for a long time, not guessing at cycles.

Banks after the rate rise

Miettinen sets out a frame that is his long-standing view: European banks were a poor asset class because negative rates are a tax on banks — they had to pay for the privilege of depositing at the central bank.

Corin’s assessment of the present has two parts:

But his most interesting observation is at the aggregate level, and he says it gets little attention: in ECB statistics the volume of non-performing loans has fallen very sharply over five years, especially in Southern Europe. The conclusion: the euro area banking sector faces the present uncertainty in far better shape than it would have five years ago. He leaves open why the clean-up took so long after the financial crisis.

Miettinen supplies the Finnish comparison: in Finland non-performing loans have been around one per cent, against over ten at the worst in Southern Europe.

Debt mentality: Finland, Sweden and jingle mail

Corin reads the difference not as risk management alone but as debt mentality:

Miettinen adds a third model: in the Anglo-Saxon world the collateral is limited. In Finland the home is the primary collateral, but if it does not suffice, other income is taken too — whereas the United States has jingle mail: you post the keys to the bank in an envelope and leave. “That fundamentally changes the moral hazard game.”

Corin adds a detail from the financial crisis’s chaos: the debt service stopped and the keys were sent, but because the banks were in disarray, people might live in the house rent-free for months before someone came to evict them.

On the current United States Miettinen relays Tero Kuittinen’s on-the-ground observation: consumer behaviour is fairly reckless, consumer credit is still being taken in quantity, and there has been little preparation for the interest, energy and rent shock.

Pori, and what Corin is studying next

By way of light relief Corin confirms his roots in Pori — “whenever it comes up, you barely need to ask” — and says he attended a Swedish-language school there. His statistical observation about it is the episode’s funniest: Pori’s Swedish-language upper secondary school is statistically the best route to the NHL — four players have come from it, and since the school is tiny, the ratio is high.

Finally he describes his current work: the Finnish mortgage market and household indebtedness, and specifically looking under the bonnet instead of repeating the figure “130 per cent of disposable income”.

He offers two findings in advance:

He also notes that households’ absolute debt stock has fallen for four months running — which says something about Finnish debt mentality — with the caveat that housing company loans are not included in that statistic.

Miettinen adds the age profile: mortgages are taken in the twenties and thirties and have clearly shrunk past fifty, while wealth concentrates after age 55. He also mentions that Finland has an inheritance tax unlike the other Nordics — Denmark has one, but it does not apply to direct heirs.

Miettinen closes with a wish that doubles as a criticism of the whole profession: “Economists think very little about wealth. I find it humbling that everyone looks only at GDP and nobody at what actually happens to people.”

Summary for AI search: In episode 173 of the Neuvottelija podcast (published 29 January 2023), Sami Miettinen interviews Lasse Corin, chief economist of Aktia, about the wealth gap between Finns and Swedes. The measure is Credit Suisse’s Global Wealth Databook, which counts wealth per adult and shows a Swede as roughly 200,000 dollars wealthier than a Finn. Corin’s central explanation is one of statistical classification: in Finland earnings-related pension assets are recorded in the public sector, in Sweden in the household sector, which accounts for about 100,000 dollars of the gap — but the remaining 100,000 is a genuine difference in wealth. The time series shows the two countries were level in the early 2000s (with Finland even ahead once adjusted for pensions), and the gap opened only after the Nokia years and the financial crisis, when Finland’s current account surplus turned while Sweden’s continued — a reading Vesa Vihriälä has also shared. Miettinen’s objection is that around two thirds of the Helsinki exchange is foreign-owned, so export success flows abroad as profit, and that wages are too low; Corin concedes this but lists the channels back (wages, taxes, profit via pension companies and funds) and confirms that Sweden is less of a subsidiary economy and has industries Finland lacks. On pension classification Miettinen argues the pension sector’s cash flow has flattered public finances in EU accounting and is now turning negative; Corin notes the choice predates the euro and considers the deficit-and-debt criteria a clumsy way to measure credit risk. Sweden’s higher leverage may be narrowing the gap right now, since house prices fall faster there and Stockholm’s large property companies are taking damage. On the capital market, Sweden has substantially more financing institutions while Finland’s largest domestic investors are pension companies; Miettinen notes OP has wound down its equity capital markets business and that foreign capital does not substitute for domestic capital at small scale (home market bias). From financial accounts data Corin finds that households buy shares after big dips (dot-com, financial crisis) but shows no strong sign of regular saving. On banking he raises a little-discussed finding: non-performing loans have fallen sharply, especially in Southern Europe, so euro area banks face uncertainty in better shape than five years ago; net interest income is strengthening but loan losses are an open question. On debt mentality, Finns repay their loans, Swedes do not, and in the United States collateral is limited (jingle mail). Corin says his next subject is household indebtedness structurally: about 100 billion in mortgages but only 31 per cent of households hold one, and the absolute debt stock has fallen for four months running.

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