How Finland's egalitarian instinct was captured to punish producers and subsidize rent
There's a folk saying in Finland: "A Finn would pay 100 euros to deny his neighbor 50."
The spiritual ancestor lives in the Kanteletar, the 19th-century collection of Finnish folk poetry: "Kateus vie kalatkin vedestä"—"Envy takes even the fish from the water." The conventional wisdom: Finns are envious. They punish success. The tall poppy gets cut down.
This is wrong.
Herrmann, Thöni, and Gächter's 2008 cross-cultural study on punishment behavior tested this directly. Participants played public goods games where they could pay to punish others. The researchers distinguished between prosocial punishment (punishing free-riders and cheaters) and antisocial punishment (punishing high contributors out of spite).
The results: Finns consistently engage in prosocial punishment. They punish cheaters, not high performers. Finland clusters with other high-trust Nordic societies, not with spite-driven cultures. The "envious Finn" is a myth. This is the opposite of antisocial punishment (punishing success out of spite), which the study found in low-trust societies with weak rule of law.
So here's the paradox: If Finns individually punish cheaters, why does the Finnish state punish producers?
The answer is not that Finns are secretly spiteful. It's that the prosocial instinct was misdirected. The instinct is good; the targeting is wrong.
Consider the numbers. Labor income faces marginal rates exceeding 55%. Capital gains on your primary residence? Zero if you've lived there two years. Land appreciation? Taxed on 1993 valuations. The surgeon who works 60-hour weeks pays more than the fund that owns the ground beneath her apartment building.
The prosocial instinct was captured. The state painted the Earner as the cheater and made the Rentier invisible. The Finnish egalitarian immune system now attacks the muscle while ignoring the parasite. (Tellingly, one Finnish teacher associated the "envy" saying with Ostrobothnian stereotype—the region with the strongest freeholder tradition. Those who benefit most attribute spite to those who suffer from the arrangement.)
This essay explains how the glitch occurred, what it extracts, and how to fix it.
You can only punish what you can see.
The Finnish state developed world-class sensors for labor income and near-total blindness to land rent. This asymmetry is an axiological choice revealed through infrastructure investment.
The Tulorekisteri (Incomes Register) provides real-time data on every euro of wages, pensions, and benefits. Employers act as deputy tax collectors, deducting taxes at source. The worker never holds the money. The system is automated, frictionless, and inescapable.
Then comes Veropäivä—Tax Day. Every November, media outlets publish the incomes of top earners. The surgeon, the CEO, the successful entrepreneur: their compensation becomes public spectacle. The ritual activates the prosocial punishment instinct against visible income. "These people took too much."
This is a Two-Minute Hate directed at the Salaryman.
Property tax valuations are based on 1993 data. A comprehensive reform using modern GIS and market prices was scheduled for 2022-2024. It died. Omakotiliitto (the homeowners' association) lobbied against it; Kokoomus and Keskusta killed it in parliament. Updating valuations would have meant tax increases for Helsinki homeowners. Market values have multiplied; tax values remain frozen.
Tonttirahasto (plot fund) structures are even more opaque. These are investment vehicles where institutional investors—pension funds, asset managers—buy residential land and lease it to housing companies. The "homeowner" owns their apartment but pays perpetual ground rent to the fund. The yields (typically 4-6%, inflation-indexed) are buried in limited partnership structures. Beneficial ownership is obscured. There is no "Rent-Seeker Day" publishing who received the most housing allowance subsidy, no annual list of tonttirahasto returns, no public registry of land appreciation by owner.
The measurement absence is policy.
Kela knows exactly which landlords receive how much asumistuki. When allowances are paid directly to landlords (common for tenants with arrears history), Kela has the IBAN, the Y-tunnus, the exact flow. A "Top 100 Recipients of Housing Allowance" report would be trivial to generate. It doesn't exist because Kela classifies this as "benefit data" (tenant privacy) rather than "procurement data" (public spending). The legal framing shields the landlord.
The technology to track land values exists. GIS mapping is mature. Automated valuation models work. Estonia built a fully public e-Land Register. Denmark's OIS publishes land values, ownership, and mortgage encumbrances for any address. The UK's Register of Overseas Entities pierces offshore shell companies. NYC publishes "Worst Landlord" lists naming the humans behind LLCs.
Finland chose not to build these sensors.
We spent millions creating infrastructure to track every cent of a cleaner's wages. We spent nothing creating infrastructure to track land rent. The state wants to see labor. It refuses to see capital.
The result is the Streetlight Effect applied to taxation: search for revenue where the light is brightest (labor income: visible, automated, low political resistance), not where the rent actually is (land value: invisible, contested, politically lethal).
