Towards a Nordic competition state? Politico-economic transformation of statehood in Finland, 1965–2005 SAMI MOISIO AND LAURA LEPPÄNEN Moisio, Sami & Laura Leppänen (2007). Towards a Nordic competition state? Politico-economic transformation of statehood in Finland, 1965–2005. Fennia 185: 2, pp. 63–87. Helsinki. ISSN 0015-0010. We live in an era of rapid transformation of the European states, which are taking new forms rather than disappearing or being hollowed out. This transformation inescapably touches upon the question of the interaction between a state and its territory. Since there is a growing need to conceptualize this change in statehood from a historical perspective on various margins of Europe, this paper aims at providing a context-sensitive theorization of the gradual transformation of the spatiality of the Keynesian welfare state in Finland. The arguments presented are authenticated by reference to documents on Finnish public investment policy as evidence of the changes in state strategies from the 1960s onwards. The paper concludes that the change from “regimes of security political survival” to “re- gimes of survival in international economic competition” has inevitably influ- enced the relationship between the Finnish state and its territory. It also suggests, however, that inertia caused by the embedded spatial culture of the welfare state has hindered the development of a truly international competition state charac- terized by economic efficiency rather than territorial and social equalization. We therefore conceptualize the contemporary condition of Finnish statehood as spatially promiscuous, in that the Finnish state is becoming an increasingly com- plex combination of the marketplace model (the glocal state) and one nation politics (territorial integrity). Sami Moisio, Academy of Finland/Department of Geography, FI-20014 Univer- sity of Turku, Finland. E-mail: sami.moisio@utu.fi. Laura Leppänen, Department of Geography, University of Turku, FI-20014 Uni- versity of Turku, Finland. E-mail: laura.leppanen@utu.fi. MS received 30 April 2007. Introduction “The other side of globalization has again spoken: a Finnish enterprise has been forced to discover that its competitiveness does not meet up to international standards. Our national election campaign cannot ignore the debate on competitiveness … We know the disease, we know the medication for it. Why is the patient [the state] refusing to take this medica- tion?” – Antti Herlin, Chairman of the Confederation of Finnish Industries, in the leading Finnish newspaper after the sudden announcement by the Nokia sub- contractor Perlos that an industrial plant in Joensuu was to be closed down (22.1.2007) The “molecular processes of capital flow”, capital moving left, right and centre, and everywhere, build new geographical spaces and concentrations within states (Harvey 2003). Globally, there has been a notable rise of regional and within-country differentiation over the past thirty years (see Ag- new 2005). In addition to the increasing inequality within states, Neil Brenner (2004b) goes on to pro- pose that the nationally scaled configurations of politico-economic organization upon which in- dustrial growth and the Keynesian welfare states were grounded until the late 1970s have now been significantly rearticulated and re-organized in Western Europe and beyond. This suggests that there has been a fundamental shift from the cohe- sion policies of the welfare state to the competi- tion and growth policies of the re-worked state. In such a conceptualization, the national territorial states, being both facilitators and mediators of 64 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen capitalist globalization, have been rescaled and reterritorialized as part of global restructuring and increasing economic competition between plac- es. The discourse of international competitiveness and competition, an integral part of the contempo- rary political condition, has clearly necessitated the formation of specific state configurations, and some of these have been carefully examined from a spatial perspective. Most empirical studies touch- ing upon the rise of competition states, the urbani- zation of neoliberalism, the re-scaling of state- hood, or changing city/state relations, for example, have nevertheless focused on the core areas of Eu- rope, so that its geographical margins have re- mained relatively untouched areas of research. As the change in statehood inescapably plays out in a historically constituted social setting based on spe- cific modes of conceiving space, the transforma- tion of the “Nordic welfare state” provides a useful context for studying the ways in which the proc- esses and strategies of re-scaling take shape at dif- ferent speeds, include place-specific strategies, surface in different spatial forms and evoke differ- ent responses in different places. We should thus view the state as being constantly transformed and reconstituted through institutional practices that are necessarily place-particular (cf. Lynn 1999: 825). State intervention has traditionally been crucial in forming the geographical basis for social equal- ity in the Nordic welfare states. It was in these en- vironments that significant state regulation was combined with capitalist imperatives during the Cold War epoch and created specific politico-eco- nomic practices. During the past twenty years, however, the Finnish state, as one representative of the Nordic model, has been in the process of un- dergoing a steady and somewhat hidden transfor- mation instigated by diverse transnational actors such as the EU, the G8 group, the World Bank, the International Monetary Fund, the World Economic Forum, the WTO, the OECD and representatives of the transnational business elite. New forms of eco- nomic governance which give markets priority over the state are thus under construction in Fin- land. A number of scholars have argued that both the practices of the state and the frameworks through which its role is understood have changed considerably over the past twenty years (e.g. Heis- kala 2006; Patomäki 2007). The outcomes of these changes surface relatively slowly, however, and are therefore still relatively unclear. In any case, it is notable that within-country differentiation has significantly increased in Finland over the past thirty years and that the pace of this differentiation has accelerated significantly during the past fifteen years (Table 1). Even though the Finnish state has been under considerable transnational pressure, and even though differentiation has increased, the global practices of state restructuring have not substan- tially replaced the politico-economic configura- tions of the welfare state which originated from the late 1960s. In other words, the change in state- hood has been greatly encumbered by historically constructed, persistent state infrastructures, politi- cal cultures and institutional practices. This sug- gests that while some social systems typical of the 1970s and 1980s have now been significantly de- stabilized in Finland, they have not simply been superseded by new ones. As Meric S. Gertler (2003: 135) aptly puts it, “current decisions are not determined by past ones, but they are conditioned by them”. This is also the case with the restructur- ing of the Finnish state, in which inherited forma- tions have remained important. In other words, the spatiality of the welfare state is embodied in mate- rial objects such as the physical infrastructure and in the habits of the people, not to mention the so- cial institutions which structure and shape the at- titudes, expectations and practices of both indi- viduals and their political representatives. The social dimension of this path dependence was highly visible in the 2007 national parliamen- tary election campaign, for example, where the globalization rhetoric of change was strangely as- sociated with the political articulation of one na- tion and welfare spatiality, even among those who had been most wholeheartedly involved in insti- gating the notable re-working of the state. This leads us to believe that the process of state trans- formation is not easily traceable to the political argumentation or campaigning of the political par- ties, where the notions of an indivisible nation, social equality and equal treatment of the whole territory are still of high value as political argu- ments among actors who seek to persuade the people to support their politics. The transformation of the state must thus be found by examining other sources. The familiar political rhetoric of one nation and one territory typical of national political campaign- ing indicates in the Finnish context that transna- tional time has encountered a national space of inertia, the historically embedded spatial culture. FENNIA 185: 2 (2007) 65Towards a Nordic competition state? Politico-economic … Table 1. Finnish regional dynamics, 1975–2005. Gross value added is presented at basic prices in million Euros (current prices). The economic dependency ratio represents the ratio of the economically dependent part of the population to the productive part. The table reveals a significant differentiation between the richest and poorest regions of the country over the past thirty years. Source: Statistics Finland 2007. Region Transactions 1975 1980 1985 1990 1995 2000 2005 Uusimaa Gross value added, basic prices 4316 7622 14,468 23,504 26,188 41,080 48,541 GDP per capita 4778 8255 15,064 23,527 24,460 36,012 40,943 Population 997,755 1,033,030 1,090,599 1,147,173 1,224,206 1,304,595 1,359,150 Economic dependency ratio 0.8 0.9 0.7 0.6 1.1 0.8 0.8 Employment 540,397 551,441 651,725 695,815 584,592 713,075 737,941 South- West Finland Gross value added, basic prices 1482 2436 4387 6631 7202 9535 11,424 GDP per capita 3974 6564 11,740 17,608 18,626 24,097 28,474 Population 402,199 406,360 415,899 425,282 435,119 447,103 455,584 Economic dependency ratio 1.0 1.0 1.0 1.0 1.4 1.3 1.2 Employment 204,025 199,423 206,244 211,061 182,975 197,813 205,925 Tampere region Gross value added, basic prices 1388 2460 4016 6090 6724 9247 11,835 GDP per capita 3742 6706 10,888 16,418 17,607 23,574 29,135 Population 407,303 409,321 417,635 425,808 436,162 448,997 467,313 Economic dependency ratio 1.0 1.0 1.1 1.1 1.6 1.4 1.2 Employment 206,052 201,674 200,804 200,529 169,938 190,927 209,909 Northern Ostro- bothnia Gross value added, basic prices 999 1711 2834 4673 5185 7025 8897 GDP per capita 3585 6024 9648 15,668 16,621 22,055 27,103 Population 306,943 317,646 332,853 342,948 356,647 365,358 378,006 Economic dependency ratio 1.2 1.2 1.3 1.2 1.8 1.5 1.4 Employment 137,326 142,522 144,744 152,907 125,456 148,384 158,865 North Karelia Gross value added, basic prices 504 933 1502 2133 2141 2789 3210 GDP per capita 3166 5990 9755 14,153 14,045 18,954 22,399 Population 177,089 176,650 177,567 176,836 177,271 171,609 168,322 Economic dependency ratio 1.3 1.2 1.2 1.3 1.9 1.7 1.5 Employment 78,090 79,667 80,740 75,640 61,112 63,991 66 ,523 Kainuu Gross value added, basic prices 292 522 804 1176 1275 1300 1466 GDP per capita 3367 6030 9417 14,314 15,636 16,865 20,156 Population 97,957 99,247 99,288 96,957 95,201 89,777 85,303 Economic dependency ratio 1.1 1.1 1.1 1.2 1.8 1.6 1.5 Employment 46,855 47,526 47,570 44,812 34,137 34,138 34,134 Northern Savo Gross value added, basic prices 726 1372 2222 3404 3525 4279 5087 GDP per capita 3159 6066 9844 15,304 15,640 19,514 23,697 Population 252,668 253,913 257,894 258,633 260,085 253,759 250,064 Economic dependency ratio 1.3 1.2 1.2 1.3 1.8 1.7 1.5 Employment 107,885 114,523 114,952 113,935 91 ,430 96,003 101,247 Lapland Gross value added, basic prices 595 1143 1822 2700 3079 3611 3846 GDP per capita 3427 6709 10,544 15,876 17,830 21 ,890 24,266 Population 195,757 194,890 200,943 200,674 201,411 191,768 185,800 Economic dependency ratio 1.2 1.1 1.2 1.2 1.8 1.7 1.5 Employment 87,312 93,157 91,179 91,993 70,831 71,854 75,205 66 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen In order to understand this embeddedness, the construction of the Finnish welfare state must be placed in a historical perspective. We claim that this process of construction was inherently spatial in nature and closely connected with the notions of strategy, security, a coherent nation and societal order. It does not come as a revelation that the re- working of the Finnish state touches especially upon state/space interaction and that the politics of one nation are inextricably entangled with that interaction. Recent developments of the kind usually desig- nated as globalization have been particularly chal- lenging for this geographically remote, export-ori- ented, sparsely populated and culturally relatively isolated state with no major natural resources such as oil or gas and with internal markets that were opened to international competition less than two decades ago. The challenge