EP184 · Economy · first published 2023-03-28
Capital and Owners in Finland | Samuli Knüpfer | Negotiator 184
Samuli Knüpfer, professor of ownership at Aalto University, sets out why Finland is a poor Nordic country — even after the effect of pension funding is stripped out. Finland and Norway sit in one league on net wealth and Sweden and Denmark in another, and the single largest gap comes from unlisted shares. A Finnish household holds about 40 per cent of its financial wealth in deposits against roughly 20 in Sweden and Denmark. The most striking finding is an attitude measure: Finns regard competition more suspiciously than other Nordics, and that is the largest single gap in economic beliefs. Also the equity savings account, the missing point of contact with the pension system, the consequences of abolishing the avoir fiscal, and the absence of a line on state ownership. Published 28 March 2023.
Capital and Owners in Finland | Samuli Knüpfer
Summary: In episode 184 Sami Miettinen interviews Samuli Knüpfer, professor of ownership at Aalto University, about Finnish wealth and ownership. Published 28 March 2023.
Disclosure. Miettinen states in the episode that his firm, Translink Corporate Finance, contributed a small sum towards establishing the professorship.
Finland and Norway in one league, Sweden and Denmark in another
Knüpfer’s basic finding is clarifying and slightly surprising: on wealth the Nordics are not one group but two.
Sweden and Denmark are in a league of their own. Finland and Norway look roughly alike.
Norway landing alongside Finland is the episode’s most counter-intuitive moment, because the mental image is a trillion-euro oil fund. Knüpfer’s explanation is twofold: Norway was poor for a long time before oil, the fund has been accumulating for a comparatively short period, and the whole point of it is that the money is not released into citizens’ accounts.
The similarity to Finland is therefore historical: neither country has a long history of ownership and growing wealth. As Finnish particularities Knüpfer names the state’s large role and the weight of big corporations — and the fact that the German-style Mittelstand, a layer of mid-sized owner-led companies, is far thinner in Finland than in Sweden or Denmark.
In financial wealth the gap is numerical: Finland and Norway below €100,000, Denmark and Sweden above €150,000.
The one number that explains the most
If the episode had to be reduced to a single figure, it is this.
A Finnish household holds on average about 40 per cent of its financial wealth in deposits. In Sweden and Denmark the figure is around 20.
And the gap has a direction that says more than the number itself:
The biggest difference comes from unlisted shares — which also tells the story that more is happening outside the stock exchange in Sweden and Denmark.
In other words this is not only about Finns saving more cautiously. It is that there is less to own in Finland — fewer companies.
Knüpfer confirms this separately: the other Nordics have distinctly more companies per capita, and Finland is the only one of the four where there are fewer; in the other three the number is roughly the same.
The stock market offers no relief. Sweden has some 800 listed companies to Finland’s two hundred, though Finland is about half Sweden’s size. Norway is an exception on market capitalisation only because its GDP is considerably larger; the market value is roughly the same.
Miettinen’s summary is blunt: thin in the unlisted, thin in the listed, and the rest is in a bank account.
The most striking finding: competition
This passage is worth reading even if wealth statistics hold no interest, because it says something about what sits beneath the structures.
In international comparisons of financial literacy — compound interest, inflation, diversification — Finland places clearly worst of the four, around tenth, while Norway, Denmark and Sweden are among the best in the world.
But Knüpfer finds the soft side more interesting than the hard: what people believe about the economy.
To my mind the wildest thing there is that Finns view competition with suspicion. Competition is seen as far more harmful than in the other Nordics. And that difference is in fact the largest of these economic-belief statements.
That is a strong claim: of all the economic attitudes measured, it is the view of competition that separates Finland from its neighbours most.
Miettinen adds his own observation that the public sector’s role is seen upside down — that a regional monopoly is regarded as a good thing even where the alternative would offer a better price or quality.