Why were the sensors never built? Path dependence, not conspiracy. Four centuries of accumulated defaults created a political economy where taxing land is unthinkable.
By the mid-17th century, the parish of Helsinki contained fifteen major manors: Herttoniemi, Kulosaari, Stansvik, and others. These estates were owned by nobility and the burgher elite. They were sovereign economic units.
Today, Helsinki municipality owns approximately 65% of the city's land through the vuokratontti (leasehold) system. The remaining 17.6% is freehold—the "resistant private sphere" that includes the most valuable districts: Eira, Kaivopuisto, the historic core.
This 17.6% is the surviving residue of those 17th-century manors. Same land, four sovereign regimes: Swedish crown, Russian empire, Finnish republic, welfare state. The burgher elite of 1650 are the political ancestors of whoever blocks land value taxation in 2024.
The welfare state was built around this old money, not over it. Constitutional protections, legal path dependence, and political influence accumulated over centuries to make freehold inviolable. The 17.6% achieved escape velocity before the welfare state could reach it.
After independence, Finland faced revolutionary pressure. The Civil War of 1918 left deep scars. The state needed to prevent Bolshevism from spreading.
The solution: create freeholders. The land reform of the 1920s broke up large estates and distributed land to tenant farmers. The goal was explicitly political—make peasants into property owners with a stake in the existing order. "The independent owner-occupier" became a sacred category in Finnish law and culture.
The irony is complete. Anti-communist theater in the 1920s created the political constituency that now blocks the one reform—land value taxation—that would make the welfare state fiscally sustainable. The intervention designed to prevent socialism became the protection for private rent extraction a century later.
Every classical economist—left and right—agreed on one thing: tax land, not labor. Ricardo identified the "unearned increment" flowing to landlords who contributed nothing. Henry George built a movement around land value taxation. Even Marx included land in the means of production to be seized. Finland achieved the configuration none of them would endorse: 55%+ on labor income, effectively 0% on land appreciation.
A century of path dependence: always taxing what's visible, never building infrastructure to tax what's hidden. The answer to "why not land value tax?" is simply: "What can we extract without triggering organized resistance?" The answer was always labor.
The system that emerged is thermodynamically wasteful: an entropy machine that cycles money without creating value, extracting friction at every turn.
The general housing allowance (yleinen asumistuki) is intended to help low-income residents afford housing. In 2023, the state spent approximately 1.5 billion euros on this program.
The intent: Ensure the poor can afford shelter.
The mechanism: The allowance covers up to 80% of housing costs, effectively setting a price floor. Landlords know the state will guarantee payment.
The outcome: The capture mechanism is subtler than direct rent hikes. Recent quasi-experimental research (VATT Institute) shows near-zero pass-through from subsidy increases to rent increases for specific units. The extraction works differently: the subsidy guarantees occupancy, eliminates credit risk, and sets a floor under the entire market. For institutional landlords, asumistuki transforms low-income tenants from high-risk to sovereign-grade cash flow. The state absorbs the risk; landlords collect the yield.
The flow: Taxpayer → State (administrative overhead) → Tenant (pass-through) → Institutional Landlord (Kojamo, pension funds).
The market stabilizes at high prices because the subsidy makes those prices sustainable. Rents don't spike when subsidies increase; they simply never fall. An equilibrium of extraction, not a Red Queen's race.
VVO was founded in 1969 by the Finnish trade union federation and the progressive cooperative movement. Its purpose: provide non-profit rental housing for union members.
In the 1990s, following rent deregulation, VVO converted to a joint-stock company. In 2018, it changed its name to Kojamo and listed on the Helsinki stock exchange. It is now one of Finland's largest residential landlords, aggressively maximizing rental yields.
The major shareholders read like a roster of the Finnish labor movement: the Industrial Union, the Trade Union of Education (OAJ), Trade Union Pro, Service Union United PAM. The workers' organizations own the landlord.
The extraction loop:
The nurse pays her union to be her landlord.
Moral laundering: dirty capitalist profit (high rents extracted from workers) washed through worker solidarity (union ownership, non-profit framing). The organization claims to be a communion of workers while acting as an extractor of value from those same workers. A chimera with two incompatible functions sharing one body.
The Ghent system compounds the extraction. Under Ghent, unions administer state-subsidized unemployment insurance. Workers join unions primarily to access earnings-related benefits, not for collective bargaining. This keeps membership high and funds flowing. Union dues are tax-deductible, meaning the state subsidizes the organization that extracts rents from the state's own housing allowance system. Triple subsidy, triple extraction.
