3.1 Rapid growth and recession
3.2 Forests and brains as natural resources
3.3 Change in corporate structure
3.4 Internationalization
3.5 From tar to printing paper
3.6 A small, open economy
3.7 Standard of living

3.6 A small, open economy

Finland has traditionally been a small, open economy with a large export sector in relation to GNP. The central dilemma of the 1980s was the shrinking role of exports. Exports' share of total output was about one third at the beginning of the decade, but then fell at a pace that was unprecedented in post-war history.

During the 1980s the country diverged from the reference group of small open economies such as Austria, Denmark, Norway and Sweden, and moved toward a group of countries with which Finland has rarely been associated. The export-driven growth of the 1990s saved Finland from falling even more rapidly and moved it back into the group of small open economies. The ratio of exports to gross national product has risen to record heights.

The positive long-term development of terms of trade, which is the ratio between export and import prices, has been a key to Finnish prosperity. The standard of living has risen since Finns have been able to buy new imported goods without the volume of exports growing at the same speed. Export prices have risen faster than import prices partly thanks to lucky coincidence, that is price fluctuations determined by external factors.

However, the changes in terms of trade reflect a new export structure. Export goods are more highly processed than before. For instance, export prices for machinery have climbed more swiftly than overall exports.

The trend toward more favourable terms of trade has been minimal in the past decade. In the late 1990s, it declined again, as export prices of telecommunications devices dropped. However a rise in productivity in the sector has more than compensated for lower prices.