A History of Cold War Industrialisation

Finnish Shipbuilding between East and West

Saara Matala

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000406993
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

This monograph explores the economic consequences of the Cold War, a polarised world order which politicised technology and shaped industrial development. It provides a detailed archival-based history of the Finnish shipbuilding industry (1952–1996), which f lourished, thanks to the special relationship between Finland and the Soviet Union. Overall, it shows how a small country, Finland, gained power during the Cold War through international economic and technological cooperation. The work places Finland in a firmly international context and assesses the state–industry relationship from five different angles: technopolitics, trade infrastructure, techno-scientific cooperation, industrial reorganisation, and state aid. It presents a novel way to analyse industrialisation as an interaction between institutional stabilisation and f luctuation within a techno-economic system. In so doing, it makes empirical, theoretical, and methodological contributions to the history of industrial change. A History of Cold War Industrialisation will be of interest to advanced students and scholars in economic history, maritime history, Cold War history, and international political economy.

1 Introduction

History of Cold War industrialisation

In the dead of the winter in December 1988, two ships from two worlds were moored to the building dock in Helsinki. The first one to be completed was a nuclear icebreaker Vaygach. She had just returned from the test run and was soon to steam off eastwards to join the Soviet nuclear fleet of Arctic icebreakers. The other was a luxury cruise ship Fantasy, ordered by a Miami-based Carnival Cruise Lines. She was waiting for to be fitted with extravagantly furnished nightclubs, gambling salons, and sun decks before taking off on its journey westwards to entertain American tourists. The Cold War as the confrontation between the two opposite world views—capitalist market economy and centrally coordinated socialist planning—could not be better contrasted in the hulls of those two vessels. That an American enterprise and a Soviet state organisation became customers for the same shipyard in a non-allied country did not fit well with the overall picture of the polarised world.

This book charts the development of the Finnish shipbuilding industry from the post-war years to the turn of the 1990s. It is a story of industrial transformation from a marginal producer of simple tonnage into internationally competitive industrial branch, capable for constructing powerful icebreaking machines for the Arctic and shiny holiday resorts for the Caribbean. It is also a story about a small agrarian country in the European periphery developing into an exporter of knowledge-intensive technology while balancing in the zone of neutrality between the Cold War divide. The underlining historical question is, how decisive the connection between the Cold War political framework and the Finnish shipbuilding was in shaping the industrial transformation.

The history of European shipbuilding in the 20th century was a history of economic globalisation. Until the 1960s, Western European shipbuilders constructed most of the merchant tonnage that carried people, raw materials, and products that enabled the increasingly international supply chains, economic interconnections, and trade exchange. Building movable products, shipyards were also in the front line facing the negative side effects of the international competition and industrial relocation to the Far East. In 1950, Western Europe constructed over 80% of new merchant tonnage but in 1990 barely 15%. The gravity of the global shipbuilding moved from Western Europe to Asian industrialising countries that took advantage of lower production costs, active governmental support, and economies of scale. Only a fraction of knowledge-intensive special ship production remained in Europe.¹

The European shipyard crisis became the prime example of industrial relocation to Asia. It captured country-specific differences in how national governments and internationalising businesses tried to lay the course towards globalisation. The Finnish shipbuilding industry was a peculiar case par excellence in the way it created a unique national trajectory in the development of shipbuilding structure and scale.

The difference was particularly striking in comparison with the neighbour Sweden. After the war, the Finnish shipbuilding industry was a latecomer in European development while the modernisation of the Swedish shipbuilding industry had taken off in the interwar period and the shipyards had invested heavily in modern production facilities. In the post-war decade, Sweden built up to 10% of the global merchant tonnage, but Finland was barely in the margins of the international shipbuilding statistics. In the 1960s, Sweden took advantage of economies of scale and built large crude oil carriers to the booming tanker market, but the Finnish shipyards focused on relatively short series and special-purpose vessels including relatively advanced icebreakers and passenger ships. In the 1970s, the oil crisis triggered a worldwide recession in shipbuilding, and together with global overcapacity in shipbuilding, low demand, and fierce price competition, it forced European governments to introduce extensive rescue programs and close down shipyards. The major shipyards in Sweden were nationalised in 1977 and gradually rationalised close to non-existence. Finland, instead of following the European shipbuilders to the downturn, expanded its production capacity until the 1980s and claimed promptly that it was able to do that without state subsidies. In 1988, when Vaygach and Fantasy were under construction in Finland, only the shadows of empty shipyards reminded of the past success in Sweden.

The Finnish shipbuilding industry, in sum, took off later, expanded faster, concentrated on knowledge-intensive production earlier, and downscaled later than the European counterparts.² The Finnish shipyards were scaled down towards the end of the Cold War but not completely relocated to the Far East. The Finnish maritime cluster today is built on the two pillars that were left behind as the material and intellectual heritage of the Cold War era: icebreakers and passenger ships.