posed by global re- structuring grows even wider when we consider the fact that there are no prominent metropolitan regions within Finland, let alone any deeply rooted metropolitan cultural tradition or metropolitan governance with strong internationalizing tenden- cies. In short, the Finnish state faces the transna- tional pressure of “competitiveness” in a truly pe- culiar manner. Our aim in this paper is to engage with the aforementioned tension by elucidating the trans- formation of state/space interactions from the mid- 1960s up to the present time. More precisely, we focus on the interaction between the state appara- tus and state space over the past decades as this is articulated in various sources. We focus especially on the annual national budgets, which are inextri- cably connected with, and indeed constitutive of, the territorial processes of the state. We argue that the state strategies which unfold in the national budgets blur the distinction between domestic and international politics and are therefore an impor- tant focus of attention for politico-economic re- search. We pose two questions which need to be answered: 1. What are the key dimensions of the changing state strategies from the mid-1960s up to the present time? 2. To what extent do any changes in the Finnish state strategies reflect changing state/space relations more generally? The general idea behind these questions is that state governance can itself be conceived of as a problem-solving activity, a form of crisis manage- ment that is closely connected with territorial practices. When using the concept of state strate- gy we are referring to the attempts by the state to mould the geographies of economic development, material and immaterial investments and political struggle into a particular “spatial fix” and are therefore seeking to highlight the plasticity of state territoriality. For this formulation we rely on Neil Brenner, who argues that specific state strategies “always emerge as attempts to impose particular forms of socio-economic intervention” and that these strategies lead to spatially selective hegem- onic projects. He also goes on to suggest that these spatial strategies are not only articulated in “official” regional policies, but rather the state’s spatial strategies which attempt to influence the geography of social and economic relations are articulated through a number of policy instru- ments such as housing policies, general social policies, urban policies, infrastructure investments and economic development initiatives (Brenner 2004b: 91, 93). We treat state annual budgets as political texts which not only disclose the changing spatial strat- egies of the state but also tell us much about the changing notion of statehood. We look on the changing state strategies found in the research ma- terial as providing answers to the questions which are understood as central governmental problems at a given time. In the empirical part of this paper we study in particular whether the strategies of the state are mainly inward-looking (based on a na- tional scale) or outward-looking (beyond the na- tional scale). Secondly, we seek to study whether these strategies are based on an attempt to create territorial cohesion or more on policies which lead towards spatial differentiation and specialization. In short, we seek to investigate the current politi- co-economic processes which potentially chal- lenge the historically constructed spatial configu- rations of the Finnish state. Our paper proceeds through four sections. This introduction is followed by a section which re- views the recent literature touching upon the trans- formation of statehood under the influence of glo- balization. Several concepts are introduced through which we are able to approach the chang- ing interaction between the Finnish state and terri- tory. We especially draw on Neil Brenner’s insight- ful studies on the changing spatiality of states in the contemporary environment of globalization. In section three we illustrate our theoretical elabora- tion by taking the public investments records and the argumentation behind the official state budgets FENNIA 185: 2 (2007) 67Towards a Nordic competition state? Politico-economic … from the mid-1960s onwards as our primary sourc- es. The reasons for selecting such material are two- fold. Firstly, we sought to find a longitudinal yet qualitative set of research data through which it would be possible to trace the historical change in state practices. Our assumption was that it is espe- cially in the practices of state governance that various phenomena such as globalization are put into practice. We therefore claim that globaliza- tion is by and large “internalized” in state practic- es: it is shaped by and through local conditions and domestic political objectives (Cerny et al. 2005). Secondly, state budgets were selected be- cause they presumably contain explicit and widely shared politico-economic articulations of the state strategies prevailing at a given time. We thus be- lieve that the material selected here felicitously discloses the historical changes in Finnish state- hood from the 1960s onwards. We further assume that the material nicely uncovers the changing ra- tionales – certain meanings which are normalized and accepted as truths – behind the historical evo- lution of state/territory interaction. The concluding section discusses the regime of accumulation cur- rently under construction and the somewhat un- clear role of territory within it. Finally, we intro- duce some research themes which merit scholarly attention as the Finnish state adjusts to the intensi- fying effects of capitalist globalization. Changing state spaces The influence of the state on the trajectory of hu- man lives is perhaps more comprehensive and sus- tained than that of any other organizational con- struct. The key constituents of the state – popula- tion, governmental institutions and territory – are not only material phenomena but exist through practices. This suggests that even though the terri- torial shape of the state remains seemingly un- changing, the link between a state and its territory is not a static phenomenon. From a historical viewpoint, states are not fixed in a rigid spatiality, since the interaction between a state and its terri- tory is under constant change. Even though the consolidation of power on the scale of the state, with its tendency towards territorial integrity, has probably been the most important development within the modern era, the history of the state has not ended. The Weberian definition of the state emphasizes the coercive dimension of power. Max Weber sug- gested that the state is a “human community which (successfully) lays claim to the monopoly of legiti- mate physical violence within a certain territory” (Weber 1919/1994: 310–311). In such a view, the link between territory and the state apparatus seems unproblematic: there are no modern states without territory and state institutions. However, even though the modern state system developed hand in hand with the emerging capitalist world economy, and even though the notion of sover- eignty based on the legitimate use of violence within a given territory seems to characterize the very basis of all states, it is difficult to give a uni- versal definition of the state. States are manifesta- tions of place-specific cultural, economic, politi- cal, social and military processes, compartments of space which vary in time and space in terms of functions, forms and essence. Also, it is impossible to find any universal definition of the ethic of the state; it should rather be regarded as the bearer and creator of its own ethic (Schmitt 1999: 196). We therefore treat the state in this paper as con- stantly “becoming” something, a conceptualiza- tion which refers to the contingency and place- specificity of regional practices (Pred 1986). The state as an equalizing entity: the spatiality of the Keynesian welfare state Among the most innovative contributions to the multidisciplinary debate on state transformation that has evolved in recent years among geogra- phers, sociologists and political scientists are the very useful review of the existing literature on the state by Bob Jessop (1990), Philip Cerny’s (1990) structuralist explication of the changing forms of the state, Jamie Peck’s (2001) analysis of the re- structuring of the welfare state, and Jessop’s (2002) evaluation of the current re-working of the capital- ist state. One of the key ideas in this debate is that a significant sociospatial restructuring of the state has taken place from the late 1970s onwards. This transformation is usually conceptualized as a change from Fordist-Keynesian welfare states to competition states characterized by a neoliberal economic ideology. Neil Brenner (2004b: 30), in his useful research agenda for approaching the changing spatiality of the state in the context of global politico-econom- ic restructuring, maintains that capitalism is cur- rently experiencing the transcendence of the na- tionalized sociospatial arrangements of the welfare state. He therefore points to a need to study the 68 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen production of new sociospatial configurations that cannot be cast on the basis of purely nationally scaled models. The contention is that the geogra- phies of state space are being transformed on vari- ous scales under the influence of contemporary capitalist development. Behind this form of argu- mentation lies the assumption that all sociospatial configurations are temporary in a capitalist econo- my which seeks to expand and which has notable crisis tendencies. The processes of capitalist ex- pansion therefore include a continual restructur- ing in which social relations and physical infra- structures are incessantly being created, destroyed and reconstructed, thus continuously forming and re-forming geographical landscapes (Harvey 1982). The Keynesian welfare state was one of the his- torical landscapes of capitalist development, pos- sessing infrastructures for industrial production, transport and communications. These landscapes developed from the 1930s onwards, aiming at an equal distribution of inhabitants, industry and in- frastructure on a national scale (Brenner 2003: 198). Jessop (2002: 55–65) argues that it was the Keynesian national welfare state which ensured the particular phase of capitalist production known as Fordism. In the process of building the Keyne- sian welfare state, national states therefore pro- moted economic development by enhancing the distribution of population, industry and infrastruc- tural investments evenly across the national terri- tory (Brenner 2004a: 479). The reason why the state was called Keynesian is that it not only aimed at securing full employment in a relatively closed national economy but also tried to do so through demand-side management. In this capacity, the Keynesian welfare state deployed a variety of spa- tial policies designed to influence the spatial divi- sion of capital investments in order to govern and manage the process of uneven development with- in its territory. As such, states operated as major forms of territorialization for capital (Brenner 1998a: 465), so that it was very common to chan- nel large public infrastructural investments into the less-developed regions. In Finland, for example, this development was based on an emerging ideol- ogy that major income transfers would accelerate economic growth (see Kuusi 1961). The Keynesian states introduced a range of spatial policies with the aim of reducing national regional inequalities and promoting industrial growth and economic renewal with various forms of financial aid, loca- tion incentives and transfer payments (Brenner 2004a: 460). In many cases the national state adopted the role of an infrastructural constructor by participating substantially in the building of transportation networks, educational structures, housing facilities and utilities supplies, for exam- ple (Brenner 1998a: 474). The national scale was the principal one in the Keynesian state through which the political and economic processes generated and regulated by the government took shape, and this gradually be- came the principal scale of state operations in Fin- land from the late 1950s onwards, aided by the new state planning authorities, which started to treat the state space as a single entity. In general, industrial decentralization, urban deconcentration and spatial equalization were nationally oriented projects throughout the Fordist–Keynesian period (Brenner 2004a: 460–479). Industrialization of the urban centres was seen to create economic growth and well-being across the national state by reduc- ing uneven geographical development (Brenner 1998b: 17–18). Besides forms of direct state intervention, it was common for welfare states to operate with indirect forms of territorial