Established ideas from established institutions: austerity and structural reforms in the Finnish economic policy debate

Abstract

Instead of alternative economic ideas or institutional shifts, the post-financial crisis conjuncture has witnessed the persistence of neoliberal ideas and the strengthening of the institutions implementing them. Instructed by ideational institutionalism, this article analyzes the interplay between ideas and institutions by examining the public debate on economic policy in Finland during the euro crisis. We show how ideas formed by the dominant institutions of Finnish economic policy-making dominated the debate in the leading Finnish newspaper Helsingin Sanomat in the years 2009-2014. The media and the elites coalesced around a consensus built by the Ministry of Finance and EU institutions, which demanded austerity and structural reforms to the Finnish economy. Our findings support claims that established institutional forces prevent ideational shifts even during major crisis periods. The media takes part in this through its unwillingness to provide alternative viewpoints on consensual political issues, thus strengthening a post-democratic public sphere. the actual market-based causes of the crisis, and the economically and socially deleterious consequences of austerity, the 'dominant forms of economic regulation persist, apparently impervious to evidence, evaluation or the merits of alternatives' (Davies 2016, 121).Such inertia has defied the expectations of many political economists, among them institutionalists of different persuasions, who have emphasized that exogenous factors, such as economic crises of this magnitude, have historically been a major source of institutional change and the emergence of new policy paradigms (P. Hall 1993; Blyth 2001; Hay 2001).Crises tend to support new ideas that challenge conventional wisdoms, but such potentialities by necessity clash with established institutional settings and their ideological make-ups in specific national contexts (Schmidt 2008, 307;Baker and Underhill 2015). In the end, the success (or lack) of new ideas is dependent upon political conditions and the balance of power between divergent political and economic agents, interests and institutions.In this article, we will critically analyze how the public interplay between ideas and institutions has played out in Finland, a northern member of the EU and eurozone. It offers an interesting case since 'of all the European countries that turned austere, Finland was, apart from the UK, the only one that volunteered for it' (Blyth 2017, 7). One factor that accounts for this is that Finland's history of economic policy-making embodies, despite its reputation as a Scandinavian-style welfare state, persistent non-Keynesian features and a strong consensus-seeking orientation (Pekkarinen 1989; Pekkarinen and Heinonen 1998;Kantola and Kananen 2013). We will analyze how this tradition affected the responses of Finnish political and economic elites to the economic crisis. The article contributes to institutionalist research by examining how leading Finnish politicians and economic experts, together with the mainstream media...

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