The Ministry of Finance : two hundred years of state-building, nation-building & crisis management in Finland

PREFACE . . 8

The Grand Duchy of Finland . . 10

BIRTH IN A POSITIVE MOOD . . 10
Short war and long peace at Porvoo in 1809 . . 12
Administrative institutions are established . . 14
Finland's financial system finds form in Porvoo . . 18
European finances under reform in the push of Enlightenment . . 20
Porvoo in a European intellectual context . . 24
Traditions from Sweden . . 25
Finland's first heads of finance and leading civil servants . . 29  
The machinery . . 32
The machinery at work . . 35
The budgeting and accounting system . . 38

NICHOLAS I STALLS THE REFORMS . . 40
Leading personnel and administrative structures . . 42
Financial system and taxation . . 46

ALEXANDER II OPENS WINDOWS TO REFORMS . . 40
Economic development and economic policies . . 51
Political leadership of finances . . 55
Monetary reforms . . 56
Budgetary reforms . . 58
Reforms in financial administration . . 65

POLITICAL REACTION AND ECONOMIC VITALITY . . 68
Political backlash . . 71
Liberal economic reforms continue . . 72
New winds in nominations . . 74
Minor reforms in budgeting and taxation . . 76
Finance and economic policies are separated into different departments . . 80

FINANCES IN STATE-BUILDING AND NATION-BUILDING . . 83

Independent Finland . . 89

EARLY YEARS OF INDEPENDENCE 1917-1939 . . 89
Independence, suddenly . . 92
Principles of governance are defined . . 95
Economy recovers amid political crisis and international economic depressions . . 99
Brevity and turbulence in political leadership . . 103
Money and monetary policy dominates the economy and economic policies . . 106
Planning boards and committees . . 108
Incremental reforms in the financial management system . . 110
Structure and functions of the Ministry . . 114

NEW START DURING THE WAR . . 116
Centralization of power . . 118
Controlled war economy . . 122
Economic planning, a new task for the Ministry of Finance . . 124
More control to budgetary appropriations . . 128
Need for rationalization of administration . . 130
Structural reform of the Ministry . . 131

GROWING EMPHASIS ON ECONOMIC AND FINANCIAL MATTERS . . 133
Politics takes a left turn . . 136
Short-lived governments and political turmoil . . 138
Discontinuity in the political leadership of the Ministry . . 140
From rationing to regulation of the economy and towards ever deeper economic integration . . 141
Towards rational economic policies and planning . . 146
Post-war economic planning . . 148
Control of expenditure dominates budgetary policies and reforms . . 153
From rationalization towards administrative modernization . . 160
Slow reforms inside the Ministry of Finance . . 163
 Top management 163
 Personnel . . 165
A way towards a general coordinator of the government . . 166

General Coordinator of the Public Sector . . 168

Towards stable political leadership . . 171
Firm management team at the top . . 176
Growth-oriented economic policies . . 178
Birth of a new welfare state . . 181
Planning becomes the magic word . . 185
Reforming the financial management system . . 187
 Annual budgeting . . 188
 Medium-term planning . . 189
 ex ante finance control . . 190
From rationalization to steering of administrative modernization . . 191
 Personnel policies . . 194
Reforming the Ministry to support its growing responsibilities . . 195

From Management of Depression to National European Economic Policy Coordination . . 197
Continuity in governments in spite of changing political constellations . . 199
Minister of Finance becomes Number Two in the Government . . 200
From closed economy to open markets and market liberalization . . 205
The 1980s and new economic doctrines . . 206
Profound financial management reforms . . 213
 Reforms start from constitution and legislation... . . 214
 ...continue in annual budgeting and medium-term frame budgeting... . . 214
 ...adaptation of performance management... . . 217
 ...use of market mechanisms... . . 218
 ...and reforms in the system of local government financing . . 220
From traditional public administration to new public management . . 221
 Personnel policies . . 224
Internal structural turmoil in the Ministry of Finance . . 225

The Many Roles of the Ministry . . 229

Notes . . 234
Bibliography . . 240
Index . . 249
Appendix 1. Heads of the Departments . . 252
Appendix 2. Ministers of Finance . . 254
Illustrations . . 262