Nov 9, 2015

Sipilänomics, part 3: Health zones and falling cabinets, oh my

Last Thursday, Finland suddenly found itself in a crisis when prime minister Juha Sipilä threatened to dissolve his cabinet. There was high drama until around 1 am Saturday, when we were told that the situation had been resolved. The crux of the argument was sote: the social and health services reform. To explain what this is all about, we need a short lesson in Finnish administrative history.


For most of Finnish independence, there were three main administrative tiers in the country: the municipality, the province and the state. Of these, the Finnish municipality in its current form dates back to the 1865 decree of municipalities, passed when Finland was still a grand duchy of Russia. At this time, a secular local administration separate from the church parish was created. Some of the responsibilities of the state were devolved to the municipalities, and municipal councils started to be established. Another 19th-century development was municipal taxation. These laid down the basis for the municipality as a local unit with theoretically independent finances and a large and growing array of responsibilities to provide services for its inhabitants. In the 21st century, the constitution guarantees municipalities autonomy.

Over time, two things happened. First, with the general growth of the state, municipal responsibilities also mushroomed. Contributing to this was the decline of the provinces. Back in 1996, there were still twelve provinces in Finland:

Coming into the 2000s, that number dropped to five, until the agrarian-led second Vanhanen cabinet abolished the provinces entirely in 2010. The weakness and eventual disappearance of this intermediate level of administration meant that Finnish municipalities ended up being saddled with a huge number of responsibilities. Finland is almost unique in Europe in having practically no intermediate level of government whatsoever between the municipality and the state.

Secondly, continuing urbanization made the municipal structure unviable. Because the original municipalities were based on parishes, there were a lot of them. Below is a map of Finnish municipalities in 2007:

That's a total of 432 municipalities. Today, that number is 317. The financial autonomy of the municipalities was never really possible, and all kinds of co-operative arrangements were created between municipalities to produce services more economically. With the continuing movement from the countryside into the cities, the state of municipal finances became so dire that several grand local government reforms have been attempted since the 1960s. Real progress only started to be made under agrarian and coalition administrations in the 2000s, but municipal reform has been a constant battleground between parties and areas.

With healthcare forming such a large part of overall state and local expenditures, the bewildering array of administrative arrangements created to provide them has been identified as a prime target for rationalization ages ago. Back in 2005, a working group comprised of all parliamentary parties forged an agreement to centralize healthcare and social services in five national "social and health" (sote) areas. The actual implementation of this was delayed in the general clusterfuck that was the Katainen/Stubb administration, but when prime minister Sipilä took office on his messianic mission to rescue the Finnish economy, it was clear from the get-go that the sote reforms would be a key project.

So the Sipilä administration inherited an agreement on five sote zones, based on expert consensus. The coalition party had set a maximum of twelve sote zones in their electoral program coming in, as this had been identified as the maximum viable number. Despite this, the prime minister demanded that the Coalition party agree to a system of eighteen zones. Experts condemned this as completely unworkable, but the prime minister insisted that it was either eighteen zones or he would dissolve cabinet.

Why? What happened?


As Sipilä explained in his dramatic live press conference last Friday, his aim is not only to provide healthcare and social services efficiently. Instead, the agrarian party has hijacked the sote reform, and instead of creating healthcare and social service zones, they are now insisting that the reforms produce comprehensive, autonomous local government units that will combine a far wider variety of administrative powers.

Whether it's left-wingers occupying the universities or an agrarian local government scheme, the definition of autonomy in Finland is that a group of people decide what they want to spend money on, and make someone else pay for it. What Sipilä is doing is taking a healthcare reform project with almost universal parliamentary support, and turning it into an agrarian pork-barrel scheme to funnel endless streams of money into what they are pleased to call "area politics".

After the Second World War, Finland was still largely an agrarian economy. By the 1960's, the mechanization of agriculture and forestry work made the small farmer's life largely untenable, and a wave of urbanization started, leading to the evolution of Finland from an agrarian to a high-tech and service economy. The simplest way to explain what prime minister Juha Sipilä's agrarian party stands for is to say that they are doing their best to stop this evolution from happening. At their most demented, they condemn urbanization as an artificial, politically created process that can be reversed, in a sort of Finnish agrarian version of Mao's Cultural Revolution.

The raison d'être of the agrarian party is the pork barrel. Under the guise of farm subsidies, area subsidies and the wonderful euphemism "area equality", the Finnish state dumps billions of euros every single year into what is called "keeping all of Finland inhabited". It's difficult to comb through the various state budgets to figure out exactly how much money is being spent on various area subsidy schemes; it becomes a herculean task to estimate how much money is constantly being wasted in retarding the development of the Finnish economy. The chimera of "area equality" is almost certainly the most colossal waste of resources by the Finnish government. Dispensing with it would fix the deficit immediately, and make life better in this country for everyone. Maintaining it, on the other hand, creates this:

That right there is a map of Finland with each municipality color-coded by the party that got the most votes there in the 2015 parliamentary elections. Guess who's dark green.

This scheme, where the agrarian party makes sure the money keeps flowing from the state and the cities into the countryside and the voters keep on voting, is the machine that powers Sipilä's party. Because it gets dressed up in various nationalistic notions of food autarky, the exceptional purity of Finnish food and other ridiculous mirages, it's politically very difficult to oppose openly anyway, but to the agrarian party, it's absolutely crucial. Crucial enough that healthcare reform and even the entire Sipilä cabinet can be laid on the line to safeguard it.


At the time of this writing, the word was that a compromise had been reached: there would be 15 sote zones and 18 autonomous administrative areas. This sounds like a terrible compromise, and a decisive defeat for the Coalition party, who effectively surrendered to Sipilä's blackmail. At worst, it will be ruinous for the nation. Compared to the more reasonable four- or five-area model, the Sipilä scheme is at least a billion euros more expensive. A billion.

Sipilä's sote project will take a system of healthcare and social services that was supposed to save money by centralizing services and turn it into a permanent pork-barrel system of autonomous local administrations, whose actual task will be to keep this political machine running in perpetuity. So what is being sold to the public as a scheme to cut the deficit is, in fact, again, the opposite. This is entirely in line with the Sipilä cabinet's fake austerity policies in general, and their project to undevelop the Finnish economy.

So the headline you may have seen, that says health care reform is bringing down the Finnish government, is dead wrong. Sipilä's insistence on turning health care reform into a pork barrel electoral machine and sacrificing his cabinet to make it happen is what caused this crisis, and the Coalition party's capitulation means it's being resolved in the worst possible way. If the government really wanted to reform healthcare, it wouldn't be this hard. To paraphrase Lenin, it's not what the mouth says, it's what the hands do. As ever for the Sipilä cabinet, these are two completely different things.

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