A third attitude finding runs as the episode’s cold open and returns at the end:
Finns like the levelling of incomes and wealth far more than the other Nordics.
The equity savings account and three proposals
Knüpfer regards the equity savings account as an enormously good thing and recalls writing in favour of one before leaving Finland nearly fifteen years earlier. It has generated a billion in capital and brought some investing culture with it.
He proposes three developments, and they are concrete:
- The cap on invested capital. It is not at all clear to him why there should be an upper limit.
- Allow funds. At present only shares are permitted. From a diversification point of view funds are better for most people.
- The pension system is the bigger opportunity. This is what he presses hardest.
Pensions: the missing point of contact
In Knüpfer’s account an individual in Finland has no contact whatsoever with pension saving. In Sweden part of the salary goes to individual accounts whose investments the saver chooses, and depending on the employer an occupational account may sit on top. Norway is similar.
Finland is a country where we have decided this is a centralised system in which people have no contact at all.
His point is not primarily returns but learning: if someone sees even a small part of their own pension capital and makes decisions about it, they learn about investing the hard way. This is precisely where nudging would belong.
Miettinen’s counter-proposal — shares in the maternity package — gets a polite but clear refusal, and the reasoning is good:
As a father of three I have to say that the first thing you think about when a child is born… it does not quite land at the right point in life.
The idea may be right; the timing is wrong.
Why there is less venture capital — and what it is not
Finland comes last of the four both in investments made by domestic venture investors and — though the gaps narrow — when foreign investors are included.
Knüpfer’s diagnosis here is unusually direct, and it inverts the usual explanation:
It is surely not because we lack enough money and enough good venture investors. I think it is more that there simply are not enough good ideas and good targets.
Which returns to the same root: few companies, and fewer growth companies still.
Miettinen offers a counterweight from his own work: at the scale-up stage foreign investors do find Finnish targets. Knüpfer confirms that growth stalling at a certain point is much discussed, but says plainly that he does not himself know why. The question is left open, which is honest.
The role of domestic capital
The most practical stretch for anyone raising money.
Miettinen’s observation from the field: raising for a company that is not a giant unicorn, many Finnish cases fail simply because no domestic investor turns up.
Knüpfer’s answer separates research evidence from practical observation — expected of an academic, but still rare:
It has been studied a great deal, and the phenomenon certainly exists; how much benefit there is in it is another matter.
And then he comes down on the practical side: this is a globally competitive market, ideas are plentiful, and attracting a foreign investor takes more than persuading a local one. Domestic capital supply therefore matters.
As structural background Miettinen notes that Europe, compared with the United States, is bank-centred: there the capital market is the primary financing channel, here the bank. And in Finland it is especially thin — “if Nordea and OP say no to you, then you are in trouble.”
Tax: two different classes that get conflated
Miettinen’s argument is that Finnish debate bundles earned income and capital income together so that capital looks lightly taxed. On his account 34 per cent only sounds low because the marginal rate on earned income climbs towards 58 — while the capital tax rate is among Europe’s highest.
The historical passage is the episode’s most interesting point of economic history. After the recession of the 1990s Finland had an avoir fiscal system in which corporate tax and shareholder tax were combined so that a dividend recipient received relief for tax the company had already paid. His reading: it created a substantial incentive for capital formation, and dismantling it produced today’s double-taxation wedges and an artificial boundary between listed and unlisted companies — in effect a listing threshold, because listing raises the tax burden.
Clarification. This is Miettinen’s interpretation of the system’s effects; the article does not assess it. Knüpfer notes that tax law sits at the edge of his own research area.
Knüpfer does not, however, withhold his own view:
Given how big a thing it is to found a company, put all your eggs in that one basket and take a large personal risk — entrepreneurship and ownership do need to be encouraged.
It is noted in passing that Sweden has no inheritance tax, which could be part of why companies pass between generations there more intact.
Why wealthy people are needed
The episode’s most value-laden passage, and both speakers mark it as such.
