Nordic experts: privatization of welfare services involves big risks

The think tanks Kalevi Sorsa Foundation, Arena Idé and FES Nordic Countries organized a discussion on the experiences of privatization of welfare services in the Nordic countries on 20 May. Privatization and outsourcing have caused problems everywhere. In Sweden, the services have even become business of criminals and their quality has deteriorated. The Swedish companies are now increasingly expanding their operations to Finland. The easiest way to prevent problems is to limit privatization.

The event begun with presentations by Lisa Pelling (the head of the Swedish Arena Idé and political scientist), economist Jan-Erik Støstad, Mari Huupponen, (care expert at the Swedish public sector trade union Kommunal) and Ville Ruutiainen (university lecturer at the University of Jyväskylä). In addition to the presenters, the event’s panel discussion involved Krista Kiuru (SDP MP, Chair of the Parliamentary Committee on Social Affairs and Health) and Samuli Sinisalo (special expert at the trade union JHL). You can watch the recording of the event on the Kalevi Sorsa Foundation’s YouTube channel.

Lisa Pelling: “Don’t try the Swedish welfare experiment in Finland!”

Lisa Pelling spoke in her presentation based on her report describing the privatization of Swedish welfare services, which she wrote with Mia Laurén for the Friedrich Ebert Stiftung (Don’t try this at home: Exporting Sweden’s neoliberal welfare experiment). Pelling’s key message was the title of the report: “don’t try this at home”.

Pelling described how public services have been privatized and outsourced extensively in Sweden since the early 1990s. The problems are visible and public opinion has turned against privatization. For example, the privatization of schools has led to poor learning outcomes and growing inequality between schools in privileged and socio-economically disadvantaged areas. In Sweden, the private production of public services has even become a business for organized crime that has also been able to exploit it for money laundering.

Pelling described how private companies have made big profits by pushing down quality, sometimes even illegally. Now companies are using the capital accumulated from the profits to expand their operations abroad. Pelling said that she was surprised how many Sweden-based companies are now aiming for the Finnish market. As an example, she mentioned AcadeMedia, which last year acquired the Touhula daycare chain and its 113 daycare centers around the country.

According to Pelling, it is difficult to address the problems afterwards, because private companies have funds, which gives them the power to influence decision-makers. Returning services to private production is also difficult because the private companies control the resources needed for this: they have both the premises and the staff needed to provide the services.

Jan-Erik Støstad: “Oursourced services can be returned to public providers”

Jan-Erik Støstad spoke about the final report of the Norwegian government’s Welfare Services Committee published last autumn. Støstad chaired the committee that received widespread attention in Norway as well as in Sweden. The committee’s main task was to examine how publicly funded welfare services should be produced and how outsourced services could be returned to public production.

The committee’s key conclusion was that due to the characteristics of welfare services, they are difficult to produce efficiently and equitably in the private market. This is because they are complex basic services aimed particularly at vulnerable people. Hence quality of the services is often very hard to verify, giving providers an information advantage that they can exploit, for instance, to increase their profits.

The committee’s final report concludes that commercial welfare services can be transferred to the public sector or to non-profit service providers if there is political will. However, this requires careful implementation, taking into account the characteristics of the services. It requires redirecting funding to public or non-profit providers and tackling political resistance from commercial providers.

Støstad has written a more detailed summary of the final report on the Kalevi Sorsa Foundation blog in Finnish. During the discussion at the event, it emerged that a similar study should also be carried out in Finland.

Privatisation can weaken the position of employees and disadvantaged families

In her speech, Mari Huupponen focused on the privatization of welfare services from the perspective of employees. She discussed the situation particularly in elderly services, on which Kommunal has recently published a new report. The conclusion is clear: working conditions and wages are significantly worse in private companies. This demonstrates they also increase their profits at the expense of employees.

In his presentation, Ville Ruutiainen examined the privatization and marketization of services in Finnish early childhood education. He has also written his doctoral dissertation on the subject. The share of private production in early childhood education in Finland has increased to about a fifth in the 2020s. On the other hand, there are big differences between municipalities. According to him, privatization has increased inequality to Finland’s traditionally universal services.