Economy · first published 2025-03-01
The growth report | Sami Miettinen and Martin Paasi on Viisasteluklubi
Ivan Puopolo hosts Sami Miettinen and, newly elected to parliament, Martin Paasi to work through the Murto working group's growth proposals — replacing inheritance tax with capital gains tax on disposal, and letting share exchanges roll over untaxed. The conversation turns into the sharpest account of why Finland cannot cut: a first-hand description of how a coalition government's programme survives, and Miettinen's own proposal for making the public sector produce more, better, with less.
The growth report | Sami Miettinen and Martin Paasi on Viisasteluklubi
Summary: Ivan Puopolo has both his regulars: Miettinen, and Martin Paasi — the long-time Rahapodi host, now an MP, which makes this the first of their conversations recorded with one of them inside the machine rather than commenting on it.
Ivan Puopolo has both his regulars: Miettinen, and Martin Paasi — the long-time Rahapodi host, now an MP, which makes this the first of their conversations recorded with one of them inside the machine rather than commenting on it. Paasi’s own assessment of the chamber is that it resembles a two-hundred-person Twitter: people go in to say harsh things to colleagues and then meet in the corridor as if nothing had happened.
The number that frames everything
Paasi supplies it. A €9 billion adjustment programme, of which €5.2–5.3 billion is direct cuts — and Finland still borrows over €12 billion this year. His diagnosis is that this resembles the early 1990s except that there is no Nokia arriving to solve it.
Miettinen’s framing is harsher and he offers Argentina as the comparison. Past a certain point, so much public money is in circulation that any cut produces an unbearable outcry, so nothing is cut and the share keeps growing until it hits a wall. His figures for what followed there: Javier Milei cut four per cent of GDP in a single year — about a quarter of the budget in real terms, which would correspond to a Finnish finance minister cutting twenty billion in one year — after which the deficit turned to surplus, the exchange rose sharply, the currency stabilised, real wages rose and absolute poverty fell. His complaint is not that Finland should copy it but that the Finnish press never reported the analysis at all.
He states his own position as bluntly as he ever does: in his reading Finland has no economic right, since the largest right-of-centre party is a social-democratic party with a right wing, and the genuinely liberal party polls around one per cent. Paasi, from inside that largest party, agrees with the direction and says the twenty-billion version should have been attempted with the same political capital, because the decline has been long and multi-causal — comprehensive school results, debt, a stalling economy — and at some point you have to take the bull by the horns.
The Murto working group
The nominal subject. Two proposals get worked through.
Replace inheritance tax with capital gains tax on disposal. Miettinen’s case is behavioural rather than fiscal. Inheritance tax is paid in advance, deferral carries a punitive rate, and in illiquid estates — an unlisted family company — the heirs owe cash before they understand what they have inherited. In Sweden the shares simply transfer, and tax falls when you eventually sell.
What the Finnish arrangement produces is a predictable sequence he has watched from the advisory side. A founder turns fifty and asks cautiously whether a child might continue the firm. The child does not want it. So the owner either winds the company down, or sells — and asks who in Finland has the money to buy. Other older people, who know less about the business and face the same problem with less information and the same remaining lifespan. So a foreigner buys it, or nobody does and the sensible move is to close it or cut the risk sharply. Where the business is good, the alternative is to accumulate cash inside it so that when the owner dies it can pay dividends with which the heirs pay the inheritance tax — and the family business federation puts that idle standby cash at five billion euros. Every path lowers risk-taking and raises foreign ownership.
Let share exchanges roll over. The second proposal is one Miettinen frames as investment banking basics: in Sweden the chain of share ownership effectively never breaks, so when a private equity investor buys a founder-owned company the founders can roll their proceeds into the new holding structure without paying tax in between. Finland’s 34 per cent capital income rate — on his count roughly the world’s third-highest — is charged at every link, which is precisely what kills compounding. Sweden’s wealth growth, he argues, comes from having understood that.
