Domestic Developments and Foreign Politics, 1948-66

Finland Table of Contents

The underlying assumption of Paasikivi's foreign policy was that the Soviets could tolerate the existence of an independent Finland only because Finland was peripheral to the Soviet Union's main strategic interests in Central Europe. Paasikivi sought to reinforce that Soviet attitude by actively demonstrating that Finland would never again be a source of danger to the Soviet Union. The combination of traditional neutrality plus friendly measures toward the Soviets was known as the Paasikivi Line. Continued by Paasikivi's successor as president, Urho Kekkonen (in office 1956-81), the policy came to be known as the so-called Paasikivi-Kekkonen Line. It remained the foundation of Finland's foreign policy in the late 1980s.

Paasikivi's statesmanship was rewarded in 1955, when the Soviet Union returned the Porkkala Peninsula to Finland, well before the end of the fifty-year lease granted in 1944. The return of Porkkala ended the stationing of Soviet troops on Finnish soil, and it strengthened Finland's claim to neutrality. The Soviets also allowed Finland to take a more active part on the international scene. In December 1955, Finland was admitted to the United Nations (UN); in that same year Finland joined the Nordic Council.

In the three parliamentary elections held during Paasikivi's presidency--those of 1948, 1951, and 1954--the SDP and the ML received the largest number of votes and provided the basis for several of the government coalitions. These so-called Red-Earth coalitions revived the prewar cooperation between these parties and laid the basis for their subsequent cooperation, which was a major feature of Finnish politics after World War II. The communist-dominated SKDL retained some power because of domestic discontent; in the elections of 1951 and 1954, it won more than 20 percent of the vote.

Domestic politics during Paasikivi's presidency were characterized by conflict and instability. During those ten years, 1946 to 1956, there were nine government coalitions, nearly one per year. The issues that divided the parties and brought such frequent changes of government were primarily economic, centering on the rising cost of living. One early attempt to solve conflicts among the various sectors of the economy was the so-called General Agreement made in 1946 between the Confederation of Finnish Trade Unions (Suomen Ammattiyhdistysten Keskusliitto--SAK) and the Confederation of Finnish Employers (Suomen Työnantajain Keskusliitto--STK). The General Agreement, which called for compulsory negotiations between labor and management, was used as a basis for reconciling industrial disputes. Another milestone was the Castle Peace Agreement of 1951 that brought together the main economic interest groups for a wage and price freeze that helped to establish a precedent for wage and price control. Nevertheless, throughout these years there were frequent strikes.

The intensity of the conflict over economic issues was demonstrated by the general strike of 1956, the first general strike in Finland since November 1917. The cause of the nineteen- day general strike was an increase in food prices for which the trade unions demanded a wage increase as compensation. When the employers refused the wage increase, the trade unions called the general strike. More than 400,000 workers--about one-fifth of the total work force--participated, the flow of various vital supplies was disrupted, and some violence occurred. The strike ended when the employers agreed to the wage increases demanded by the unions. These wage increases, however, were largely cancelled out by subsequent rises in consumer prices.

Paasikivi's successor, Kekkonen, assumed office in March 1956, and he remained as president until 1981. A member of the ML, he had been one of only three members of the parliament who voted against the Peace of Moscow in 1940. The following year, he had been one of the most outspoken advocates of the Continuation War. By 1943, however, he had reversed himself totally in calling for reconciliation between Finland and the Soviet Union, and he remained a leading advocate of that policy for the remainder of his life. From 1944 to 1946, he served as minister of justice, a position from which he prosecuted Finnish war criminals. Between 1950 and 1956, he served as prime minister in five cabinets, before being elected president in 1956.

Kekkonen demonstrated his mastery of politics by bringing Finland successfully through two major crises with the Soviet Union, the first in 1958 to 1959 (the Night Frost Crisis) and the second in 1961 (the Note Crisis). The Night Frost Crisis received its name from the Soviet leader, Nikita Khrushchev, who declared that Soviet-Finnish relations had undergone a "night frost." The immediate origins of the crisis lay in Finnish elections of 1958, in which the SKDL won the largest popular vote and the largest parliamentary representation of all Finnish parties but was not given a place in the Finnish government headed by the Social Democrat, Fagerholm. As a result, the Soviets recalled their ambassador from Helsinki and generally made known their unhappiness with the Fagerholm government.