intervention. These were firstly the reproduction of labour power operating through redistributive social welfare policies, sec- ondly industrial relocation through subsidies and tax concessions, and thirdly the promotion of pub- lic expenditure in policy areas such as education, transportation and planning. These actions were justified with arguments such as balanced national development and spatial equalization (Brenner 1998b: 15, 2004a: 460–462). The neoliberal competition state and the re-scaling of state spaces The intensive debate on the future of the state has perhaps been one of the major constituents of the discourse of globalization: whether the state is in retreat, being “hollowed out”, or merely been re- shaped in order to maintain its power and author- ity better (Keating 2001: 372). What seems central to this debate is that the capacities of the state are being reorganized functionally and territorially on supranational, national and regional levels. As Jamie Peck (2001: 447) reminds us, it is not ana- lytically fruitful to ask whether the national state has somehow become less powerful in the global neoliberal era. It is more relevant to ask how it has become powerful in a different way. In other words, states continue to act as central players FENNIA 185: 2 (2007) 69Towards a Nordic competition state? Politico-economic … within the era of globalization even though their form and essence are changing. It is therefore cru- cial to understand the suggestion made by Martin Jones and Rhys Jones (2004: 410–411) that we should focus on the ways in which states continue to act, albeit in a modified manner, during an ep- och in which their ideological power is being qualitatively re-engineered. There has clearly been a partial loss of sover- eignty on the part of national states as decision- making power has been transferred upwards to supranational bodies overlapping with regional levels of territorial organization (Brenner 1998b: 3; Heeg & Oßenbrügge 2002: 81). This reorgani- zation of political and social life does not mean, however, that the notion of territory has become meaningless, in spite of the fact that control over networks – of finance, information, raw material flows and cyberspace – is perhaps becoming in- creasingly important at the expense of physical ter- ritorial space (see Biersteker 2002: 165). Even if globalization becomes the focus of attention at the expense of the state, the question of territory and reterritorialization will remain of paramount im- portance, as it will become crucial to investigate how the logic of territoriality is being both played out and challenged in the age of globalization (cf. Elden 2005: 9). The IR scholars Charles W. Kegley and Gregory A. Raymond (2002: 157), for example, suggest that globalization produces a complex network of ex- changes which are not solely organized according to any territorial principles typical of modern states. As such, their claim represents the literature which sees globalization as severely undermining territory, a view which is directly connected with the modern state. We are nevertheless inclined to conceptualize globalization as an inherently spa- tial phenomenon which neither makes space meaningless nor destroys all the territorial proc- esses of the modern state. Hobson and Ramesh (2002: 8–9) suggest succinctly that states are nei- ther hollowed out by globalization (as passive vic- tims) nor autonomous agents which shape it. In- stead states and globalization are mutually reflex- ive and co-constitutive of each other. They also come up with the idea that states are “spatially promiscuous”, in that while they cannot physically move across territory they have a specific ability to dip into the global realm in order to adapt or miti- gate the perceived domestic, regional or global political problems. Partly following this logic, we regard globalization not as a new reality or an ac- tor which forces states and people into new roles, i.e. a replacement for states, but rather as a ques- tion of their destabilization and reorientation (Ag- new 2007). We therefore treat globalization as a powerful discourse that articulates a specific type of relationship between national and international politics and between national and international economics. In such a view, the globalization im- perative has been nationally constituted out of par- ticular political ambitions and social practices (Gibson-Graham 2003: 104). The Keynesian welfare state faced increasing pressure from the 1970s onwards, a crisis that was emerging in the well-developed capitalist econo- mies alongside the crisis affecting Fordism and the internationalization of economic relations (cf. Brenner et al. 2003: 4). The extensive state inter- vention of the Keynesian period came to be chal- lenged, and it was now the state which was seen as a principal factor in the initiation of the massive malaise afflicting the neoliberal economies: eco- nomic stagnation, unemployment and inflation. The need for a radical reduction in public expend- iture and the transition from the Keynesian welfare state towards more competitive markets are said to have emerged as means of resolving the economic crisis (cf. Brenner 2000: 327). Brenner (2004a: 468) thus suggests that the crisis of the Fordist par- adigm in the 1980s began to lead both to a new phase of change in industrial structure and to a spatial restructuring of the national state. This change was also coupled with the significant de- velopment of information technologies. Philip Cerny (1990: 205–231) invented the con- cept of the competition state to illustrate how the forms of state economic policies were changing in an attempt to respond to and achieve better con- trol over the increasing international interpenetra- tion. He went on to claim that the promotion of international competitiveness had been adopted as the key objective of national state intervention so that it had even come to challenge “national security” as the primary concern of state govern- ments. As Tore Fougner (2006: 165) suggests, inter- national competitiveness has been constituted both as a central objective in relation to which most state policies should be considered and as a central means of resolving most of the problems that confront the state. It must be pointed out, however, that international competitiveness, un- derstood here as a central governmental problem, has lead to different solutions in different places over the past three decades. 70 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen Even though there is no single universal model for a competition state, it seems common within this development that state governments have not only started to act more and more often as market players, shaping their policies to maximize the re- turns from market forces in an international envi- ronment, but they have also started to create poli- cies which aim at improving the climate for both national and multinational business (Cerny 1990: 230). The international competitiveness of the state was mainly understood in the Keynesian era as the capacity of “national firms” (often industries owned by the state) to compete with foreign com- panies in an international environment with the help of state governance. In the era of the competi- tion state it is the states which are competing against each other to attract international enter- prises by attempting through various policies to create attractive “investment landscapes” for inter- national capital. International competitiveness has therefore become a governmental problem, in the form of “the capacity of a state to compete with other states for shares of so-called footloose invest- ment capital” (Fougner 2006: 175). In such a de- velopment states can easily adopt a somewhat naturalized attitude towards markets. Since the crisis of Keynesian accumulation re- gimes based on state regulation and state planning that took place in Western Europe in the 1970s, the global market system has become increasingly neoliberalized (Brenner & Theodore 2002: 342). John Agnew (2005) conceptualizes this develop- ment as a spread of the American marketplace so- ciety: the spread of market practices and values instigated by transnational forces which aim to bring places, including states, into the markets. It is now commonplace to connect the change in state territoriality with the expansion of this neo- liberal economic ideology, arguably one of the key constituents of contemporary capitalist globaliza- tion. David Harvey (2005: 65) gives a very solid definition of the neoliberal state: Sectors formerly run or regulated by the state must be turned over to the private sphere and be deregulated (freed from any state interference). Competition – be- tween individuals, between firms, between territorial entities (cities, regions, nations, regional groupings) – is held to be a primary virtue. The ground-rules for market competition must be properly observed, of course. In situations where such rules are not clearly laid out or where property rights are hard to define, the state must use its power to impose or invent mar- ket systems. Privatization and deregulation combined with competition, it is claimed, eliminate bureaucrat- ic red tape, increase efficiency and productivity, im- prove quality, and reduce costs, both directly to the consumer through cheaper commodities and services and indirectly through reduction of the tax burden. Competition state policies often follow the neo- liberal political imagination, which promotes free markets (liberalization), opposes state intervention or direct control by the state (deregulation), aims to sell off the state-controlled parts of the public sector (privatization), requires the public sector to operate on a commercial basis, stimulates the pur- suit of market forces (internationalization) and supports high-income earners by creating oppor- tunities for entrepreneurial activity (individualiza- tion) (Brenner & Theodore 2002; Jones et al. 2004: 68). The primary function of the neoliberal compe- tition state is thus to act as an enabler and facilita- tor. In other words, an entrepreneurial-like policy is adopted in state governance. The idea is now to enhance the spontaneous development of regions with new means of financing (cf. Hudson et al. 1997: 371; Heeg & Oßenbrügge 2002: 83). In a world where competitive edge is increasingly val- ued, national states allocate “state-financed capi- tal” to enhance their potential instead of acting strictly to guarantee the services of the welfare state through high state expenditure. In such a context, local governments, with the help of pub- lic-private partnerships, seek to attract entrepre- neurs to their regions through investments in pub- lic facilities, infrastructure and services, thus influ- encing the operational preconditions for compa- nies (Eberts 1990: 15; Hudson et al. 1997: 367– 369). It is important to notice that the neoliberalising state is persistently seeking out forms of internal reorganization, both spatial and institutional, that might improve its position in the economic com- petition with other states in the global market. The Keynesian welfare state was less concerned with international competitiveness and the creation of an attractive investment landscape for footloose capital, as it assumed a relatively closed national economy, whereas the Schumpeterian understand- ing of competition typical of neoliberal competi- tion states argues that international competitive- ness depends on developing the individual and collective capacities which extend the narrow na- tional economy. In other words, these capacities are seen as crucial in the international competition between nations, regions and cities. It is therefore typical of competition states that public resources FENNIA 185: 2 (2007) 71Towards a Nordic competition state? Politico-economic … are increasingly allocated to the promotion of (technological) innovations that are conceived of as increasing the pace of economic growth (cf. Jes- sop 2002: 121–122). Suffice it to point out that capitalist globaliza- tion, the neoliberalization of states outlined above and the spatial transformation of states are closely intertwined. This is precisely the reason why the neoliberal economic ideology has argu- ably led to a re-scaling of the European states (see Brenner 1999; Brenner & Theodore 2002). In oth- er words, the state space is now being re-differen- tiated and re-scaled to correspond to the imprint of the location preferences of international foot- loose capital within each national territory. The importance of sub-state regions has increased significantly in the policies of competition states, as the current discourses of competitiveness seem to emphasize the importance of regions as “play- ers” in this global competition (cf. Agnew 2000: 103). In Western Europe it is especially the large-scale metropolitan regions