Tuesday, May 17, 2011

Whither EU? Angry Birds soar as Nokia goes sour

FINLAND, the home of Santa Claus and Nokia, is not a regular news hot spot. But two recent developments - the rise of an anti-European Union, ultra right-wing political party, and the blow suffered by the mobile phone market leader - have propelled the country into the spotlight. Though apparently unrelated, these political and business developments have raised questions about the impact of globalisation on a modern economy like Finland's, and the future of European unity.

By Nayan Chanda, For The Straits Times

The unsurprising victory of the anti-immigrant party, True Finns - which is also hostile to the euro zone - has delivered a jolt, reinforcing a trend seen in recent right-wing victories in Austria, the Netherlands and Sweden. In France, Ms Marine Le Pen, daughter of National Front founder Jean-Marie Le Pen, has also made surprising gains in opinion polls against the established parties, sending them scrambling ahead of the 2012 presidential elections.

The common ideologies uniting these right-wing parties are their isolationist, anti-immigrant and anti-globalisation postures, and their deep hostility to the euro zone. The right's victory in Finland, which brings them closer to power as a coalition partner, raises for the first time the possibility of a right-wing party affecting the future of the euro.

Under euro zone rules, all 17 members must approve bailout packages for member countries. The European Union (EU) plan to bail out debt-strapped Portugal to the tune of €80 billion (S$142 billion) will be the first such case where the right's clout may be tested.

Long opposed to the EU, the Finnish party grabbed the issue of aid to Portugal to score electoral points with a population weary of serial bailouts - starting with Greece and Ireland. There is increasingly less sympathy for countries that lived beyond their means, hiding their debts and allowing banks to act recklessly.

The Finnish share of the proposed Portuguese bailout would amount to €7.9 billion. Even if, as a member of a coalition, the True Finns do not succeed in vetoing a bailout, they could block the funding, negatively impacting the euro.

The rise of the True Finns is not solely the product of frustration with the EU's coddling of laggards. A particular source of anger is the Schengen border-free travel regime, which allows immigration from poorer members. Although immigrants constitute barely 2.5 per cent of the Finnish population, they are blamed for rising unemployment and social ills. The True Finns call them 'parasites on taxpayers' money'.

The party's rise has tracked the downturn in the Finnish economy and rising unemployment, which currently stands at 8.4 per cent. Long reliant on forestry, paper and manufacturing, Finland has seen its export market eaten away by foreign competition.

Things were different in the 1990s, when Finland's high-quality education and open economy set it up for rapid growth. The rise of mobile phone giant Nokia, which brought large revenues and jobs, turned Finland into a poster child of globalisation. At its peak about a decade ago, Nokia accounted for 4 per cent of Finland's gross domestic product and 21 per cent of its corporate tax revenues - a rare single enterprise with a huge impact on the national economy. With the world's cellphone market exploding, Nokia came to command a 34 per cent share.

But Nokia had failed to keep up with technology that turned a cellphone into a mini computer and music player with a camera. Assailed by agile competitors with newer technologies, especially Apple's cool iPhone, Nokia lost its top spot. It has forced the company to junk its own Symbian software, which failed to keep pace with changing consumer demands, and join forces with the Windows mobile system to do battle with Apple and Google.

Only time will tell if this late move will save Nokia, which has already been forced to lay off 4,000 and move 3,000 employees from Symbian. To the critics of globalisation, this provides further proof of the fickleness of the globalised economy and reinforces the appeal of isolationism.

There is of course, another side. Angry Birds, an addictive game, has been a global hit, boosting the valuation of its Finnish creator Rovio Mobile 200-fold, and laying the grounds for an initial public offering on Wall Street. As Finland adjusts to its changing fortunes, hopefully the angry Finns who voted for True Finns will note that globalisation does reward innovators, even as it punishes complacent winners like Nokia.

The writer is director of publications at the Yale Centre for the Study of Globalisation, and Editor of YaleGlobal Online.