But because unions are culturally coded as "defenders of workers," the prosocial punishment instinct does not target them. The chimera is invisible.
The 2010s presented an opportunity. Interest rates collapsed. The cost of capital approached zero. Cities could have acquired land and captured rent streams, replacing income tax with publicly-collected land rent. The vuokratontti system already provided the template.
Private funds captured those rent streams instead.
Tonttirahasto (plot funds) invest in residential land, leasing it to housing companies. Investors—often pension funds like Ilmarinen and Varma, or asset managers like Taaleri—receive stable, inflation-indexed returns derived entirely from location value. The total market now exceeds two billion euros.
The structure: Investor owns the land. Housing company owns the building. Resident pays vastike (maintenance charge) that includes ground rent to the fund. Forever.
This is the exact opposite of what Henry George proposed. Instead of the community capturing socially-created land value to fund public goods and replace income tax, private finance captures that value and the community taxes labor to fund public goods separately.
Call it what it is: Feudalism 2.0.
Old feudalism: Lord owns land, serf works land, serf pays tribute to lord.
New feudalism: Fund owns land, "homeowner" owns walls, "homeowner" pays vastike (tribute) to fund.
The twist: the Lord is now the pension fund. You pay tribute to Ilmarinen, which needs high housing costs to pay your future pension. You are a serf to your own geriatric self. We have financialized the manor system and called it "investment product."
State-subsidized ARA housing provides below-market rents. The difference between market rent and ARA rent is a windfall to the occupant—often worth hundreds of euros monthly, tens of thousands over a tenancy.
Allocation is essentially a lottery. Income checks for continued residency have historically been absent or weak. A recipient whose career prospers remains in the subsidized unit, capturing subsidy meant for those in need.
The system rewards luck, not merit. Tonttirahasto yields reward capital. Income tax at 55% punishes labor.
The one thing not rewarded in Finland is productive contribution.
If the system is dysfunctional, why doesn't it change? Because the dysfunction is a stable equilibrium, defended by a coalition that controls both the moral narrative and the economic flows.
Bruce Yandle's model of regulatory politics identifies two groups that form stable coalitions: Baptists provide moral justification; Bootleggers profit from the policy. Neither can win alone. Together, they're unbeatable.
The Finnish Baptists are left parties, student organizations, and tenant advocacy groups. Their argument: "Housing allowance prevents homelessness. ARA housing is a welfare state victory. Land value tax would hurt grandma: asset-rich but cash-poor pensioners forced from their homes."
The Finnish Bootleggers are construction companies (YIT, SRV), institutional landlords (Kojamo, SATO), pension funds (Ilmarinen, Varma), tonttirahasto operators (Taaleri, OP), and homeowner associations (Omakotiliitto). Their interest: high housing costs, restricted supply, subsidy flows, low land taxation.
The coalition deflects any reform. Propose cutting asumistuki? "You hate the poor." Propose land value tax? "You're attacking the Finnish dream." Propose transparency for Kojamo dividends? "You're attacking worker solidarity."
The only politically safe target is the high-income earner. They have no Baptist defenders (it's hard to morally defend "the rich"). They're not organized enough to act as Bootleggers. They become the universal donor to the system.
The TyEL pension system collects approximately 24-25% of payroll. This capital must be invested. Pension funds favor domestic real estate for liability matching: long-duration assets with inflation-linked returns that match their long-duration liabilities.
But why Finnish real estate specifically? The answer reveals a self-reinforcing trap.
Finnish real estate is considered "safe" because: supply is constrained (zoning restrictions, NIMBYism, construction cartel), demand is subsidized (asumistuki), rents have a floor (government guarantees payment), and land is undertaxed (no meaningful LVT). These features make domestic real estate an attractive, low-risk investment.
These features exist because pension funds and other concentrated interests lobby to maintain them. And pension funds invest in Finnish real estate because these features make it safe.
The pension funds' entire investment thesis depends on the policy regime that creates high housing costs, and they have the political influence to maintain that regime. They are active participants in preserving the distortions that make their portfolios viable.
The consequence: Ilmarinen, Varma, and Elo require high housing costs to remain solvent. Any policy that would significantly lower housing costs—aggressive zoning reform, cutting asumistuki, implementing LVT—threatens pension fund solvency. No single actor can deviate from this equilibrium without taking transition losses, facing regulatory scrutiny, and watching competitors capture the yields they abandoned.
"Endangering pensions" is the ultimate trump card. It ends any policy discussion instantly.
