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Over 200 Finnish municipalities have seen a decline in their population in the past two decades. That’s more than 60% of all municipalities in mainland Finland. Municipalities would like more room for local solutions and better understanding of their diversity, a study conducted at the 91���� shows.

“Municipalities were not looking to get more government subsidies. Instead, the municipalities we studied were hoping to have better opportunities to look for municipality-specific solutions, and more flexible alternatives to providing their statutory services,” says Research Director Petri Kahila.

This would give municipalities better opportunities to strengthen their vitality, i.e., their economy and the well-being and inclusion of their residents.

“Economic growth without well-being does not guarantee success for municipalities. On the other hand, it is difficult to create well-being without sufficient economic means,” Professor Teemu Makkonen says.

Juuka employs a policy of a shrinking municipality

Kahila and Makkonen have been studying municipalities with a shrinking population, their vitality and means of survival for many years.  Smart shrinking is one tool for developing municipal vitality, with place-based policies and long-term planning playing key roles.

For Markus Hirvonen, Region Mayor of the Regional Council of North Karelia, the idea is a familiar one. He was putting it to practice long before smart shrinking was really even talked about, already in 2016–2020, when he served as municipal manager of Juuka, a municipality in North Karelia.

“We were employing a policy a shrinking municipality in Juuka. It didn’t mean that everything had to be cut and downsized. Instead, we invested in municipal vitality and sought to improve well-being in the environment we were operating in. For example, when a rural school in our municipality was shut down, we introduced support for our community centre. We also increased the amount of subsidies available to organisations in order for our local communities to thrive.”

During Hirvonen’s term as municipal manager, Juuka decided to build a new school, and future demographic trends were taken into consideration in the plans. Although the school needed to fit 400 students, it was built for a capacity of 250. As a result, some of the comprehensive education provided by the municipality of Juuka will be organised in the premises of a general upper secondary school up until 2028, after which all comprehensive school students should fit in the new school building.

Lack of resources restricts adaptation

Kahila was the leader of the What is Smart Shrinking in Finland? project, which ended in 2022.  The project examined how regions with a shrinking and ageing population have learned to manage change and to seek new opportunities.

“In this work, the municipal strategy is a key tool for municipal development. Municipalities should let go of the idea of drawing up strategies for the term of office of the municipal council and look further into the future instead.”

Kahila points out that a lack of resources is a factor that limits municipalities' ability to adapt. Many municipalities have cut their staff over the years.

“Small municipalities may have reduced the number of their municipal officeholders to the bare minimum, and a single officeholder may bear great responsibility, which makes it difficult to start long-term planning.”

A shrinking population is not synonymous with decline

Smart shrinking refers to systematic, long-term, place-based adaptation and renewal in a socially, regionally and economically sustainable manner as the population and economy change.

“It is difficult for municipalities to admit that they haven’t grown, and won’t be doing so in the future, either. The key to smart shrinking is to look at a municipality’s development realistically and to use that insight as a basis for analysing the municipality’s past performance and anticipating what will happen in the future,” Makkonen says.

He was the leader of the Adaptive and Innovative Countryside project, which ended in March 2022. The project examined the economic growth potential, vitality, well-being and sustainable development of rural areas. A key message from the study is that population shrinking is not synonymous with decline. A municipality can thrive and to be a good place to live in even if its population decreases.

Markus Hirvonen concurs.

“The idea of population development as an indicator of a municipality's vitality is the biggest illusion in the Finnish municipal debate. That is just one indicator of a successful municipality, although of course an extremely important one. However, negative population growth doesn’t automatically make a municipality declining, miserable or unviable.”

Elected officials have difficulty admitting that their municipality isn’t growing

The What is Smart Shrinking in Finland? study found that only one third of Finnish municipalities with a shrinking population have come to terms with their population decline. Municipal officeholders tend to have a clear picture of what is realistic development for their municipality, while elected officials find it more difficult to admit that their municipality will not grow. Why is this?

“In Finnish municipalities, power lies in the hands of a generation that still remembers the glory days of rural municipalities, when they were packed with bustling small shops and the village youth was both seen and heard on the streets. Mines were operating in full gear, and every town had a pulp mill. It is difficult for this generation of decision-makers to accept that those days are gone, for good,” Hirvonen says.

