The two decades following the war were a potentially formative period in which there could have been a break in the conservative economic policy tradition, As noted above, many Finnish economists had by that time assimilated the Keynesian ideas of contracyclical policy. There was also a clear shift in political hegemony. The labour movement had gained new strength, although it was bitterly divided into Social Democrats and Communists. The major right-wing party lost most of its influence with the new foreign policy orientation. In the latter half of the 19401s, the Communists, Social Democrats and Agrarian Centre formed a coalition government. After 1948 the Communists' position was weakened, and since then, the Social Democrats and the Centre have been prominent in Finnish politics.
Furthermore, the war had meant in Finland - as in many other countries - more extensive governmental intervention in the economy. Extensive rationing and planning were applied during the war and, after the war, the state played a strategic role in the resettlement of the Carelian refugees and the organization of production to pay for war reparations to the Soviet Union. The development of the productive structure and the fostering of necessary investment were seen as the main economic policy goals at that time, State-owned companies were established, and the metal industry, which has since become an important export industry, was created mainly through state initiatives designed to cover the war reparations. In this new political context, new welfare programmes were also started. All in all, the public sector remained large after the war, and both economic and social policies were interventionist. But, as we shall see, interventionism was not applied to stabilization.
The anti-Keynesian character of the Finnish policy model is most obvious in the trajectory of fiscal policy, the area in which Keynesian initiatives were generally concentrated. Even in the post-war period, Finnish fiscal policy has continuously relied on
the principle of sound finance, What is more, the state has been, until recently, a net saver, i.e, the budget su-r plus has been positive throughout. This results from attempts to balance the budget without loan financing even though the state's own financial investments are counted like current expenditures, In the same spirit, emphasis has been placed on the need to enhance the competitiveness of industry by curtailing its costs through fiscal measures. Loan financing has been avoided, and the crowding-out effects of fiscal policy have been underlined althought the official lines of argumentation have been far from consistent, One can, however, discern a line of argument in accordance with the old British Treasury View: every penny loaned by the state diminishes private economic activity by the same amount, Given the target of a balanced budget, only a few selective measures have been employed to deal with cyclical unemployment, Hence, Finnish fiscal policy has tended to reinforce rather than counterbalance, the underlying cycles of the economy, especially in the 1950's.