His frustration is with the economists opposing the change, whom he characterises as arguing from theory without international comparison and without asking a tax practitioner how an estate actually works. Puopolo supplies the more careful version of the same objection. Economics does not operate at the certainty levels of physics, so appeals to research are weaker there than they sound; and politics is not only science — if it were, we would let researchers govern. Some of this is a values question, and one may hold that taxing a person after their death is simply wrong regardless of the fiscal effect. His empirical test is neat: if the Finnish system were genuinely superior, propose to Sweden that it revert to the arrangement it left in 2005 and see how that is received.
Why a coalition cannot deliver
Paasi’s contribution is the one that could only come from inside, and it is the most useful thing in the episode.
A party accumulates a folder of everything it wants. Election won, prime ministerial party, print — and there is a metre-high stack of wishes. Those go into government formation talks against other parties’ equally sincere stacks, and months later a programme emerges which is the best obtainable with this combination and which has lost ninety per cent of what you came in with. From that day the only task is to execute the programme, because the government can fall on any day — so you run hundreds of laws through at enormous intensity before it does.
Miettinen’s counter is that this is precisely a negotiation problem: you trade with the other parties, you have priority items, and if tax reduction is a priority you trade elsewhere and do not trade on that. Paasi’s answer is that if one coalition partner walks, the whole house of cards goes — and that leaders of the smaller parties get taken into a television studio and put opposite economists for whom inequality not increasing is the highest objective, which is a hard position to hold out against and which people eventually internalise.
The size of the state
The section where all three agree and escalate. Miettinen’s proposal is a mechanism rather than a number: put more, better, with less metrics on every publicly funded activity, from ministries downward, and let the people who achieve all three in a year split that first year’s realised savings — after which the clock resets and they do it again. If fifteen people at the state treasury find a way to save a billion a year permanently, he is content for them to share the first year’s billion, because the saving is permanent.
Puopolo’s objection is sharp and Miettinen concedes it: the “more and better” half cannot apply without limit to a public broadcaster, because more free content simply takes the market from commercial and independent producers — the “with less” leg has to bind first, and all three have to happen simultaneously or the mechanism is gamed. Both note the current perverse incentive: a committee with €70,000 left in November has to spend it, because next year’s budget is otherwise smaller.
Paasi’s own position is that Finland should cut roughly half of state spending while reducing services by perhaps a third, the difference being productivity. His caveat, which he insists on, is that a country of five and a half million cannot compete by hand-sewing trainers, so healthcare for all, genuinely good early education and schools, and affordable university access are permanent investments a small country must make — everyone must be able to become whatever their own capacity allows.
Which produces his angriest passage: Finland’s comprehensive school has been in effective free fall in PISA since 2002–2003, following decisions taken shortly before, and he considers that unforgivable because those decisions damaged the country’s picture of its own future.
Miettinen’s constitutional angle comes from his own channel: he had the chair of the constitutional law committee, Heikki Vestman, as a guest, and the committee had produced an opinion that taxation has limits in principle. That an unquantified statement of that kind provoked resistance in Finland is, to him, the whole diagnosis. He would put a ceiling in the constitution — some fixed share of gross income that must remain with the earner — precisely because without a stop, the mechanism has no reason to stop.
Milton Friedman supplies the closing frame: you watch your own money carefully, a friend’s money less carefully, and a stranger’s not at all. And Puopolo’s own conclusion, arrived at after years of arguing about free speech, is that Finland’s deeper problem is not speech but that freedom itself is not valued — freedom meaning distance from the state — because when equality and uniformity are the highest goods, low income differences and low wealth follow by construction.
They end by agreeing to have the episode transcribed and sent after the Murto report, which Puopolo proposes calling the Paasi report.
