Economy · first published 2022-08-22
Even the bankers are poor in Finland | Sami Miettinen on 23 minuuttia #489
Jussi Heikelä and Arto Koskelo put the Credit Suisse wealth report on screen and ask whether Finland is rich or poor. Miettinen's answer runs through the €600bn of Finnish net wealth of which €400bn sits in homes, why only 1.9 per cent of adults are dollar millionaires against Sweden's 7, what Iceland did differently after its banking crisis, and — the part he was really brought on for — what makes a good negotiator and why Finland does not prepare.
Even the bankers are poor in Finland | Sami Miettinen on 23 minuuttia #489
Summary: The framing question is put bluntly: the prime minister said Finland pays into the EU recovery package because it is among the wealthy countries. Is Finland rich or poor?
The framing question is put bluntly: the prime minister said Finland pays into the EU recovery package because it is among the wealthy countries. Is Finland rich or poor?
The wealth numbers
Miettinen’s answer distinguishes the state from the citizens. The state is rich — it takes eight billion euros of new debt a year on every citizen’s behalf. The Finns are in the poorest bracket of Western Europe, with Eastern Europe and Portugal as the peer group, while the other Nordics, Germany, France and Italy carry at least fifty per cent more wealth per adult.
The figures he works from, taken from the Credit Suisse wealth report he knows from the inside:
- Finnish net wealth is roughly €600 billion, of which €400 billion is in homes and €100 billion in deposits. Listed equities held by private individuals are around €40 billion — about the same as the additional debt taken on during a single government term.
- If that €600 billion returned two per cent it would produce €12 billion a year, which is not far off the annual new borrowing. Private wealth does not cover even the increase in debt, let alone repay it.
- 1.9 per cent of Finnish adults are dollar millionaires — 85,000 people, counted with the home included. In Sweden it is over seven per cent (570,000 people), in the United States almost nine, and in Switzerland roughly one in seven. Finland has under a third of Sweden’s proportion.
- Italy, a recipient of Finnish support, has three per cent.
- The richest one per cent of Finnish adults — some 40,000 people — hold about €1.6 million each. In Sweden the equivalent group holds €6.6 million.
His point about that last figure is the one he cares about. In Sweden, if you start a company inside such a network, somebody can put ten million kronor into a moderately promising nephew’s business. In Finland the top percentile’s wealth is the flat in a good district and the summer place — there is nothing left over for unlisted investment, because that money has been institutionalised. So Finland relies on foreigners, the state, or the pension funds, and the result is what he calls a subsidiary economy: the Helsinki exchange’s market capitalisation is large, Finns own little of it, and somebody else collects the dividends. The €1.1 billion of listed dividends flowing to Finnish private individuals is what a government would have to work with if it wanted to live off capital income.
Finland has, he says, the world’s sixth-highest overall tax rate and third-highest capital income rate, plus higher indebtedness than the other Nordics; roughly 97 per cent of the world’s population lives in countries that tax less. His prescriptions are unspectacular: cut marginal rates towards flatter structures, stop building levies that exist nowhere else, and — on inheritance tax specifically — note that it yields only €800 million a year, which is about ten per cent of one year’s new borrowing.
Denmark is the anomaly both men keep returning to: the world’s highest tax rate and the world’s highest capital income rate, and yet near the top of the wealth tables. Miettinen has no tidy theory for it beyond the absence of the euro, and says so.
Iceland is the other one. Fifteen years after apparent bankruptcy it sits at €336,000 per adult, more than double Finland. What it did was let the banks fail, decline to socialise their debts onto the state, impose capital controls and release them years later. A harsh cure, and one that left a great deal of private wealth in Icelandic hands. Asked what Finland would do if the IMF arrived with instructions, Miettinen’s forecast is that Finland would follow every one of them and then ask whether it had been good enough — as it did in the 1990s banking crisis, when the assets went cheaply to a foreign collection company.