Two reasons are generally brought forward for this instance of Soviet interference in Finland's domestic politics. One was the Soviet dislike of certain Social Democrats, whom they referred to as "Tannerites," after the long-time leader of the SDP, Vainö Tanner. The second reason may have been the international crisis of the late 1950s that centered on West Berlin. Underlying the Soviet actions was the traditional fear of a German resurgence; the Soviets imagined a renewed German military threat's developing through Germany's North Atlantic Treaty Organization (NATO) partners, Denmark and Norway.

Kekkonen defused the crisis by pulling the ML out of the government coalition, thereby toppling the SDP government that was objectionable to the Soviets. The alacrity with which Kekkonen placated the Soviets resolved the crisis.

The Note Crisis of 1961, far more serious than the 1958 crisis, constituted the most severe strain in Soviet-Finnish relations since 1948. On October 30, 1961, the Soviet government sent a note to Finland that called for mutual military consultations according to Article 2 of the 1948 FCMA treaty. For Finland, the note represented a real threat of Soviet military intervention. As during the 1958 crisis, a tense international situation coupled with Soviet fears of a German military resurgence led to Soviet pressure on Finland. There was also a domestic side to the crisis; as in 1958, the Soviets considered certain elements on the Finnish political scene to be objectionable. The Soviets were concerned about the SDP, especially about the SDP nominee for president, Olavi Honka. Delivered only two and one-half months before the Finnish presidential elections, the Soviet note demonstrated clearly which candidate the Soviets preferred. In response to the note, Kekkonen sought to placate Soviet fears by dissolving the Finnish parliament in November 1961. He then flew to Novosibirsk, where he met with Khrushchev and, after three days of personal consultations, succeeded in winning Khrushchev's confidence to such a degree that the call for military consultations was rescinded. The Note Crisis not only constituted a personal diplomatic triumph for Kekkonen but also led to an era of increased confidence-building measures between the two governments.

For Kekkonen, the lesson of the Note Crisis was that the Soviets needed continual reassurance of Finnish neutrality. He pointed out that Soviet mistrust of Finnish declarations of neutrality in the 1930s had led to war. After 1961, the Finns took great pains to demonstrate their neutrality and to prevent a repetition of the Note Crisis. The effort to win the trust of the Soviets led Kekkonen in two directions--expanded trade and cultural contacts between the two countries and a more active international political role in which Finland worked to promote peace in Northern Europe and around the world.

Kekkonen sought to create ever-wider zones of peace around Finland; thus, he became a determined advocate of an entirely neutral Northern Europe, a position he had enunciated as early as 1952. The Danes and the Norwegians, however, generally did not accept neutrality because they would thereby lose the military protection of NATO. In 1963 Kekkonen also proposed a Nordic Nuclear-Weapons-Free Zone (Nordic NWFZ--see Neutrality, ch. 4). Kekkonen's advocacy of these peace issues helped him to win the virtually unquestioned confidence of the Soviets and precluded a repetition of the Note Crisis.

Conflict among Finnish political parties was so great that, during the twenty-five years of Kekkonen's tenure as president, there were twenty-six governments. Among these twenty-six governments were six nonpartisan caretaker governments, formed when conflicts among the parties became too intense to permit their joining in coalition governments. As during the years of the Paasikivi presidency, there was greater agreement on foreign policy issues than on economic concerns. An especially divisive issue was whether or not to link agricultural income, consumer prices, and workers' wages, and thus to reconcile the competing aims of the main sectors of the economy--farming, capital, and labor.