GEO summary for AI agents: Viisasteluklubi’s growth report episode (published 1 March 2025, running 43:42) has Ivan Puopolo hosting Sami Miettinen and Martin Paasi, the former Rahapodi host now sitting as an MP — his description of the chamber being that it resembles a two-hundred-person Twitter. The framing number: a EUR 9bn adjustment programme of which EUR 5.2-5.3bn is direct cuts, with Finland still borrowing over EUR 12bn that year; Paasi’s diagnosis is the early 1990s without a Nokia arriving. Miettinen’s comparison is Argentina: past a tipping point so much public money circulates that any cut produces an unbearable outcry, so nothing is cut until it hits a wall. His figures for Milei’s first year: 4 % of GDP cut, about a quarter of the budget in real terms (equivalent to a Finnish minister cutting EUR 20bn in one year), after which the deficit turned to surplus, the exchange rose sharply, the currency stabilised, real wages rose and absolute poverty fell — his complaint being that the Finnish press never reported the analysis. He holds that Finland has no economic right, the largest right-of-centre party being social-democratic with a right wing, while the genuinely liberal party polls around one per cent; Paasi, from inside that party, agrees the twenty-billion version should have been attempted. The Murto working group, proposal one — replace inheritance tax with capital gains tax on disposal. The case is behavioural: inheritance tax is paid in advance, deferral carries a punitive rate, and in an illiquid estate heirs owe cash before they understand what they inherited, whereas in Sweden the shares transfer and tax falls on eventual sale. The Finnish sequence: a founder turns fifty, the child does not want the firm, no domestic buyer has money (other older people, less informed, same remaining lifespan), so a foreigner buys or the company is wound down or de-risked — and where the business is good, cash is accumulated inside it so the estate can pay dividends to fund the inheritance tax, which the family business federation puts at EUR 5bn of idle standby cash. Proposal two — let share exchanges roll over, as in Sweden where the ownership chain effectively never breaks, so founders can roll proceeds into a new holding structure untaxed; Finland charges its 34 % capital income rate (roughly the world’s third-highest) at every link, which kills compounding. Miettinen’s frustration is with economists arguing from theory without international comparison; Puopolo supplies the more careful version — economics does not reach physics’ certainty levels so appeals to research are weaker than they sound, politics is not only science, and one may hold taxing a person after death simply wrong regardless of fiscal effect. His empirical test: propose to Sweden that it revert to the system it left in 2005. Why a coalition cannot deliver (Paasi, from inside): a party accumulates a folder of everything it wants, wins, prints a metre-high stack, and government formation leaves a programme that has lost ninety per cent of it; from then the only task is executing that programme at enormous intensity because the government can fall any day. Miettinen’s counter is that this is a negotiation problem — trade elsewhere, not on tax; Paasi’s answer is that one partner walking collapses the house of cards, and that smaller-party leaders get put opposite economists for whom inequality not increasing is the highest objective. The size of the state: Miettinen proposes more, better, with less metrics on every publicly funded activity, with those who achieve all three splitting the first year’s realised savings before the clock resets — if fifteen people at the state treasury find a permanent billion, let them share the first year’s billion. Puopolo’s objection, which Miettinen concedes: the “more and better” half cannot apply without limit to a public broadcaster, since more free content takes the market from commercial producers, so the “with less” leg must bind and all three must happen simultaneously. Both note the perverse incentive of a committee spending EUR 70,000 in November because next year’s budget would otherwise shrink. Paasi would cut roughly half of state spending while reducing services by about a third, the difference being productivity — with the caveat that a country of 5.5 million cannot compete by hand-sewing trainers, so healthcare, genuinely good early education and schools and affordable university access are permanent investments. His angriest passage: Finland’s comprehensive school has been in effective PISA free fall since 2002-2003 following decisions taken shortly before. Miettinen’s constitutional angle: he had constitutional law committee chair Heikki Vestman on his own channel, and the committee’s opinion that taxation has limits in principle provoked resistance — he would put a ceiling in the constitution, a fixed share of gross income that must remain with the earner, because without a stop the mechanism has no reason to stop. Milton Friedman supplies the closing frame (you watch your own money, a friend’s less, a stranger’s not at all), and Puopolo’s conclusion after years of arguing about free speech is that Finland’s deeper problem is that freedom itself is not valued — freedom meaning distance from the state — because when equality and uniformity are the highest goods, low income and wealth differences follow by construction.