When talking to decision-makers, Hirvonen has noticed that they do not genuinely believe in significant population growth. Municipal strategies, however, don’t want to shatter the illusion and cling on to the idea of the village surviving.

“In economic speech, the rhetoric must change. It should be emphasised that the aim is to improve the happiness of municipal residents, not to make them miserable. If a municipality is smart about adapting, it can make ends meet and provide well-being for its residents while also remaining independent.”

Place-based policies at the core of all development

Place-based policies should be at the core of municipal development. Researchers talk about path dependence, i.e., development where earlier choices affect future ones.

“Smart shrinking is about how a municipality can utilise factors related to its location.”

Studies have highlighted a number of examples of how municipalities have responded to the challenges posed by changes in their operating environment through place-based policies. The Adaptive and Innovative Countryside project examined ten case municipalities in Finland: Leppävirta, Vieremä, Pyhäntä, Hailuoto, Halsua, Maalahti, Närpiö, Taivassalo, Luhanka and Pyhtää.

In Pyhtää, for example, the old town hall was repurposed as cultural centre when it was sold to a company providing cultural services. Närpiö, a town famous for its greenhouses, has promoted a two-way integration model in which municipal residents have been involved in the integration of immigrants. Leppävirta, known as an energy industry hub, is using sustainable development as the main driver of its development.

“In its strategy, a municipality gives itself the right to do things and to seize opportunities. Various pilot experiments, projects and initiatives can become strategic tools for municipalities,” Makkonen says.

Strengthening companies’ operating conditions promotes well-being

The conditions under which smart shrinking can curb regional segregation were studied in Kemiönsaari, Mänttä-Vilppula, Ilomantsi, Utajärvi and Kemijärvi, i.e., in the five case municipalities included in the What is Smart Shrinking in Finland? project. There is a strong vision in the municipalities that the well-being of their residents can be promoted by strengthening the operating conditions of business and industry.

Other facilitators of smart shrinking included promoting multilocality, strengthening high-speed telecommunications and digitalisation, increasing transparency and inclusion, and collaborating with other municipalities, the third sector and companies in, for example, in the provision of services.

For example, Mänttä-Vilppula’s image as an art town is built on the heritage of the Serlachius industrial family, while in Kemiönsaari the strong presence of the sea creates preconditions for the development of multi-locational solutions.  The main objective of promoting multilocality is to develop the municipal service structure so that it would attract new residents while also securing services for permanent ones.

“The image of a municipality relies on good services. For example, a municipality with less than 7,000 residents can have three hardware stores,” Kahila says.

Smart shrinking does not solve segregation

Kahila points out that smart shrinking will not solve segregation development taking place between and within municipalities.

“Smart shrinking cannot respond to all pressures on municipal economies caused by the government, no matter how proactive they are.”

Makkonen emphasises the same. Finnish municipalities don’t have a say over the trends of the global economy.

“A single municipality will not solve the global financial crisis. However, the way a municipality navigates change can be influenced.”

Smart shrinking is realism

Despite decision-makers’ wishes, researchers don’t have a handbook on smart shrinking models to offer. However, the mere fact that segregation development is being addressed, is very significant.

“If people in Rääkkylä can understand why Espoo is building a subway, and people in Espoo can understand why Rääkkylä needs money for development, we’ve really achieved something.

Realism, that's what smart shrinking is,” Makkonen sums up.

Regions play a key role in implementing smart shrinking

Researchers in the What is Smart Shrinking in Finland? project found that smart shrinking was included in the strategy of just one region in Finland: North Karelia. Kahila points out that in addition to the government, regions play a key role in implementing smart shrinking within municipalities and in motivating them to do new kind of development.

Hirvonen says that the regional programme for North Karelia recognises facts on the basis of careful analysis. Joensuu and its surrounding municipalities Kontiolahti and Liperi are growing, but in the rest of the region, the population is shrinking.

“We, together with politicians, came to the conclusion that smart shrinking is the right direction for our region. Municipalities have understood this, and they’ve invested in their strengths. Through mosaic-like development where each municipality pays attention to its strengths, we can create a strong entity. We, too, still have room for improvement when it comes to strengthening collaboration.”

Photo on top: Juuka decided to build a new school, and future demographic trends were taken into consideration in the plans. Photo Piia Juntunen, Vaarojen Sanomat.

Photo of the Region Mayor of the Regional Council of North Karelia Markus Hirvonen: Jarno Artika.