that are nowadays viewed as embodying the most important institutional and political arenas in which the re-scaling of state- hood is being forged and new economic growth policies initiated (Brenner 2004b: 50–60). That is to say, the transformation of the state has been about the reorientation of state institutions and policies towards subnational regions. In other words, new urban competition policies have been launched all over Europe in order to incorporate new competitive spaces (large city regions) into the conceived spaces of competition (the competi- tion between the US, Europe and Asia). In this process the territorial economy of the state is being challenged by a city-centred economy driven by the main urban conglomerates. Thus, if the spatial- ity of the Keynesian welfare state was character- ized by a somewhat even territorialization of capi- tal, the rescaled state institutions (metropolitan governance etc.) currently represent what may be called a re-territorialization of capital. In the proc- esses of re-scaling, states are thus acting as impor- tant agents for regionalizing economic develop- ment capacity to cities, city-regions and industrial regions and in marketing these areas and locations globally (Brenner 1998a: 465, 2006: 263). In Eu- rope, the re-scaling of the state is therefore closely associated with an intensifying interspatial compe- tition within which regions are forced to compete to attract foreign direct investments, EU funds and state subsidies. Changing state strategies, 1965–2005 The interaction between the state and territory is in the process of constant transition. Governments use different measures to affect the relationship between the state and its territory at different times, and the institutional structures of the state, such as its legislation, are assuming crucial importance in the process of expanding the state power within its confines. State may use public infrastructural in- vestments such as the construction of roads, rail- ways, airports, seaports and telecommunications systems to intensify state/territory relations. These physical and social infrastructures can thus be seen as capital goods for which users do not pay a market price (cf. Rietveld 1989: 256). As such, public investments in social infrastructure such as education belong to these measures through which the state seeks to stretch itself throughout its terri- tory. It is self-evident today that states should pro- vide the basic infrastructure without which capi- talist exchange could not operate (cf. Dicken 2003: 131). From a spatial point of view, we may consider public investments from two perspectives. It has been common to examine the impacts of public investments on economic growth within a particu- lar state. In such a view, the public infrastructure can be understood as a factor influencing the loca- tion of private investments. The provision of a ba- sic infrastructure in a certain region can thus be argued to lead to an increase in the productivity of private production factors (Rietveld 1989: 255– 272). It has been common in economic geography to study the role and impacts of public investments in affecting regional divergence (Costa-i-Font & Rodriguez-Oreggia 2005: 310). In such a view, the domestic infrastructure is a factor explaining in- dustrial relocation (Gramlich 1994: 349). Public infrastructure may have a role in attracting indus- tries from other regions in a context where there are negative effects of industrial concentration in the place of departure (Costa-i-Font & Rodriguez- Oreggia 2005: 310), while Haughwouth (1999), for his part, has studied the impact of state infra- structure growth on the interstate distribution of economic activity. We regard state investments in this paper as in- struments which tell us something crucial about the changing interaction between a state and its territory. We argue that public investments serve well to characterize changes in the spatial strate- gies of the state as these are employed in different 72 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen historical contexts. In other words, public invest- ments are practices which always reflect their time. In the ensuing pages the general justification sec- tions of the state budgets of Finland from 1965 to 2005 will be used to disclose the changing strate- gies of the state apparatus as it has sought to man- age and steer politico-economic practices. We have chosen the year 1965 as the initial point giv- en the fact that Finnish regional policy legislation, which aimed at launching a massive state inter- vention throughout the territory, dates back to 1966. As indicated in Fig. 1, investments (including both public and private investments) have fluctu- ated significantly in the history of Finland, and these fluctuations reflect the changing state strate- gies that we go on to introduce in the following pages. Roughly speaking, three investment eras can be distinguished. The first was before the Sec- ond World War, when Finland was mainly an ag- ricultural society and the investment rate fluctu- ated between approximately 10% and 20%. In- vestments tripled from the early 1920s to the late 1930s, even though the recession in the early 1930s was a crisis which caused a significant re- duction in state investments (Hjerppe 1988: 124). World War II was an interruption during which investments dropped significantly, and the second investment era began shortly after the end of the war and continued until the late 1980s. The invest- ment rate rose gradually over this period from ap- proximately 10% to over 33%. The development that took place from the 1960s onwards therefore exemplifies the more general trend in Western Eu- rope that had already begun in the 1930s, when states began to interfere directly in the actions of society through subsidies, income transfers, grants, loans, tax advantages, public investments and the state ownership of production facilities. In the Finnish context, the latter half of the second invest- ment period is usually considered to mark the creation of the welfare state, thus being character- ized by a record of significant public investment in both material and non-material sectors. The severe recession which took place in the early 1990s was coupled with a considerable decline in public in- vestments, to be followed by the third “investment era”, which began in the early 1990s and has con- tinued up to the present time. Central to this period is not only that a significant decline in the rate of public investment (to c. 10%), but also a signifi- cant increase in the proportion of non-material investments by the state at the expanse of material ones. We will now turn our attention into the chang- ing strategies of the state as these are presented in the annual budgets. We will seek to identify the basic dimensions of these changing strategies with respect to three issues: general investment poli- cies, education policies and regional policies. The reason for making such a distinction is that the spatiality of the state is not moulded only in the context of “official” regional policies but also, and perhaps even more so, in the context of general economic and social policies. Fig. 1. The investment rate (gross fixed capital formation / GDP) from 1917 to 2005 indicates that there have been three “investment eras” in the history of Finland since gaining independence: 1) c. 1917–1939, 2) c. 1944–1989 and 3) 1990–. Source: Statis- tics Finland 2006. FENNIA 185: 2 (2007) 73Towards a Nordic competition state? Politico-economic … Looking inward: territorial equalization in the 1960s and 1970s Centralized state planning was launched in Fin- land in the mid-1950s, but it was only in the mid- 1960s that the rationale which considered the state to be an indivisible entity could be said to have been in operation in full swing. From that time on- wards the state took a decisive role in strengthen- ing and supporting the diffusion of settlement and economic activities into the peripheral areas, with the help of public investments aimed at homoge- nizing spatial economic development in a manner typical of an equalizing state. The laws and deci- sions enacted in order to establish an integrated nation caused a considerable growth in state ex- penditure (Hallituksen esitys… 1964). The state made a forceful expansion into its ter- ritories in the 1960s and 1970s, and had already started to construct territorial equality and unified welfare systems during the first of these decades (Tulo- ja menoarvioesitys… 1967). The same phe- nomenon continued throughout the 1970s. In gen- eral, the state’s distribution of its centralizing pow- er throughout its territory was a crucial strategy in the 1960s and 1970s, and perhaps surprisingly, in- cluded plans to transfer tasks and authority from the central administration to the regional and local level in view of a perceived need to relocate of- fices and institutions outside the Helsinki region (Tulo- ja menoarvioesitys… 1974). The argumenta- tion of harmonious and equal territorial develop- ment of one nation was highly visible in the state budgets of the early 1970s, coupled with the need to create a well-balanced regional structure with full employment (see Tulo- ja menoarvioesitys… 1968, 1974). Far-reaching measures to construct an integrated and well-balanced nation-state based on both regional and social equality were thus highlighted at that time (Tulo- ja menoarvioesi- tys… 1974). In sum, the politics of one nation in- cluded a wide range of practices such as develop- ment of the educational system and the construc- tion of basic infrastructure throughout the territory. These actions were coupled with the promotion of industrial production and the construction of fur- ther transport infrastructure. The development of vocational education and extension of the higher education system played an important role in the budget argumentation of the 1960s. There was an awareness of the need to develop an educational system which would over- come both regional differences and differences between the social classes. As far as basic educa- tion was concerned, the network of schools ex- panded significantly and the preparation of a state- wide comprehensive school system started in 1964. A law on the development of the higher education system over the period 1967–1981 was enacted in 1966, and new universities were estab- lished in the development regions. In order to fulfil the requirements of equal opportunities to study, the government developed a system of study grants in the late 1960s, and this was coupled with the launching of the State Study Grants Centre in 1969. Further work on developing the grant system con- tinued in the 1970s and was presented as one of the key state strategies in the national budgets (Tulo- ja menoarvioesitys… 1967, 1968, 1970, 1972, 1974). The argument based on the need to develop the education system further persisted throughout the 1970s, and the focus of state strategies in the early years of the decade in particular was clearly on providing and guaranteeing equal study opportu- nities on a regional basis. Implementation of the comprehensive school system began in northern Finland in 1972, the specific aim of this system as explained in the budget documents being to re- duce differences between the core areas and the more peripheral parts of the country. All in all, the state increased education opportunities in the de- velopment areas at all educational levels from the mid-1960s onwards (Tulo- ja menoarvioesitys… 1970, 1972, 1974). As articulated in the state budget for 1973, “In order to equalize the persist- ing regional differences in vocational education, it is hoped to increase educational opportunities in the development areas by directing a considerable proportion of the student places to these regions” (Tulo- ja menoarvioesitys… 1972: 16). The state budgets of the 1960s and 1970s also indicate that the expansion of the entire education system to cover the whole country was considered to be of the utmost importance. Given the crucial impor- tance of the education system in the national con- text, the creation of a unified educational system can be said to be inherently intertwined with an attempt to create societal order throughout the ter- ritory. In addition to active education policies, the government began to implement an active public investment policy from the late 1960s onwards. This included large public investments in welfare infrastructures such as local hospitals, office build- ings and transportation which increased the visi- 74 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen bility of the state in peoples’ everyday lives. The construction of transportation infrastructure con- tinued throughout the 1970s with the electrifica- tion of the rail network, road investments and au- tomation of the telecommunications network. Par- ticularly