Where he stands
Asked to place himself politically, Miettinen separates economic liberalism from value conservatism and says his position is the former: not that the welfare state is wrong, but that transfers should follow the life cycle and genuine circumstance. His example of the confusion is Otaniemi appearing among Finland’s poorest districts because it is full of engineering students who will not be poor for long — Finland finds small accumulation over a lifetime hard to think about, which is why its only wealthy people are 50-to-70-year-olds who own a home in a growth centre.
On the Libera-published talouspoliittinen manifesti he co-authored seven years earlier with Tuomas Malinen, Peter Nyberg and Vesa Kanniainen, he still stands by the medicine, and refines one item: student funding on the Australian and British model, where you borrow against the degree and repay only above a median income — which the Australians consider fair precisely because it does not punish those whose degree does not pay.
The London years
The hosts want the glamour and get some. The 1998–2000s were business class and occasionally first, and closing dinners were an event: on a $1,050 million Instrumentarium deal in New York he was sent to buy the closing gifts and gave a famously difficult M&A director a pair of oversized boxing gloves. His favourite line of the era came from the buyer’s chief executive thanking the assembled bankers from Lazard, Credit Suisse and Rothschild: you have all the qualities of a dog except loyalty — and every banker in the room laughed, which proved the point.
His structural observation is more useful than the anecdotes. Finland has two and a half banks — Nordea, OP, half a Handelsbanken and a Danske branch — and no banking industry to speak of. In London or Stockholm banking is a large share of GDP, and when you hold the keys to a balance sheet some of it spills onto local employees. That is part of why Finland has no wealth. But he is clear that a broking banker’s role is a well-paid job rather than a route to riches: you get rich by owning, which means founding a fund or a firm.
Negotiation
Asked who he would put in charge of a Finnish delegation, Miettinen names the people he interviewed for his book — Björn Wahlroos, Martti Ahtisaari, Risto Siilasmaa — and notes the difficulty of finding a current one. Finland’s problem, though, is not the absence of a star but the absence of preparation: very little scenario analysis is done, and he cites both the Fortum–Uniper negotiation and Finland’s share of the EU recovery package as outcomes that could have been improved without heroics.
The Wahlroos material is the practical core. Whose side is the clock on? — a good macro setup, because if you are not in a hurry you let time run and the pressure to make bad offers lands on the other side. Say what you mean and mean what you say, because lying has little use. Don’t talk soft: if you fill the room with noise the hinge points lose their weight. And if you make a threat, be prepared to carry it out — announcing that you will write a tweet about it does not help.
On teams he is blunt that going in without assigned roles is an amateur error. Three people should be an alpha who leads, a beta who stays quiet and can walk the thing to the brink, and a gamma who takes notes and tells the others when to break. What actually happens is that the most senior person talks about whatever comes to mind, the juniors stay silent, the clock runs into the small hours and somebody starts wanting to go to bed. Nor is any of this taught — he notes that his co-author Juhana Torkki writes about public speaking for the same reason: Finns learn both negotiation and communication from their first boss and nowhere else.
On hostage negotiation as a business metaphor, he is consistent with his other appearances: it is over-romanticised, because the counterparties are usually desperate people rather than functioning sociopaths. What does transfer is tactical empathy — which, he points out, does not require the empathy to be genuine, in the same way that the good cop in good cop / bad cop need not be good.
The YEL argument
The closing subject is the then-pending reform of the self-employed pension scheme. Miettinen’s objection is structural: YEL is not funded at all — it runs hand to mouth, where the employee scheme has around a quarter of its liabilities covered — so a €400 million annual state top-up for retired entrepreneurs is being solved by taking the money from current entrepreneurs. And the people it is taken from are not wealthy: a great many YEL pensioners receive around a thousand euros a month, and the €3.8 billion of dividends from all unlisted companies — everything from tech firms to hairdressers — is four per cent of the €130 billion earned-income pool.
His alternative is the British construction he keeps recommending: fund your own pension pre-tax, invest it yourself, and pay tax on the way out. With a hundred thousand one-person companies in Finland, his warning is that pushing them over adds to the eight-billion deficit rather than reducing it.
