EP183 · Economy · first published 2023-03-22
Economics Instead of Number Magic | Martin Paasi, Elina Valtonen | Negotiator 183
Two National Coalition candidates ten days before Finland's April 2023 election: Nordnet economist Martin Paasi and MP Elina Valtonen. The most usable part is not the campaign pitch but the unpicking of a concept: making something more efficient is not the same as cutting it, and Paasi illustrates the difference with a concrete health centre example. Also Paasi's proposal that Finland simply telephone the hundred most growth-hungry companies in the world and ask directly what an investment here would require; criticism of promising Hornets to Ukraine rather than building Finnish defence capacity; ministerial competence in negotiations such as the Uniper deal; and work-based immigration, labour market testing and Estonia's flat tax. Published 22 March 2023.
Economics Instead of Number Magic | Paasi, Valtonen
Summary: In episode 183 Sami Miettinen interviews two National Coalition candidates, Nordnet economist Martin Paasi (Uusimaa) and MP Elina Valtonen (Helsinki), ten days before Finland’s April 2023 election. Published 22 March 2023.
A note on reading this. This is an election episode in which two candidates from the same party speak in their own names. The views are theirs and are attributed by speaker. Campaign promises and forecasts are marked as forecasts, and the article takes no position on who is right. Both men are criticising the incumbent government, so the other side is not represented here — worth keeping in mind.
Efficiency is not cutting
This is the best single passage in the episode, and it is worth reading even if election politics holds no interest. It concerns a distinction that Finnish debate routinely collapses.
Miettinen and Paasi raise a televised debate in which the Coalition’s line was attacked for increasing health and social spending over the first parliamentary term by three billion rather than four — and for this to have been characterised as a cut. An increase of three billion was described as a saving, and the saving as a cut.
Paasi’s definition is precise:
Making things more efficient means doing them more intelligently, that is, more productively. It does not mean people having to do more work or longer days.
And then he does what is rarely done in this argument: gives a concrete example. One health centre had three-month queues. The staff were allowed to work out how to clear them, and settled on handling everything possible by telephone — in the mornings six nurses around one doctor taking calls, so prescriptions and the like are dealt with and afternoons free up for anything more serious.
This is a concrete example from lived experience of what making something more efficient actually means.
Valtonen’s parallel is international and inverts the usual assumption: if a health system were better the more money is poured into it, American healthcare ought to be the left’s dream, since it costs an enormous share of GDP. That does not mean you get care when you need it.
Number magic: what a tax rate does and does not tell you
The episode’s title comes from here. Miettinen notes the government’s tax rate rising from 41.8 to 43.2 per cent, and that Finland has passed Sweden such that 97 per cent of the world’s countries tax less.
Valtonen does not take the simple comparison. She notes that Denmark taxes more still, and then enters a methodological caveat that is among the episode’s most analytical moments:
Comparing a single country to our situation is quite problematic.
Miettinen deepens the same point from the other direction: Denmark’s VAT is a flat 25 per cent, its top income tax rates are lower than Finland’s and its lowest are higher — and nobody in Finland wants Denmark’s labour market, which has essentially no protection against dismissal. In other words the aggregate tax rate is a poor comparator because it conceals how the tax is raised.
Valtonen’s own position is that the tax rate cannot be an end in itself in either direction. Paasi’s context is bleaker: Finland’s GDP has been flat for fourteen years, because productivity has been flat for fourteen years, the current account has gone increasingly negative, and public finances have been continuously in deficit.
Paasi’s proposal: call a hundred companies and ask
This is the episode’s most concrete single idea, and Paasi presents it as a “wild” thought rather than a finished programme.
The premise is that if GDP has not grown in fourteen years, something large is needed. The proposal runs:
- Telephone the hundred most growth-hungry companies in the world. If one of them is Finnish, call it too.
- Ask directly what it would take for the next investment to come to Finland.
- Collect the wish lists and work out which commitments would buy the most investment.
- Call back and agree it in writing: if we do these things, you make these investments.
