Engineer, entrepreneur, leader of Finland.

Photographer: Antti Aimo-Koivisto/AFP/Getty Images

Can Finland Be Run Like a Business?

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
Read More.
( Updated
)
a | A

In tough times, voters will sometimes turn to entrepreneurs to try running their countries as they once ran their businesses. So far, though, the record of business leaders as heads of nations is spotty, and this should be a sobering thought for tech millionaire Juha Sipila, whose party won yesterday's parliamentary elections in Finland.

Unless you count Thailand's Thaksin Shinawatra, Sipila is the first tech entrepreneur to become leader of a top-100 economy. Unlike Thaksin, who started out as a police officer, Sipila is an engineer by training, and the business that made him wealthy is the mobile network component producer Solitra, which he sold to a U.S. company in 1997. He further increased his fortune by selling shares in another company he owned, JOT Automation, which focuses on the testing of wireless devices and eliminating human labor from electronics manufacturing. 

Finns, whose small nation was, until the 2010s, a major global tech hub (it lost that status when Nokia slept through the touchscreen smartphone revolution), have a lot of respect for technology and the people who build it. Sipila, who ventured into politics only in 2011, tells voters he's going to draw on his business experience when he runs the government. He told Yle News:

I have a lot of experience on how to manage companies to make big changes. I think that the rule is the same, you have to have vision and you have to have targets and you have to concentrate on a few things.

This has the ring of truth. Someone who has built and managed businesses, negotiated tough commercial deals, and handled budgets and business plans should be in his element running a country, especially one that sorely needs a turnaround, mainly for business-related reasons. After Nokia's collapse, Finland discovered that it was a relatively backward economy, too reliant on a shrinking pulp and paper industry and on ties with Russia. Sipila and his Centrist Party want to concentrate on balancing the budget and improving the tax climate for business.

The intuition behind Sipila's voter appeal isn't necessarily correct, however.

In the U.S. by most accounts, strong business leaders have not been successful as presidents -- Herbert Hoover, Jimmy Carter and George H.W. Bush are most often cited as examples. "Businessmen -- even great businessmen -- do not, in general, have any special insights into what it takes to achieve economic recovery," Nobel prize-winning economist Paul Krugman wrote in 2012, when entrepreneur Mitt Romney was running for president. Romney failed, of course, as did other business leaders before him, who promised to run America more like a corporation. Remember Ross Perot and Herman Cain?

In other countries, Krugman's maxim has proved false: Businessmen turned politicians do know how to speed up economic growth. Still, they tend to be middling national leaders, or worse.

In 2010, Chile elected billionaire Sebastian Pinera as president, and he dutifully sold off his numerous assets (the biggest of which was a blocking minority stake in the national airline). Pro-business Pinera presided over robust economic growth:

Yet his approval ratings were at one point the lowest ever for a post-Augusto Pinochet leader. Pinera's biggest problem was that he couldn't handle protest. When Chileans took to the streets against natural gas price hikes or the commercialization of universities, Pinera responded with truncheons, water cannons and tear gas. 

Billionaire Thaksin, unlike Pinera, was hugely popular and overwhelmingly won re-election. He's credited with Thailand's economic rebound after the Asian financial crisis of the late 1990s, and Thaksinomics, which included a massive support program for small business, resulted in spectacular economic growth:

Like Pinera, however, Thaksin was heavy-handed in dealing with protest, and he never really ceased to think like a businessman. When he sold his assets, for instance, he failed to pay Thai taxes. In 2006, he was overthrown in a military coup and convicted, in absentia, of corruption. His reluctance to give up power later cost Thailand years of political strife and bloody street clashes.

Last year, the billionaire owner of a confectionary empire, Petro Poroshenko, became president of Ukraine. It's too early to discuss his economic record, but it will probably be better than that of his predecessors: Ukraine is starting from a low base, and it has plenty of help from its powerful civil society and international experts. Yet Poroshenko, too, displays the common flaws of big businessmen turned national leaders. He is explosive, intolerant of dissent and, like much of his private-sector-bred team, impatient with consensus politics. Because of this, the ruling coalition is torn with internecine strife. Besides, Poroshenko hasn't yet sold his company; it keeps opening new candy stores in Kiev, which hasn't been great for Poroshenko's approval rating (now at 20 percent).

Perhaps it takes someone like Sipila to break the mold. He's no billionaire, and the companies he's built haven't been empires, so he may be less inclined than the likes of Pinera, Thaksin or Poroshenko toward an authoritarian leadership style. Besides, the egalitarian, consensual Finnish culture hardly fosters toughness and impatience in an executive, and it is intolerant of conflicts of interest. An engineering background does tend to encourage rationality, and a history of successful deal-making in a non-bubbly sector of tech is an asset for a leader involved in the European Union's complicated, negotiation-based decision-making process. 

Nevertheless, running a business is vastly different from running a government -- with its entrenched bureaucracy, treacherous undercurrents and a constant need to compromise and build consensus, even when this leads to a loss of focus and delays in achieving goals. The easiest thing for a business leader to do in government is to break things, show a burst of growth and go down kicking and screaming. Sipila has a chance to set a different kind of example. If he raises the Finnish economy from the doldrums without showing impatience or excessive cockiness, his will be a case for other business leaders to study as they contemplate going into politics to save their countries.

(Corrects spelling of Juha Sipila's name in first paragraph.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net