the transport investments must be seen as crucial attempts to connect the geographical pe- ripheries under the direct influence of the central government. Even though investments in infra- structure were not a focal point of the state budg- ets in the 1970s (contrary to the 1960s, when in- dustrial investments required massive public fi- nancing), they nevertheless remained central to them. Investments in the state-owned Post and Tel- ecommunications of Finland were already being legitimized in the early 1970s by emphasizing the significance of economic growth especially in less developed areas (Tulo- ja menoarvioesitys… 1970, 1972, 1974; Valtion tulo- ja menoarvioesitys… 1976, 1978). In general, extensive public invest- ments and financing were argued to be the key means of promoting balanced regional develop- ment and social cohesion. The mining industry in northern Finland, for example, together with geo- logical research in those areas, was strongly sup- ported in the state strategies. In other words, the territory of the state was regarded as a fundamen- tal economic and social resource, a type of spatial capital. As a result, industrial and power plants, mines and forest industries were established in less developed areas, largely with public invest- ments. In addition to these investments in infra- structure, large forest improvement strategies were emphasised in the state budgets (Tulo- ja menoar- vioesitys… 1967). State ownership was the backbone of the wel- fare state strategies, which aimed not only to im- prove economic growth but also to foster national integrity. The budgets in the 1960s and 1970s highlighted close linkages between employment, societal order and public investments. In the 1970s, when the argumentation legitimizing large public investments was notably blatant, state strat- egies were often justified with a reference to poor employment conditions. In fact, in the mid-1970s, when the number of unemployed exceeded 100,000, President Urho Kekkonen declared a state of national emergency. As late as 1979, the state budget proposal (Valtion tulo- ja menoarvio- esitys… 1978: 13) still clearly revealed a classical Keynesian tone: “weaknesses in domestic invest- ment and consumer demand have been the reason for the high unemployment”. It was argued in the 1960s and 1970s that un- employment was the major threat to societal order and economic growth, and the ability of public in- vestments to smooth over the cyclic variations in employment was often highlighted in state strate- gies from the mid-1960s up to the mid-1980s (Hal- lituksen esitys… 1964; Tulo- ja menoarvioesitys… 1967, 1968, 1970; Valtion tulo- ja menoarvioesi- tys… 1976, 1978). Public investments were espe- cially directed to areas which suffered from unem- ployment (Tulo- ja menoarvioesitys… 1974). In addition to employment, public investments were also seen as measures designed to avoid produc- tion shortages. In 1975, for example, the govern- ment argued that “economic policy has especially been directed towards supporting investments in industry in order to create additional export ca- pacity for the needs of the new economic boom” (Tulo- ja menoarvioesitys… 1974: 9). Arguments also emerged for a need to increase production ca- pacity because of the rapid growth of exports to the Soviet Union. Interestingly, the justifications for public investments gradually altered from em- ployment aspects towards the management of pro- duction. The aforementioned educational and invest- ment policies were both remarkably inward-look- ing in the 1960s and 1970s, and the same applies to the regional policies, which paid special atten- tion to the welfare conditions and economic growth in the less developed areas. Concepts such as “development regions” and “balanced regional development” were notably visible in the state budgets of the latter half of the 1970s (Tulo- ja menoarvioesitys… 1974; Valtion tulo- ja menoar- vioesitys… 1978). Various measures and actions took place in the less developed areas in the 1970s to balance out the developing territorial differenc- es. The specific objective was to use public fund- ing to promote entrepreneurship that would later operate in a financially independent manner. One of the most important actions in the 1970s was the establishment of Kehitysaluerahasto Oy, an organ- ization which started to finance small and medi- um-sized enterprises in the development areas. The external development potential of companies in the development areas in particular was subsi- dized through state funds (Tulo- ja menoarvioesi- tys… 1970), and financial subsidies were also al- located directly to the promotion of industry. Espe- cially the mining industry, power production, elec- trification, the construction of hydroelectric power plants, ore prospecting and geological explora- FENNIA 185: 2 (2007) 75Towards a Nordic competition state? Politico-economic … tions in the development areas were supported by the state (Valtion tulo- ja menoarvioesitys… 1976, 1978). In other words, rational state planning, the material infrastructure, natural resources and an attempt to foster economic growth formed a single entity. Education, investments and regional policies in the 1960s and 1970s revealed a strong need to raise the development regions to the same level as the rest of the country. The “policies of one na- tion”, an attempt to construct a coherent national state with well-balanced economic development throughout its territory coupled with the objective of attaining territorial control both vertically and horizontally, were strategically pursued through education, investments and regional development policies. These interlinked policies were based on an understanding that the state territory was the key constituent of societal order as well as a strate- gic asset for increasing economic prosperity. These policies also clearly reveal that the state strategies in the 1960s and 1970s were mainly inward-look- ing and based on equalizing principles. The understanding of national competitiveness in the state budgets changed remarkably from the 1970s to the late 1990s. Despite the inward-look- ing state strategies, the concept of competitiveness had already emerged in the budgets by the early 1970s, but it referred specifically to a need to de- velop national competitiveness through active la- bour and education policies. State investments in education were therefore seen as a crucial prereq- uisite for gaining competitive advantages in inter- national trade. The term competitiveness therefore referred at first mainly to the price competitiveness of the state owned industries (Tulo- ja menoarvio- esitys… 1970). Some initiatives for launching re- search and development projects were already be- ing made in the late 1970s, but this form of reason- ing remained marginal to the state strategies until 1990s. In the 1970s the concept of national competi- tiveness was inextricably connected with the pro- motion of industrial structure and employment (Valtion tulo- ja menoarvioesitys… 1978). In this form, the rhetoric of “being competitive” was highly visible in the state budgets of the late 1970s (Valtion tulo- ja menoarvioesitys… 1976, 1978). It is also important to note that the concept of na- tional competitiveness in the 1960s and 1970s was inherently spatial in nature, as it referred espe- cially to balanced economic and regional devel- opment. Understanding the territorialization of state power: inward-looking and equalizing state strategies at a time of internal and external pressures The history of Finland is often conceptualized as a continuing attempt to survive on a turbulent world political map (see Jakobson 2006). We argue that from the early 1950s up to the late 1980s the logic of survival especially revolved around the issue of securing the territorial state, its membership of the non-communist camp and its political institutions. These formed the basis of state sovereignty from the early 1950s to the late 1980s. We thus go on to propose that power politics in Finland had a major impact on the ways in which governments under- stood the relations between territory, population, security and societal order. Keijo Korhonen, one of the key political figures in Finland during the Cold War period, stressed in 1969 that “The foreign policy of every country is a result of both external and internal circumstances, of both existing conditions and the political will” (Korhonen 1969: 31). In a similar vein, we may understand the interaction between the Finnish state and its territory in the 1960s and 1970s as a result of both internal and external circumstances, of both existing conditions and the political will. In other words, the state space at that time was a manifestation of changing political contexts in which global economic ideologies mattered as well as power politics. The “central political problem for the govern- ment” which developed in Finland from the 1950s onwards included two inherently intertwined is- sues: national integrity and economic growth, i.e. it was inherently tied up with security policy con- cerns. It was in this political context that the idea that the state had the ultimate responsibility to cre- ate territorial and social integrity began to develop. This goal was inextricably conditioned by both in- ternal and external pressures, which were con- nected with the more or less undisputed ideologi- cal goal of the leading political groupings. The Social Democrats, Conservatives and Agrarian Par- ty all shared the view that Finnish society should belong ideologically to the non-communist camp. Externally, therefore, the rising industrial and mili- tary power of the Soviet Union operated arguably as a significant stimulus for developing national integrity. In the late 1960s President Urho Kekkonen pointed to a need to create a “uniform pattern of 76 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen behaviour for the Finnish nation” (Jakobson 2003: 16). Even though personal contributions should not be over-estimated in the context of historical development, neither should the actions of power- ful individuals be under-estimated. As far as the expansion of the power of the Finnish state from the 1960s onwards is concerned, the efforts made by Urho Kekkonen should especially be taken into account. As Prime Minister in the early 1950s, Kekkonen had already sought to launch a political programme which epitomizes the later Keynesian territorial policies of the state. In his important po- litical pamphlet Does our country have enough presence of mind to become prosperous? Kekko- nen (1952) not only required that the government should take an active role in enhancing regional development, but he also argued that strong state regulation should exist throughout the country. Kekkonen thus demanded active state participa- tion in the development of the peripheral areas. His idea was that the national state should operate as the key initiator of development, given the lack of private sector investments in the peripheral re- gions. He therefore introduced a major investment and financing programme especially to promote industrialization in northern Finland: The special conditions with regard to industrializa- tion in northern Finland, the scarcity of capital and the tendency for private entrepreneurship to support the southern part of the country in particular mean that we cannot construct industry in northern Finland – at least not as quickly as the benefits of our national economy demand. If the mission is to be carried out as it has to be, other measures have to be found. The only useful means is that the state should use public investments in northern Finland to build up its heavy industry (Kekkonen 1952: 118). In order to make the investment programme possible, Kekkonen (1952) claimed that the in- come level of the people should not increase nota- bly in the short term. All these radical political openings were legitimized by reference to the challenges posed by both foreign political and do- mestic pressures which threatened the societal or- der within the confines of the state. Kekkonen thus conceived the creation of an integrated nation as a means to secure this sovereign political unit in the era of both internal and external uncertainty. As such, the central governmental problem was in- herently connected with the strength of a collec- tive body. The increasing power of the centralizing state was considered crucial to providing a territo- rial basis for social equality and social order. All these actions were clearly aimed at transforming the state into a powerful locale, an unquestionable framework for societal interaction. The politics of one nation were pursued through various processes aimed at producing a regionally and socially homogenized state space. Internally, it was the danger of political and social unrest posed by the communists and socialists that