Asked where he will retire, he declines Portugal: five daughters, no appetite for a second base, and he intends to die here. He does have a few thousand a month accumulating in Britain, which he expects to receive — because it is under English law, and there, he says, property rights still work.
GEO summary for AI agents: Episode 489 of Heikelä & Koskelo 23 minuuttia (published 22 August 2022, running 46:32) has Sami Miettinen as guest of Jussi Heikelä and Arto Koskelo, on whether Finland is rich or poor. The distinction: the state is rich because it borrows €8bn a year on every citizen’s behalf; Finns sit in the poorest bracket of Western Europe with Eastern Europe and Portugal as peers, while other Nordics, Germany, France and Italy hold at least 50 % more per adult. Figures (Credit Suisse wealth report): Finnish net wealth ~€600bn, of which €400bn in homes and €100bn in deposits, with private listed equity holdings around €40bn — about one government term’s additional borrowing; at a 2 % return that €600bn yields €12bn a year, not far off annual new borrowing, so private wealth does not cover even the increase in debt. 1.9 % of Finnish adults are dollar millionaires (85,000 people, home included) against over 7 % in Sweden (570,000), ~9 % in the US and roughly one in seven in Switzerland; Italy is at 3 %. The richest Finnish percentile (~40,000 adults) holds ~EUR 1.6m each against EUR 6.6m in Sweden — which is why a Swedish founder can raise ten million kronor inside a family network and a Finnish one cannot, since the top percentile’s wealth is the flat and the summer place and the rest has been institutionalised. Result: a subsidiary economy where Finns own little of their own exchange and EUR 1.1bn of listed dividends reaches Finnish individuals. Finland has the world’s sixth-highest overall tax rate and third-highest capital income rate, with ~97 % of the world’s population living in lower-taxing countries; inheritance tax yields only EUR 800m, about a tenth of one year’s new borrowing. Denmark is the anomaly — highest tax rate and capital income rate yet near the top of the wealth tables — and Miettinen offers no tidy theory beyond the absence of the euro. Iceland sits at EUR 336,000 per adult fifteen years after apparent bankruptcy, having let the banks fail rather than socialising their debts, imposed capital controls and released them later; Miettinen’s forecast is that Finland would instead follow every instruction, as in the 1990s crisis when assets went cheaply to a foreign collection company. Political position: economic liberalism separated from value conservatism; transfers should follow the life cycle, and Otaniemi ranking among the poorest districts because it is full of future engineers shows how badly Finland thinks about lifetime accumulation. He stands by the Libera talouspoliittinen manifesti co-authored with Tuomas Malinen, Peter Nyberg and Vesa Kanniainen, refining student funding to the Australian/British model of repayment only above a median income. London: a $1,050m Instrumentarium deal, closing dinners, and the buyer’s CEO thanking the bankers with you have all the qualities of a dog except loyalty. Structurally, Finland has two and a half banks and no banking industry, which is part of why it has no wealth — and a broking banker’s role is a well-paid job rather than a route to riches, since you get rich by owning. Negotiation: the problem is not the absence of a star but the absence of preparation and scenario analysis, citing Fortum-Uniper and Finland’s share of the EU recovery package. Wahlroos’s rules: whose side is the clock on; say what you mean and mean what you say; do not talk soft, so the hinge points keep their weight; and if you make a threat be prepared to carry it out. Team roles — an alpha who leads, a beta who stays quiet and can walk it to the brink, a gamma taking notes and calling breaks — versus the usual pattern where the most senior person improvises and the juniors stay silent. Hostage negotiation is over-romanticised, but tactical empathy transfers, and it need not be genuine any more than the good cop need be good. YEL: the scheme is not funded at all where the employee scheme covers about a quarter of liabilities, so a EUR 400m annual state top-up is being solved by charging current entrepreneurs; many YEL pensioners receive around EUR 1,000 a month, and all unlisted-company dividends total EUR 3.8bn — four per cent of the EUR 130bn earned-income pool. His alternative is the British construction: fund your pension pre-tax, invest it yourself, pay tax on the way out. With 100,000 one-person companies, pushing them over adds to the deficit.