An escape from a resource curse: the development of property rights in Finland

This paper explores the question how Finland was able to escape the resource curse. The resource in this case is forests. We argue that the basic reason for the resource curse in forests lies in the ill-de? ned or narrow property rights. In the case of narrow ownership of the resource, bene? ts ? ow only to a narrow circle of people - an enclave. This enclave may consist of domestic or foreign owners, private persons or companies. On the other hand common or ill-de? ned ownership rights usually lead to problems of commons, like deforestation or resource depletion. These are aggravated by institutional weaknesses, like weak state regulation or corruption. According to the Finnish experience, wide ownership of the resource spreads incomes from the resource in the society. Bene? ts ? ow to a larger segment in the society, strengthening the total demand and creating favourable conditions for economic growth. Wide ownership also creates better chances for democratic and non-corrupt decision making. It is also important that the economy has the ability to develop backward and forward economic linkages to the resource industry. State policy can also help, for example, by using a resource tax or collecting royalty payments and using these revenues for purposes which bene? t the whole society. In this paper I concentrate especially to the question how the property rights of the resource have been developed in Finland. Formation of property rights has taken a long time. In fact, they can be seen as a result of a process lasting centuries. A major question in this context is how a small-scale private ownership of forests has developed in Finland instead of plantation, common or state ownership. In different parts of the world there are major differences in forest ownership and there are obviously different historical reasons behind this.