Paasi’s point is that this would establish exactly what level of effort buys what kind of investment, instead of building everything first and then hoping. He guesses the three most common answers could be predicted in advance: connections, work-based immigration or the right to recruit directly, and lighter regulation.
And his reason why inbound direct investment matters is not only tax revenue: money arrives, a site is bought, a factory is built and filled with people — but above all it brings momentum, and at best a centre of expertise rather than merely a production plant.
Defence industry: Hornets or capacity
The two agree here, and the criticism is specific.
Valtonen regards promising Hornets to Ukraine as the wrong priority and argues it technically: the aircraft are reaching the end of their life — which is why replacements are being procured — parts support is limited, and the horizon is a couple of years, by which time one hopes the fighting has stopped. Her conclusion is procedural: such a thing should not be promised to a country at war in the closing weeks of a parliamentary term.
In its place she proposes what can actually be influenced: establish, as official work, what the bottlenecks are in scaling up Finnish defence industry. Financing should not be the obstacle, because this materiel will not sit on a shelf — the state could act as bridge financier. She widens the frame to dual-use products and notes that NATO membership opens the American market in an entirely different way.
Miettinen brings in the Nammo plant, Patria and Finnish drone expertise, and describes himself half-jokingly as having become a militarist over Ukraine.
In passing it emerges that Valtonen herself wrote tank-versus-tank combat simulation software for the defence forces’ technical research centre during her postgraduate studies.
NATO also changes the economic risk picture
Paasi’s observation here is the one he says has drawn least attention publicly: NATO membership also changes how a foreign investor prices Finland.
Previously there was a background political risk that Russia might do to Finland what it is doing to Ukraine. With the “NATO shield” overhead that risk falls — and attracting larger foreign investment becomes materially more realistic.
Valtonen puts the same point in terms of values: Finland does not merely look west, it is western, and the United States becomes from here the most important foreign policy relationship.
Ministerial competence, and the money left unclaimed
The most critical stretch, and its core is a distinction worth reading carefully.
Paasi’s formulation is not that a minister should know everything:
A politician or minister does not need to know and understand everything themselves. But they do need to understand that they do not understand.
What is unforgivable, in his view, is a minister operating in a field they do not know and not turning to those who do. Fortum’s Uniper affair runs through this as his example, which he judges to have gone “under the table”.
A second example is money left unclaimed. Miettinen and Paasi discuss whether Finland could have sought EU funding to convert its rail gauge region by region to the western European standard, and quote the transport minister rejecting the idea categorically. Paasi’s position is that money in the EU pot is already lost by default, so any percentage recovered is a gain — “and that is not being anti-EU, that is just the game.”
He condenses the problem into a cultural one: Finland has concentrated on how it looks to the world and too little on not incurring restoration bills or failing to apply for grants.
A note for the reader: the claims about the rail gauge are the speakers’ own views about what might have been obtainable. This article takes no position on whether the financing would in fact have been available.
Why the left is missing its economists
A short but characterful passage in which Miettinen voices a nostalgic complaint: he misses Esko Seppänen, because Seppänen could reduce problems to economic equations even though he was politically distant. His claim is that today’s left does not even have its Esko Seppänens.
Valtonen’s sharper version of the same criticism is arithmetic rather than ideological: if the prescription is that no savings are needed because growth is coming, and in the same sentence taxes are raised by over two billion, then those two billion are by definition out of the economy regardless of where they are collected. Her remark to journalists is that asking this question requires no degree in economics.
The demography missing from the debate
In Miettinen’s view even elementary demographic analysis is absent from the debate. He also notes a two-way effect that usually goes unmentioned: as cohorts shrink, the same education budget produces more resources per pupil — while costs rise at the other end of the age distribution.
From this follows the episode’s longest single theme.
Work-based immigration: four concrete proposals
The most policy-dense stretch, and the proposals are separable.
1. Abolish labour market testing. Valtonen argues its function was never to check whether an employer is fit or whether Finnish law is observed in the employment relationship. It only slows the process.