The structure is a hostage situation: we cannot reduce housing costs because pension funds are solvent only if real estate stays expensive. We must cannibalize the young (high rents, restricted homeownership) to feed the old (solvent pensions, maintained asset values). The intergenerational transfer is locked in by the investment allocation of the pension system itself—an allocation that is rational precisely because the policy distortions make it so.
Over 65% of Finnish households own their residence. Homeowners benefit from high land values—their primary asset appreciates. Any land value tax is, for the median voter, a wealth tax on their most important possession.
Proposing LVT is electoral suicide. The people who would pay it are the people who vote.
Finland ranks among the least corrupt countries for transactional corruption. Cash bribes are rare. But hyvä veli ("good brother") networks operate through reciprocal favors and shared group membership. Zoning decisions that create millions in land value are made by boards connected to construction and institutional investor networks. No cash changes hands; it's "cooperation between trusted partners."
Because network corruption doesn't match the legal definition, it doesn't trigger the prosocial punishment instinct. The extraction continues, invisible and unpunished.
How do you fix a captured system?
Not by arguing for "lower taxes." That's Right-Wing code, and it triggers the Baptist defense. You win by arguing for correct targeting. The prosocial instinct is good; it just needs accurate sensors.
The first step is making the invisible visible. Create a Rent-Seeking Register: publish annual data on asumistuki flows by recipient landlord, tonttirahasto yields and beneficial ownership, and union shareholders' distributions from Kojamo. PAM members should know how much their union received from their rent payments. Complete the land valuation reform—you cannot tax what you cannot measure.
The principle: you cannot redirect punishment until the target is visible. First, build the sensors.
Once the flows are visible, reframe the narrative. Reform Veropäivä: not just top earners, but top rent recipients. Reframe ARA as "random wealth transfer to lucky recipients" rather than "social housing." The prosocial punishment instinct will do the rest. Finns punish cheaters; they just need to see who the cheaters are.
Once visibility and narrative shift have prepared the ground, implement the structural reform.
Gradual land value tax replacing income tax. A transition spread over decades to prevent asset value crash. Each year, a percentage point moves from income tax to land value tax. Pension fund exposure to real estate is unwound incrementally. The transition is slow enough to be absorbed, fast enough to matter.
The end state: Tax the Ground, Not the Man.
Producers keep their output. Location value, created by community investment in infrastructure rather than by the landowner, funds public goods. The 400-year free ride ends. The entropy machine stops.
This must be acknowledged honestly: sudden LVT would crash asset values that pension funds, banks, and homeowners depend on. The Olson lock is real. The median voter would lose wealth. The pension system would face crisis.
This is why visibility comes first. Build the sensors, shift the narrative, create political space for gradual transition. Revolution is impossible. Evolution is the only path.
It took a century to build this trap. It will take decades to dismantle it.
The Law of Jante was meant to prevent arrogance, not excellence.
"Du skal ikke tro at du er noget"—"You shall not think you are anything special." The target was the person who demands status without contribution. The person who extracts from the community while giving nothing back. The free-rider.
Somewhere, the law was inverted.
The surgeon working 60-hour weeks, creating value through skill and effort, is treated as if she is "thinking she is something special." The fund collecting ground rent from land it did nothing to improve: invisible, unpunished, protected.
The Inventor is special. They create value. They expand complexity. They drive civilization forward. They export order into the environment.
The Rentier thinks they are special. They demand value for holding a deed. They contribute nothing. They consume order created by others.
The glitch must be fixed. The cannon must be re-aimed.
This essay is the economic corollary to the Nokia Phase Transition. That essay explains how windfall wealth funded Finland's institutional capture and locked in civilizational decline. This essay explains what the trap extracts—the specific mechanism by which productive labor is taxed to subsidize passive ownership.
Nokia was the fuel. This is the engine.
Together, they explain how a high-trust, high-capability society can build a machine that systematically penalizes the people who create wealth while subsidizing those who extract it—all under the banner of fairness, all invisible to the prosocial punishment instinct that would otherwise correct it.
The welfare state promised to make everyone a freeholder. Instead, it made everyone a tenant—of Kojamo, of the pension funds, of the tonttirahasto, of the state itself. The "envy" narrative deflects from this failure by blaming the victims for noticing.
A society that genuinely believes in fairness should operate a machine that serves fairness. Where the maker keeps the value. Where the leech starves. Where the immune system attacks parasites, not muscle.
This requires one thing: making the parasite visible.
Build the sensors. Publish the flows. Let the prosocial punishment instinct find its correct target.
Don't shoot the tall poppy. Shoot the weed wrapping around its roots.
This draws from Aliveness: Principles of Telic Systems, a physics-based framework for understanding what sustains organized complexity over deep time—from cells to civilizations.
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