was seen to require state interference. In terminology of Taylor (2006), the creation of territorial integrity from the 1960s onwards was inextricably connect- ed with guardian practices which were aimed at controlling social relations within the state. The national territory was thus clearly understood as a seat of power and a fundamental resource for se- curing a sovereign state. The state became an in- ward-looking, equalizing unit which operated through the creation of both spatial and social capital. In short, the Finnish state and its territory began to interact in such a way that they became mutually constitutive (cf. Lefebvre 2003: 87). The state constructed what Carl Schmitt (2003: 67–79) calls nomos: the measure by which the land in a particular order is divided and situated and the form of social and political order determined by this process. Moreover, the internal and external pressures led to the development of what Michael Mann (1984) calls the state’s infrastructural power across its territory: the state possessed infrastruc- tures that penetrated universally throughout the civil society. From the 1950s onwards, economic growth, in- dustrialization and social equalization were con- ceived of as fundamental prerequisites for contain- ing the communist ideology within the state. In- deed, social scientists tailored theories according to which Finnish communism was a “spatial dis- ease” which was located not only in the poor neighbourhoods of the major urban centres but es- pecially in the vast peripheries within which the power of the state was poorly developed (cf. Koikkalainen 2004). The government thus began in the 1960s to create industrial environments in the less developed areas. In general, the develop- ment of the state’s infrastructural power included massive investments in the material infrastructure of the peripheries, significant transfer payments to the less developed areas, development of the so- cial security system and the construction of a uni- fied education system and a nation-wide university network. The principle of equal rights to services across the territory of the state was at the core of the development of the infrastructural power. The FENNIA 185: 2 (2007) 77Towards a Nordic competition state? Politico-economic … state, therefore, took the key sectors of the econo- my such as health care and education out of the market on the grounds that access to basic human needs should not determined by market forces. As the state budgets clearly disclose, the state sought to foster not only its visibility but also the national consciousness through these interventions which entailed expansions in public expenditure. From the 1960s onwards welfare state policies started to colonize the everyday life of the Finns through bureaucratization and discourses of state planning and surveillance (cf. Lefebvre 1991). As such, a unique expansion of state infrastructural power across its spaces took place through state regulation, which, it was argued, would increase economic efficiency. The government therefore ac- cepted that the state should focus on full employ- ment, economic growth and the welfare of its citi- zens, and if necessary intervene in or replace mar- ket processes in order to achieve these ends. The expansion of the state’s infrastructural power was further “bolted to the ground” by the regional po- litical legislation, which was aimed at producing societal trust among the different social classes across the regions. Looking inwards and outwards: state strategies in the 1980s Development of the welfare state in Finland reached its culmination in the 1980s, as educa- tion, investment and regional policies gradually took on new forms (Valtion tulo- ja menoarvioesi- tys… 1980, 1982), so that investments in social capital, know-how and education increased in state budgets in the early part of the decade and investments in research and innovation towards the end. It was now argued that national competi- tiveness could be constructed and maintained through research, product development and the promotion of the exports (Valtion tulo- ja menoar- vioesitys… 1982). The state budget for 1987, for example, emphasizes that “the enhancement of the professional skills of personnel and their moti- vation towards their work are the factors on which real competitiveness is ultimately based” (Valtion tulo- ja menoarvioesitys… 1986: 9). The budgets therefore started to highlight the importance of re- search in promoting the competitiveness of do- mestic production. For the first time the universi- ties were explicitly linked to the concept of eco- nomic competitiveness, although regional stability in higher education was still highly valued in the state strategies (Valtion tulo- ja menoarvioesitys… 1980, 1988). The increasing importance of non-material in- vestments, especially in the form of research and development, indicated a significant change in strategy in the late 1980s. In fact, investments in research and development increased significantly from the 1980s onwards, with the aim of reaching an “international level” (Fig. 2). State subsidies were allocated to the development of new applied technology, product development and production Fig. 2. Gross domestic ex- penditure on R&D as a per- centage of GDP from 1983 to 2003. The figure discloses a significant increase in R&D investments. Source: OECD 2005. 78 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen systems (Valtion tulo- ja menoarvioesitys… 1980), and it was now conceived that regional policy funding for entrepreneurship would improve the country’s long-term competitiveness (Valtion tulo- ja menoarvioesitys… 1982, 1988). As a result, public funding was increasingly being diverted away from direct investment assistance and to- wards research and development subsidies (Val- tion tulo- ja menoarvioesitys… 1984, 1986) (Fig. 3). It is important to note that regional access to research activity was also taken into consideration, and growth in the research sector was channelled outside the Helsinki region (Valtion tulo- ja meno- arvioesitys… 1986). Where the construction of the welfare state, es- pecially in the 1970s, had taken place with the help of large public infrastructure and service in- vestments, these basic infrastructure investments had mainly been completed by the early 1980s. It is also important to note that the possibility of us- ing state investments for achieving permanent im- provements in the employment situation was questioned for the first time in the state budgets of the early 1980s (Valtion tulo- ja menoarvioesitys… 1980, 1982). This criticism took place in a situa- tion in which political interventions by the state had started to be perceived as economically harm- ful rather than advantageous. It was in this context that the justifications for the use of public invest- ments changed from the improvement of employ- ment to the creation of competitiveness. In 1981, for example, the government emphasized that a rapid and balanced expansion in investment was necessary for regeneration of the production struc- ture and the competitiveness of production. The government also went on, however, to stress that great variations in investment activity could po- tentially lead to unstable economic development, which would weaken the possibilities for creating favourable preconditions for sustainable econom- ic growth (Valtion tulo- ja menoarvioesitys… 1980). Where the state-owned companies were heavily subsidized in the 1960s and 1970s, a change in thinking with regard to their productivity of the state-owned companies took place in the early 1980s. It was now argued that state-owned indus- tries should operate as real enterprises with the objective of making an economic profit (Valtion tulo- ja menoarvioesitys… 1982, 1986). We con- sider this as the first step towards the gradual priva- tization of the state-owned industries that took place especially in the 1990s. Moreover, this new principle indicates that the notion of competitive- ness was becoming a more central part of govern- ment strategy. It was now argued that it was neces- sary to allocate funds to fields that had the prereq- uisites to survive in the face of international com- petition without continuous public sector invest- ments. It must be noted, too, that this policy was launched even though the unemployment rate was high and there were shortages in the supply of skilled labour, in southern Finland, especially in the growing branches of industry and in the serv- Fig. 3. Rates of investment in the public and private sec- tors from 1975 to 2004. Source: Statistics Finland 2007. FENNIA 185: 2 (2007) 79Towards a Nordic competition state? Politico-economic … ice sector (see Valtion tulo- ja menoarvioesitys… 1984, 1986, 1988). A distinct need to renew regional policies emerged in the late 1980s in response to increas- ing regional differentiation. This was argued in the state budget of 1989 with reference to changes in economic structures: “the structural change in in- dustry and the growth in service sector together with the increasing importance of knowledge and research investments in fostering international economic activity have given rise to a need to in- tensify regional policy measures” (Valtion tulo- ja menoarvioesitys… 1988: 32). Regional policies were gradually reformulated, with a new emphasis on industrial restructuring and service sector growth, and the increasing importance of knowl- edge and research investments also surfaced in their reformulation in the late 1980s. It is also strik- ing to note that the idea of internationalization was for the first time added to the previously in- ward-looking and equalizing regional policies of the mid-1980s. This internationalization was closely connected with the need to increase re- gional competitiveness through know-how and research activity (Valtion tulo- ja menoarvioesi- tys… 1988). Regional policy reform was articulated especial- ly with reference to competitiveness. The decline in economic competitiveness was characterized as a threat that would jeopardize not only economic development and employment but also the growth of foreign trade (Valtion tulo- ja menoarvioesitys… 1986). For the first time regional policies were ex- plicitly connected with the improvement of living conditions in the Helsinki region. Moreover, the balance between economic growth and the au- tonomous development of the regions surfaced as an important issue in the state budgets. Indeed, these new regional policy principles opened up room for decentralizing spatial development. The development activities mentioned in the state strat- egies began to concentrate especially on southern Finland. As a consequence, the role of the devel- opment areas in the state budgets diminished in the course of the 1980s (Valtion tulo- ja menoar- vioesitys… 1984, 1986, 1988). Economic competitiveness gained in impor- tance in the state strategies at the expense of em- ployment which had characterized the period from the 1960s up to the late 1970s. This transformation can be taken as an indication of a gradual change from Keynesian strategies towards Schumpeterian competition strategies. The absolute necessity of economic growth was justified by increasing the requirement for competitiveness, and professional high-tech skills, the development of technology and related R&D activities were already being conceived of by the late 1980s as forming a back- ground to the competitiveness of the state, which sought to bolster economic growth (Valtion tulo- ja menoarvioesitys… 1982: 29, also 1984, 1986). The concept of competitiveness thus became a ubiquitous formulation in state budgets at the ex- pense of the price competitiveness typical of the 1970s (cf. Tulo- ja menoarvioesitys… 1972). In ad- dition to the increasing demand for competitive- ness, the notion of internationalization became central to the state budgets in the late 1980s. All these changes that took place in the 1980s indi- cate a gradual shift from inward-looking to out- ward-looking state strategies. This was so even though inward-looking and equalizing policies still played a central role, especially in the fields of education and regional policy. An outward-looking state: emerging competition strategies from the early 1990s onwards By 1990 the economic boom had been continuing for some time and the unemployment rate was at its lowest point since the early 1970s (Valtion tulo- ja menoarvioesitys… 1990). The boom passed its peak at this point, however, and the national econ- omy fell into a period of deep stagnation, as a re- sult of which both public and private investments decreased markedly (Valtion talousarvioesitys… 1992). Employment also declined rapidly, the problems of structural and long-term unemploy- ment deepened and the public sector was unable to increase employment with its own activities (Valtion talousarvioesitys… 1994). The