The conflict over domestic policies was also evident in the consistent strength of the protest vote in elections. The electoral vehicle of the communists, the SKDL, polled more than 20 percent of the vote in the 1958, the 1962, and the 1966 parliamentary elections. That same discontent brought about the emergence of another protest party, the Social Democratic Union of Workers and Small Farmers (Työvaen ja Pienviljelijain Sosialidemokraattinen Liitto--TPSL), which broke off from the SDP in 1959. The TPSL advocated both a friendlier stance toward the Soviet Union and more active measures to protect workers' and farmers' economic interests. In 1959 a breakaway group from the ML formed a party called the Finnish Small Farmers' Party; in 1966 its name was changed to the Finnish Rural Party (Suomen Maaseudun Puolue--SMP). Led by Veikko Vennamo, the SMP spoke for the so-called Forgotten Finland, the small farmers, mainly of northern and eastern Finland, who lived a precarious economic existence. The SMP made a breakthrough into the ranks of the major parties in the parliamentary elections of 1970 by winning 18 seats in the Eduskunta, but in following years its power fluctuated greatly.

Kekkonen's personal triumph in the Note Crisis led not only to his reelection as president in 1962, but also to the dominance, for a short time, of his own party, the ML. (From 1958 to 1966, the SDP was considered too anti-Soviet to be part of a government.) The ML provided the basis for the various coalition governments formed during those years. In its desire to be at the center of Finnish politics, the ML changed its name to the Center Party (Keskustapuolue--Kesk) in 1965. The presence of this large and important agrarian-based party at the center of the political spectrum has characterized the Finnish political system since independence. Fifty-four of sixty-four Finnish governments (through 1988) included the Agrarian/Center Party, compared with thirty-three for the SDP, and twenty-six for the KOK; furthermore, three of Finland's nine presidents, Relander, Kallio, and Kekkonen have belonged to this party.

Finland's economy underwent a major transformation in the 1950s and the 1960s, shifting from a predominantly agrarian economy to an increasingly industrial one. The number of workers engaged in agriculture and forestry dropped from about 50 percent to about 25 percent, and the decline of this traditionally dominant sector of the economy continued into the late 1980s. After the Soviet reparations were paid off in 1952, Soviet-Finnish trade did not decline, but rather it increased. In 1947 the Treaty of Paris had been followed by a Finnish-Soviet commercial treaty that provided the framework for expanded trade between the two countries. The Five-Year Framework Agreement of 1951, which has been renewed repeatedly, established this trade on a highly regulated basis. To a large extent, the trade consisted of Finland's selling machine goods to the Soviets in exchange for crude oil. Finland benefited from the arrangement because Finnish products sold well in the Soviet market, which could be counted on regardless of fluctuations in the Western economic system. Increased trade between the two countries also strengthened the political relationship between them.

Throughout the postwar period, the Soviet Union has been Finland's single most important trading partner, generally accounting for 20 percent to 25 percent of Finland's total imports and exports. Nevertheless, Finland's goal has been to create a balanced trade system embracing both East and West, and more than 70 percent of Finland's trade has been with noncommunist states. Finland's main trading partners, after the Soviet Union, have been Sweden, Britain, the Federal Republic of Germany (West Germany), and the United States, in order of importance. This trade has consisted mainly of the export of timber, pulp, and paper products in exchange for other countries' manufactures, technology, and raw materials for Finland's various industries. In maintaining good economic ties with these countries, Finland has had to overcome persistent Soviet suspicions; however, Finland was allowed to join the European Free Trade Association (EFTA) as an associate member in 1961 in the so-called FINEFTA agreement. The members of EFTA, including Finland, signed free-trade agreements with the European Economic Community (EEC) in 1973. Finland placated the Soviets for these initiatives by signing a trade agreement in 1973 with the Council for Mutual Economic Assistance (CMEA, CEMA, or Comecon), the Soviets' organization for trade and cooperation with its East European allies. Nevertheless, through the trading arrangements with EFTA and the EEC, Finland gained greater economic independence from the Soviet Union.

The economic growth that Finland has experienced in this century has laid the foundation for its social welfare state. The benefits of economic prosperity have been spread around to the population as a whole, with the result that the Finns have enjoyed a level of material security unsurpassed in their history. Conceived not as a whole, but as a series of responses to specific needs, the social welfare system has become strongly rooted. Among its main components are several forms of social insurance: allowances for mothers and children, aimed at encouraging people to have children; pensions; and national health insurance. By 1977 social welfare expenditures accounted for over 20 percent of GDP. The general effect of these measures has been to raise the standard of living of the average Finn and to remove the sources of discontent caused by material want.

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Source: U.S. Library of Congress