Knüpfer’s argument is functional rather than moral: business angels do not appear without personal capital. Successful entrepreneurs become the financiers of the next generation’s startups — and if capital does not accumulate, that layer does not exist.
In the question of income or wealth distribution it is easily forgotten that having wealthy people is of benefit to the economy as well.
Miettinen adds a second, behavioural mechanism: if a person has even a small buffer they will defend it — and that shapes behaviour at exactly the expensive hinge points where someone would otherwise fall onto transfers.
Both also note that Finnish debate often borrows American figures that do not apply here: the richest percentile owns about 14 per cent of wealth in Finland, some €1.6 million, against 40 per cent and over €10 million in the United States. The scale is different altogether.
Why Finns behave as they do
Knüpfer’s most balanced moment, and it distinguishes him from ordinary investment evangelism.
You do keep wondering: if Finns behave this way, is it a mistake? Or are there sensible reasons for it?
He lists sensible reasons. Once tax and pension contributions come out of a salary, many people simply have little left to invest. And housing — in Finland the norm is that the home should be free of debt as quickly as possible, where Germany has next to no owner-occupier culture and Swedish mortgages need not be amortised nearly as hard.
Miettinen adds the tax logic: an owner-occupied home is in practice the only tax-free asset class in Finland after two years’ residence, which also explains why renovating it yourself pays — the gain capitalises into the price tax-free. “So there is some logic to be found in this slightly foolish portfolio allocation.”
But Knüpfer does not let go entirely:
I still believe a large part of it is simply the way things are done here.
And he notes the change is real but slow: about 40 per cent of Finnish households hold shares or funds, and he estimates the figure is now approaching fifty.
State ownership: the question is the line
Knüpfer’s position is procedural rather than ideological, and therefore usable.
On the stock exchange the state’s share is large in Finland compared with the other Nordics. Norway looks like an exception only because of Equinor; take it out and Finland and Norway are level, with Denmark and Sweden clearly lower.
His primary demand is not selling but a line:
There should be a line on why the state is an owner in a given company — and then it should be adhered to.
The reasoning is subtle and important: a state owner’s only real asset is credibility in the eyes of other investors. If that goes, the problem belongs not only to the state but to the company and its valuation.
On whether ownership is justified he is direct: it is justified in an unbreakable monopoly or where there is a genuine strategic interest — and asked whether all current holdings are of that kind, he answers “certainly not.”
Miettinen half-jokingly proposes distributing the shares to citizens as a dividend and identifies the problem himself: the proceeds of a sale would be spent.
ESG as part of ownership
A short but clarifying close. Knüpfer’s position is that ESG belongs by default within the economic dimension, not as a counterweight to it. Looking after employees, complying with the law, and selling responsible products to customers who want them are things a chief executive mandated to grow shareholder value should be doing anyway.
In the majority of business decisions that opposition does not necessarily even exist.
Miettinen raises a genuine edge case: a private owner may do as they like with their own money — but if a company is captured into projects whose benefit flows to the owning circle’s associates, that is a principal-agent problem under cover of a responsibility framework. Knüpfer does not dispute it and returns it to owner intent, which is where the answer ultimately comes from.
What stays with you
Three things.
Finland is not a wealthy Nordic country, and the reason is structural. Finland and Norway sit together on net wealth, Sweden and Denmark apart — and removing pension funding from the calculation does not change the picture. The single largest gap comes from unlisted shares, that is, from how many companies there are in the country to own at all.
Attitude to competition is the largest single difference. Of all internationally measured economic beliefs, it is seeing competition as harmful that separates Finns from other Nordics most. That is a measurement, not an opinion, and it explains more than any single tax parameter.
Capital is not what is missing — targets are. Knüpfer’s diagnosis of low venture investment turns the usual conversation around. The problem is not a shortage of money or of investors but of good targets, and it returns to the same root as the wealth gap: there are simply fewer companies.