bottom of the economic depression had been passed by the end of 1992, however, and the government started to seek to restore sustainable economic growth and improve the employment situation. It was now argued that the low rate of inflation would support competitiveness, accelerate investments and in- crease employment (Valtion talousarvioesitys… 1994). It was in the middle of the deep economic re- cession that profitability and effectiveness were adopted as key principles of public administration (Valtion tulo- ja menoarvioesitys… 1990). The growing demands to increase effectiveness led to a number of administrative reforms which it was ar- 80 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen gued would secure the service basis of the welfare state (Valtion talousarvioesitys… 1992). These re- forms in all sectors of the administration have con- tinued up to the present. In general, education and research were highly valued in the state budgets throughout the 1990s. New polytechnics were established to increase the instruction in applied technology, and growing de- mands were expressed to increase the efficiency of the whole education system, which was now be- ing increasingly conceived of as the backbone of economic growth. The new, outward-looking state strategies called for an increase in measures to gauge the effectiveness of the education system (costs per unit, quantitative objectives) (Valtion tulo- ja menoarvioesitys… 1990; Valtion talousar- vioesitys… 1996), and it was now argued, espe- cially internationally, that competitive research and development were essential for the nation to survive in the integrating and expanding world markets (Valtion talousarvioesitys… 1992). The emphasis on R&D was coupled with growing de- mands to create an “information society” based on technological innovations. In fact, the concept of the information society became a key reference point in the state budgets, implying that is was a central role of the state to create the preconditions necessary for the internationalization of Finnish science and technology (Valtion talousarvioesi- tys… 1992, 1996). Recent state budgets have clearly disclosed that government expenditure on research and develop- ment is viewed as crucial in order to increase the country’s international competitiveness of in glo- bal markets. This strategy is coupled with a notice- able aim to educate highly skilled workers, who are seen as the sources of technological innova- tions and economic success. This is to say, the country’s international competitiveness and its very survival has recently been closely connected with technological innovations and the techno- logical skills of the people. Given the fact that it is especially the neoliberal theory of technological change which relies on the coercive powers of competition to drive the search for new technologies and new production meth- ods, the budgets reveal a fairly clear change to- wards strategies typical of competition states. In other words, they disclose a belief that there is a technological solution to each and every problem, so that technological innovations become an inte- gral part of a state which seeks to foster interna- tional competitiveness (cf. Harvey 2005: 68). From the early 1990s onwards, investments in economic innovations and non-material assets were argued to be important for economic growth. It was now argued that the national economy de- manded massive non-material investments in edu- cation, research, product development and mar- keting. As such, the state began to develop new infrastructures for creating an attractive business climate (Valtion tulo- ja menoarvioesitys… 1990; Valtion talousarvioesitys… 1996). The need to at- tract foreign direct investments into Finland emerged in its rhetoric in the late 1990s in particu- lar, when it was emphasized that economic and industrial policies must ensure that Finland pro- vides advantageous conditions for the relocation of both domestic and foreign investments (Valtion talousarvioesitys… 1998). The establishment of the Centre of Expertise Programme in the 1990s, coupled with the gradual development of the “national innovation system”, epitomizes the way in which both centralized re- search and development and technological inno- vations have become incorporated into contempo- rary regional policies (Valtion talousarvioesitys… 1998). Indeed, considerable changes in regional policies took place in the state budgets from the early 1990s onwards. Not only have the ways of thinking about regional development changed, but regional policy concepts have also been renewed during the past fifteen years. Networks, innova- tions, clusters, city districts and private-public partnerships have more or less replaced the previ- ous spatial language in which concepts such as development regions, central place hierarchies, regional development and regional stability were often employed. European integration has naturally had a major impact on regional policy practices since 1995, but it is also the emphasis on international com- petitiveness, high-tech and privatization which has had a significant impact on the changes in these policies. The programme-based regional policies of the EU adopted by Finland in the mid-1990s further emphasised the principles of both the au- tonomous development of regions and their spe- cialization. Now urban and rural policies have become increasingly separated from each others and the state has started to act as a provider of the preconditions necessary for entrepreneurship (Val- tion tulo- ja menoarvioesitys… 1990; Valtion ta- lousarvioesitys… 1992, 1994). Regional development became increasingly un- derstood from the 1990s onwards as the responsi- FENNIA 185: 2 (2007) 81Towards a Nordic competition state? Politico-economic … bility of the regions rather than the central govern- ment. In general, the state begun to oblige the re- gions to strengthen their international economic competitiveness and attractiveness without giving them any notable degree of political self-determi- nation (cf. Hautamäki 2001: 44–45). Thus the Finnish government currently acts as a risk taker which finances “innovative” companies, especial- ly in the high-tech sector (Valtion talousarvioesi- tys… 1992, 1994, 1996). As a consequence, sub- stantial financial resources are now being allocat- ed to the information and communication tech- nology sector in particular (Valtion talousarvioesi- tys… 1996, 1998). The Schumpeterian formulation of competitiveness has therefore been clearly visi- ble in the national budgets from the mid-1990s onwards. As Jessop (2002: 121) reminds us, it is especially typical of competition state policies that public resources are increasingly allocated to the promotion of technological innovations that are assumed to increase the pace of economic growth. The notions of international competitiveness were already built into all state policies by the late 1990s, and investments were being allocated es- pecially to improve the international competitive- ness of private companies and production struc- tures in major urban regions (Valtion talousarvio- esitys… 1996, 1998). Know-how infrastructures and entrepreneurship played a crucial part in these new policies. Thus the budget articulations from the early 1990s up to the present reflect the fact that the city-centric and outward-looking ap- proaches to spatial policy have fundamentally challenged, if not entirely superseded, the forms of territorial redistribution that were launched in the 1960s. Conclusions and some challenges for future research Our analysis suggests that the interaction between the Finnish state and its territory has shifted, espe- cially since the early 1990s. The most obvious factor which reduced the central importance of territory as a major resource of the state was the collapse of the Soviet Union, together with the resultant economic restructuring. Quite clearly, economic matters are currently superseding secu- rity issues (understood here in a broad sense) as far as the interaction between the state and its ter- ritory is concerned. This suggests that contempo- rary education, investment and regional policies are less firmly based on equalizing principles than was the case from the 1960s up to the 1990s. State strategies have shifted from inward-looking territorial cohesion policies towards outward- looking policies based on the idea of differentia- tion and specialization. This is outstandingly visi- ble in the field of education and investment poli- cy, whereas regional policy has continued to be based on both outward-looking and inward-look- ing principles. The contemporary outward-looking state strate- gies are clearly informed by neoliberal economic principles. Perceived global competition between states is at the core of the contemporary restructur- ing of the state, which aspires to create investment landscapes that will attract footloose transnational capital. The prevailing state strategies thus high- light a tendency to create conditions for private businesses, particularly export-oriented ones oper- ating in the high-tech sector. Our analysis of national budgets reveals that state strategies in Finland, which must be under- stood as responses to the “central political prob- lem for the government” at a given time, have changed markedly over the past forty years. At a general level, the findings emphasize that Finland is gradually sliding from a welfare regime of ac- cumulation towards a regime emblematic of com- petition states. In other words, inward-looking and equalizing welfare state strategies have gradually been superseded by outward-looking strategies as- sociated with decentralizing regional policies. What is obvious is that the significance of territory as a central resource of state power is gradually decreasing. The state is increasingly employing non-material and spatially differentiating policies in its attempts to respond to the central political problem that has existed from the mid-1990s on- wards, international competitiveness. Roughly speaking, it is possible in the light of the state budgets evaluated hereto distinguish three epochs characterized by different state strategies (Table 2). The policies that developed in Finland from the 1960s onwards highlighted national integrity and economic growth. The connection between these and security policy concerns is evident in this con- text. Social integrity and equality, including an even distribution of settlement, equal education, full employment and a balanced economy, were conceived as the ultimate guarantors of societal order. The politics of one nation thus characterized 82 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen Table 2. The changing strategies of the Finnish state, 1965–2005. Epoch The changing strategies of the state Know-how Investments Regional policies 1960–1970 Creation of the basis for an integrated welfare state • Development of the educa- tional infrastructure and equal educational opportunities across the country. • Extension of the higher education network to the development regions. • Direction of student places into the development regions. • Building of the basic infrastructure across the state. • Vigorous investments and state activities in the development regions. • Major public investments in the production infrastructure. • Financial assistance for state-owned companies. • The objective of equal regional development is highlighted. • Forceful rhetoric regarding development regions. • State actions are seen as crucial for regional develop- ment. c. 1980–1990 Increasing emphasis on economic growth, education, research and competitiveness • Development of the system of higher education. • Increased importance of research. • Infrastructure investments: basic infrastructure and supplementary investments. • The incorporation of state-owned companies begins. • The rhetoric of development regions decreases. • The concept of competitive- ness is present in the budget rhetoric. • The ideology of welfare state equality is beginning to alter towards the competition state in the late 1980s. c. 1990– Towards the competition state • R&D activity and higher education are both highly valued. • The role of innovations is emphasized in the budget argumentation. • Effectiveness is implemented in the field of education. • Non-material investments become central to budgets. • The role of the state is understood as that of the key provider of preconditions for private businesses. • A programme-based regional policy aimed at providing international competitiveness surfaces in budgets. • Urban and rural politics emerge as separate fields in the budgets. • Differentiating regional policies are introduced. • Regional equality throughout the country is still empha- sized. the era from the mid-1960s to the late 1970s. Dur- ing this time the expansion of state infrastructural power across the state space