The overarching thesis of A Cold War History of Industrialisation is that the history of the modern Finnish shipbuilding industry unfolded as it did not only during the period we know as the Cold War but also because of it. As such, this study is strongly anchored in the historiography of Cold War technology and business, which is concerned with how the Cold War political framework pushed the development of trade and industry into new trajectories.³

The Cold War was a period characterised by geopolitical and ideological confrontation between the socialist East and the capitalist West. The perception of the ideological zero-sum game between two mutually exclusive models of modernity created a prolonged state of national emergency that underlined the national security as the ultimate priority in all political decision-making. It politicised technology and industrial development which were seen as instrumental in the competition for military statecraft and ideological superiority.

Questions concerning the politicisation of technology and interaction between state and industry are at the core of the Cold War history of technology and business.⁴

Through studies on strategic Big Science projects in the leading countries, we now know that technologies, companies, and academic disciplines that contributed to the state-level agenda on security and superiority often enjoyed generous funding, political patronage, and large project contracts which, in turn, shaped to which technologies, disciplines, and applications the scientists, engineers, and companies focused on. The Cold War historiography has also scrutinised the military-industrial clusters and their close relationship with governmental decision-making over national security. Over decades of close cooperation, participants adopted coincident values and perceptions to such an extent that coercive manipulation and active lobbying became unnecessary; everyone was already convinced that they were acting in the public interests rather than their own.⁵ Scholars have also shown the diversity and complexity of the mechanisms through which the political agenda shaped techno-scientific projects and pointed out cases where scientists managed to utilise it to advance their interests in academic research. Yet, by large, the politicisation of technology in the Cold War is understood in terms of national security and strategic applications.⁶

Finland, like most countries in the world, was not a superpower. The Finnish shipbuilding industry was not a part of military-industrial cluster. Small, neutral countries resided on the same globe with the superpowers and were in many ways exposed to and involved in the zero-sum game, but the world looked different from their point of view.⁷ Therefore, the Cold War as a framework of decision-making at the Finnish shipyards did not mean the same as it did in the foreign offices in Washington D.C. and Moscow.

The historical context for Cold War industrial transformation is the same, but the Cold War in a small neutral country and civilian industry is a different framework of explanation.

State concerns over national security in a small non-allied country and civilian shipbuilding industry manifested themselves more often through cooperation and compromises than conflicts. Decisions over foreign relations were seldom only strategic in nature but related to civilian economic matters. Industrialisation provided the nation with export revenues and industrial occupations that translated into increasing living standards. Economic growth promised a steadily increasing standard of living and served both as a source of legitimisation for the prevailing social order and as an antidote against rebellion.⁸ Finally, outstanding technological artefacts like giant ships supported national ideas of self-sufficiency, modernity, and prowess in the international comparisons.⁹

Unlike in the most famous technological consequences of the Cold War, such as satellites and space rockets, nuclear missiles, and submarines, the Cold War politics in the Finnish shipbuilding history was less striking and more mundane. It was mostly embedded in diplomatic liturgies, complex organisation charts, occasionally curious trade arrangements, and legions of engineers in grey suits sitting around negotiation tables talking about steel and money.

Domestic and international observers agreed on the prime explanatory factor for the special trajectory of the Finnish shipbuilding industry during the Cold War—the Soviet Union. The position of Finland next to the socialist superpower created simultaneously political necessities and economic possibilities to establish an extensive trade partnership that benefitted the Finnish shipyards through extensive demand and profitable prices. Throughout the Cold War, V/O Sudoimport, the Soviet Foreign Trade Organisation for ship import, was the biggest customer for the Finnish shipyards. After the Cold War, the prosperity of the Finnish Cold War shipbuilding industry has been a key argument that Finland not only survived but prospered as well.¹⁰

This book grew out of the observation that despite the broad understanding of that Finland’s geopolitical position in the Cold War had a decisive impact on the development of shipbuilding, there is significantly less scientifically rigorous analysis on primary sources about how the Cold War politics actually turned into concrete investment plans, ship contracts, and R&D projects.

The non-military influence of a powerful external force over the internal development of a sovereign country is not an idle, abstract question but constitutes a central part of how we understand the long-term effects of the Cold War on industrial development and the agency of a small country.

The two ships, Vaygach and Fantasy, moored next to each other at the Helsinki Shipyard, already hinted that critical for the development of the Finnish shipbuilding industry was not its location next to the Soviet Union but its position in between the two blocs. The Finnish Cold War shipbuilding industry was not an object of the Cold War power game nor its result, but it took shape in the cross-currents of the international development and cemented the influence in its structures. In that way, it captured the material and economic consequences of the Cold War in a small, unallied country and civilian industry.

Steel, money, and political power: outlining the research approach

Large shipyards provide excellent point of departure for explorations of state–industry relationship in the Cold War Finland. The shipbuilding industry occupied a position in multiple nation-level political considerations of security, welfare, and technological prowess, but was not dominated by any single definition. Merchant shipbuilding in the second half of the 20th century took form in the cross-currents between national and international; the shipyards were critical for local industrial communities and salient for domestic economy, but t...