Wednesday, April 25, 2007

Letter From A Dane

I read with interest Mentor Minister Lee Kuan Yew’s remark in Singapore’s Parliament that Denmark, Finland and Switzerland can afford mediocrity in the remuneration of their ministers.

I shall restrict my observations to Denmark and Finland.

These 2 Nordic countries reward their leaders, in both the private and public sectors, somewhat less handsomely than Singapore. Despite this, I would suggest that both countries’ governments are by no means mediocre, and neither have they evinced any indication of being able to afford it.

Finland has managed to weather the collapse of the Soviet Union in the early 90s, a market for 20% of its exports, in no small part due to its successful transformation from a resource-based to a knowledge-based economy. Its leading multinational, Nokia, is the market leader in the mobile telecommunications industry, with a global market share of 36% in the manufacture of mobile phones (Q42006) and revenues of €41.121 billion (2006). While most of the credit for this success story can be attributed to the Finnish private sector, Finland’s government had a significant role to play in creating the optimal framework for the flourishing of the technology sector. From the mid 1960s onwards, there were special efforts to expand higher education, with a law on higher education passed in 1966, the result being that Finns are some of the most well-educated people in the world.

The Finnish government was also instrumental in pushing for the promotion of GSM as the European mobile telephony standard, based on the Nordic countries’ experience of NMT, an earlier, pan-Nordic standard. The early adoption of GSM in Finland provided the platform for Nokia’s global breakthrough. Decades before the global liberalization of telecommunications markets in the 1990s, Finland’s telecoms market had already been liberalized, and thus had possibly the world’s most competitive market for telecom operators and equipment makers. Credit for this is in no small part due to the role of the Finnish government. Finland devotes a higher percentage of its GNP to research and development than most countries, and the role of the government has been critical, especially in the early 90s, where public-funded research increased despite recession.

In the case of Denmark, the government made the decision in the 1970s to intensify research into renewable energy. Important research was carried out at Risoe, the government research centre, into wind energy. It took political courage to subsidize feeder tariffs for wind turbine-produced electricity. That decision has paid off handsomely. Today, Danish-based companies have a global market share of ca. 50% in the manufacture of wind turbines, an industry with global annual growth rates of 30%, and estimated revenues of €10 billion (2006, est.). Indeed Denmark’s Vestas has recently set up engineering and research facilities in Singapore.

In more general terms, I would submit that both countries’ systems and governments are not mediocre, and are like Singapore’s, acutely aware of not being able to afford it. Rather than Europe being there to catch Finland and Denmark should they falter, both countries have been net contributors to the European Union budget since their accession. Mediocrity is not a hallmark of either society either. In the last 30 years, both countries, despite their small populations, have produced individuals who have won Olympic gold medals, Oscars and Nobel Prizes. They have produced New Economy pioneers, for example Finland’s Linus Torvalds, the creater of Linux (an open-source operating system and competitor to Microsoft’s Windows) and Denmark’s Janus Friis, co-founder of Skype (a peer-to-peer telephony application).

In conclusion, both countries’ positions as globally competitive economies and high-achieving societies have been attained against the backdrop of low corruption levels, and high levels of trust between citizens and government, and seemingly despite high taxes and comprehensive welfare states. This has not required stratospheric levels of remuneration of government leaders and officials.

Mr. Gregory Glen
Holstebro, Denmark