2. Shift from ex ante to ex post supervision. Abuses are acted on and sanctioned properly — but afterwards, rather than by blocking everyone in advance.
3. Certification and a fast lane. For a company accustomed to recruiting from abroad and operating within the law, a work permit ought to take a couple of days.
4. A recruitment passport. Paasi’s version: a company should not have to wonder where the people will come from. He concedes the need for limits himself — “you don’t have to hand a passport to every hot dog stand” — and proposes follow-up monitoring as the criterion.
Sweden’s cautionary example is addressed directly rather than dodged: companies have been set up there purely to recruit people who are then abandoned and end up on social security. The recruitment passport plus ex post supervision is, in the speakers’ account, precisely the answer to that.
On Ukrainians, Valtonen regrets that work rights were not granted immediately, and mentions a situation in which people will not move from Estonia to Finland because here they end up in a reception centre.
The minimum-salary debate produces the episode’s sharpest single phrase. Talk of allowing people to come to Finland only for jobs above a certain salary threshold would exclude nurses, bus drivers, restaurant workers and factory labour — in the capital region, she says, every second care home or restaurant would close.
In my view that kind of talk is irresponsible.
She adds immediately that this is not in conflict with getting those already here and unemployed into work.
Two structural numbers
Two figures that are the episode’s most durable content.
Estonia’s flat tax. Miettinen’s calculation: in Estonia ten times the salary pays ten times the tax; in Finland roughly thirty times, because the marginal rate climbs towards sixty per cent.
The cost of the pension system. Paasi’s figure is the one to sit with: a quarter of an employer’s wage cost goes to maintaining the pension system. He does not criticise the system as such but its cost, and proposes substantially raising the funded share — at least as a voluntary alternative within the self-employed scheme. His comparison: five thousand euros invested for every newborn would, by retirement, produce the average Finnish pension pot.
Clarification. This is an illustration offered by Paasi whose outcome depends on assumed returns and time horizon; the article does not verify the figure.
Incentive traps, and unemployment first-hand
The closing stretch is the most personal, and it changes the register.
Paasi says he has been unemployed himself and describes it plainly: “it eats a person from the inside and your confidence crumbles day by day.” He says he fought it by cycling, going out to lunch and staying attached to ordinary life.
From that follows his claim, deliberately opposed to the usual incentives argument: most unemployed Finns would do anything to get back to work. The problem is not willingness but a system that puts obstacles in the way — unemployment money from one place, housing benefit from another, and rules nobody can anticipate. His image for it: once you have got the contraption standing, you dare not move.
Valtonen’s version is more programmatic: social security must reward initiative, having a business ID should not block access to it, and failure is part of risk-taking — at which point society should help someone back on their feet to make new choices, not put them in a tube with no exit.
The ending, which is also the episode’s joke
Miettinen recommends both. Paasi announces he will vote for Elina Valtonen, because he lives in Helsinki — even though he is himself standing in Uusimaa. Miettinen had not known that a candidate’s residence and constituency can differ in a parliamentary election, and the episode ends on that realisation. Paasi’s own reason for standing in Uusimaa is practical: a newcomer has to start from Finland’s largest constituency.
What stays with you
Three things.
Efficiency, saving and cutting are three different things. The episode makes the distinction concretely rather than rhetorically: six nurses around one doctor clearing a telephone queue is a productivity gain, not an increase in anyone’s workload. This is the episode’s most transferable content, and it holds regardless of how one votes.
The aggregate tax rate is a poor comparator. Valtonen and Miettinen, from different directions, dismantle the Denmark comparison by showing that the same number can arise from entirely different structures. That is rare in an election debate, where one figure usually suffices as an argument.
Asking is cheap. Paasi’s proposal to call a hundred companies and ask directly what an investment would require is neither expensive nor ideological. Its value is that it would produce information currently being guessed at — and it can be assessed independently of what one thinks of the rest of his politics.