took place through public investments, state planning and transfer payments as the state adopted the role of an infra- structural constructor. The government invested in education, basic infrastructure, production infra- structure and employment with the aim of increas- ing economic growth, homogenizing the state space and generating social integrity. Restructuring of the Finnish welfare state has been taking place from the late 1970s onwards, a change in state strategies that was evident by the early 1980s. There was a change from the con- struction of societal order towards an emphasis on economic growth, competition and specialization, although the policy of one nation was still present in the state budgets throughout the 1980s, espe- cially in the context of regional policies which still remained highly inward-looking, even though the budgets from the 1980s also reveal increasing pressure to renew the principles of the country’s regional policy. The new regime of accumulation that gradually developed in Finland from the late 1980s onwards is clearly echoing the logic of the competition state. In other words, the discourse of international competitiveness has gradually found its way to the core of the state’s social and economic policies. The previous modes of reasoning regarding the competitiveness of the state, those which had al- ready emerged in state budgets in the early 1970s, have thus changed fundamentally. It is now the in- ternational competitiveness of the state which is emphasized and not the price competitiveness typical of the 1970s and 1980s. As a consequence, state subsidies have gradually been allocated new priorities. In sum, education and investment poli- cies from the 1990s onwards have become in- creasingly outward-looking, whereas regional policies still include a mixture of outward-looking and inward-looking principles. FENNIA 185: 2 (2007) 83Towards a Nordic competition state? Politico-economic … The imperatives of global competition have be- come an inseparable part of political parlance dealing with the national community in contem- porary Finland. Indeed, these imperatives are widely accepted throughout the political spec- trum, as most of the political parties seem to in- habit the similar kind of intellectual world (con- sensual competitiveness). The current articulation of international competitiveness especially em- phasizes the need to open the national economy to market forces. A highly skilled labour force, knowledge and innovations are now located at the core of the state’s outward-looking strategies. This evolving economy which is viewed as being based on knowledge, technology, innovations and crea- tive class is challenging the previous territorial economy of the state. As a consequence, new state spaces are under construction via the new urban locational policies which were introduced in the late 1990s. It is striking to note, however, that the homoge- nizing territorial strategies of the state typical of the 1960s and 1970s are interestingly built into the contemporary “national” regional policies. For in- stance, The Regional Centre Programme and Cen- tre of Expertise Programme epitomize an attempt to extend the new competition policies throughout the country. In other words, welfare spatiality is having an interesting impact on territorial practices which emphasize international competitiveness, innovations, technology, talent, creativity, urban- ism and networks. Leaning on our observations regarding the trans- formation of Finnish state strategies over a period of forty years, we can go on to suggest that the gradual change from equality regimes to competi- tion regimes not only exemplifies the gradual adoption of the rules of the global marketplace but also potentially changes the ways in which the state territory is perceived in state strategies (see Moisio 2007). The state territory was earlier under- stood not only as a key resource for increasing economic growth, but also as the most important basis for societal order. The contemporary state strategies – in which the “national” is subordinated to the markets – seem to be gradually downgrad- ing both these dimensions. It is on this basis that we would like to point out six issues which will unquestionably merit more attention in regional policy research in the coming years. Firstly, the spatial imagination based on neolib- eral economic ideology that has been clearly visi- ble in the emerging transnational regional plan- ning discourse of the EU has gradually become institutionalized in Finland, too, and has funda- mentally reshaped our national regional planning traditions (see, Jensen & Richardson 2004). In fact, EU-inflected regional policies are generating a pe- culiar situation in which the discourse and prac- tises of one nation are intertwining with the articu- lation of international competition on a suprana- tional scale. The re-working of the state, for in- stance, has been coupled with strengthening in- sistences upon creating a truly international met- ropolitan region and a new, metropolitan form of governance. This has proved to be a difficult task, however, as there is no political consensus as to what the metropolitan policies would mean in a Finnish context (cf. Pelkonen 2005: 692). Also, the historically based political tension between the capital region and the national state will clearly hinder the development of metropolitan govern- ance in Finland. But even though there is still a considerable political resistance, this metropolitan development is nowadays clearly built into the lat- est state strategies, which emphasize the need to create attractive landscapes for international capi- tal and for the international “creative class”. In- deed, the government platform in 2007 explicitly mentions the aim to launch “metropolitan policy” for the first time in the history of Finland, precisely in order to fulfil the aforementioned needs (Val- tioneuvosto 2007: 28). It is therefore clear that the evolving relationship between the national state and the glocal state (the Helsinki region) will re- quire more scholarly attention in the future. Secondly, the transformation of the global polit- ico-economic environment, European integration and the contemporary outward-looking regional policies have transformed the relationship between the Finnish state and its territory by associating the economies of the regions with the global division of labour more directly than earlier. Interestingly, these policies aim at granting regional actors a no- table degree of responsibility for promoting re- gional competitiveness in international markets. Given these new requirements, regions and cities seem to be partly obliged to form their own “for- eign policies” on various spatial scales, partly in order to secure their activities and financial re- sources. The formation of these foreign policies is clearly a topic which merits scholarly attention. Thirdly, even though contemporary Finnish statehood is based on a gradually emerging regime of accumulation which is played out at the level of the EU, the historically constructed spatial struc- 84 FENNIA 185: 2 (2007)Sami Moisio and Laura Leppänen tures still have their impact on territorial practices. In other words, not all ideologies of uniform devel- opment have been abandoned in the current spa- tial strategies of the Finnish state. The impact of path dependence generated by the historical strat- egies on the increasing demands for neoliberal state strategies is clearly a topic which should be studied from various angles. The Regional Centre Programme, for example, which aims at creating a network of urban regions throughout the country, unfolds the importance of both cultural and mate- rial path dependence in the formation of the new state territoriality. This policy reflects a need to fol- low in part the attitudes, norms, expectations and practices which were created during the 1960s and 1970s, but it also emphasizes the imperatives of global competition. As a part of the current high valuation of innovations and knowledge, the Re- gional Centre Programme and Centre of Expertise Programme can be regarded as an interesting com- bination of nationalism and transnationalism. In other words, the Finnish state has developed a mo- saic of differentiated spaces of regulation through the ongoing processes of state re-scaling and ur- ban policy reform during the past twenty years. Fourthly, various organizations such as the IMF, the World Bank and the OECD clearly serve as mediating institutions between the neoliberal ide- ology and state institutions. Put differently, these organizations work as pressure groups for transna- tional governance by employing various tech- niques – of which perhaps the most obvious exam- ples are peer pressure and state rankings – to mar- ket “suitable” political practices among states. These are operations in which the practices of in- ternational competitiveness arguably work to re- produce the state as a competitive entity on a con- tinuous basis. It is notable that the institutions con- nected with neoliberal transnational governance usually emphasize the need to break with “nation- al” or “protective” economic practices and to un- dertake economic reforms in order to foster com- petition in the “sheltered” sectors. The impact of these international institutions on Finnish regional policy practices should therefore be carefully and critically explicated. Fifth, the ways in which societal and regional cohesion could be incorporated into state practic- es which bolster international economic competi- tiveness are crucial political issues in contempo- rary Finland. David Harvey (2005) has suggested that the neoliberal competition state is crisis-prone, as this competition increases inequality among so- cial classes and regions. He goes on to propose that in order to maintain the stability of such a state, neoliberal competition must be coupled with a strong sense of nationalism. Given the fact that territory is arguably one of the key constituents of nationalism and national pride, the competition state era does not mean that territory has become meaningless in the political strategies of the state. In other words, the state and its territory continue to interact in such a way that they can be said to be mutually constitutive. The outcomes of the process in which the prin- ciple of social and regional integrity comes to be increasingly challenged by social and regional dif- ferentiation are still unclear. What is clear, how- ever, is that the territory of the Finnish state is not only social but also cultural. The declining role of territory in state strategies emphasizing interna- tional competitiveness through technological de- velopment, a few urban nodes and the creation of a real metropolis is therefore a crucial phenome- non which should merit scholarly attention in the future. Given the fact that Finnish nationalism is not only deeply rooted in the state territory but has also often been played out through it (Paasi 1996), the development towards a competition state is particularly challenging. Academic research into the changing statehood of Finland should there- fore engage with the different dimensions of terri- tory. One would like to inquire, for instance, why powerful regional movements are rare in Finland even though spatial injustice is increasing rapidly both between and within regions. Sixth and finally, the explication of the changing relationship between places and state power re- quires more scholarly effort in Finland, as else- where. Given the argument of Peter J. Taylor (2006) that one of the most important geographical at- tributes of modernity is the subordination of cities (and places in general) to territorial states, the con- temporary global condition poses a significant ac- ademic challenge to conceptualize the change taking place in the spatiality of modern statehood not only in the core areas of the world economy but also on various geographical margins. Taylor suggests that there has been a fairly clear division of labour in the modern era between states and the cities they contain. The state has become responsi- ble for territorial guardianship practices (security, discipline, regulation, orderliness) whereas the cit- ies take care of commercial practices and the crea- tion of wealth through production. In this sense, cities and states are indispensable to each other: FENNIA 185: 2 (2007) 85Towards a Nordic competition state? Politico-economic … states need wealth creation to control social rela- tions and the markets need the guardianship prac- tices of the states for their operation. Taylor stresses that modern states are based on “simplification”, implying that the space of places can be imagined in the image of the state itself (e.g. national urban and place hierarchies, as was the case in Finland). 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