What was it like to start a business in Finland in 1872?
If a Finn´s last name ends with letters “us” one can be certain of that his/her ancestors were Lutheran priests in 1600s and 1700s. This was the case also with Lars Krogius sr., who set up his steamship and forwarding agency in Helsinki in 1872.
Lars Krogius sr. was originally a captain of the merchant navy. He participated three around the world journeys between 1857-1963. Quite unusually, his wife accompanied him on board and some of their children were born during the sea journeys.
In 1872 Lars Krogius sr., who was born in 1832, was a 40-year-old headmaster of a navigation school in Helsinki, a position which he held until 1889 despite of his business ventures. In 1872 he was also elected to participate the national Diet, Finnish parliament of the time. The Diet of 1872 enacted Finnish Maritime Code of 1873 and Lars Krogius sr. participated actively in drafting the text of the statute. In 1872 Lars Krogius sr. was thus already a well-established figure in Finnish public life.
The 1860s was a decade that started profound reforms in Finnish society and in business. Even though Finland was part of the Russian Empire, Finland had large autonomy. Legislative work, which had stopped completely in 1809 after Russia invaded Finland, was recommenced only in 1863, when the Russian emperor agreed to summon the first Finnish national Diet in almost 50 years.
During the 1800´s, especially during the first half of the century, the people with money were required to start a business. These people were surprisingly, civil servants, including the clergy as the crown and the church were tightly knit. In addition to the civil servants, were the large landowners, nobles, shipowners and wealthy merchants, amount of which was small. As a result of the annexation of Finland to Russia in 1809, the Finnish army was reduced to a minimum. Former army officers, nobles and landowners who had formerly been on top of the social hierarchy educated their sons as civil servants and priests. Vicars and district judges of large country parishes amassed considerable wealth – they did not have a fixed salary but their remuneration was based on various fees and tax like payments which they could levy. It was a standard practice that even most experienced judges, members of the Senate (now the Supreme Court) applied for a lowly position of a district judge because of the excellent pay.
Vigorous economic growth in Finland started in the latter part of 1800s. New legislation and investments in infrastructure were important contributing factors. Saimaa channel was opened in 1856 and first railway line stared operating in 1862. Finland started minting its own currency in 1860 and 1865 the value of Finnish markka was detached from its parity with Russian rouble. In 1878 Finland adopted the gold standard of the Latin Monetary Union, which meant that one could pay with a Finnish gold coin for example in France and in Italy. Finnish currency remained stable until the first world war, whilst Russian rouble faced repeated crises. The maximum interest rate in Finland was set for 6 % per annum until 1883 and it remained in force for long-term loans even after that.
The ending of the Crimean War in 1856 started an upturn in the business cycle in shipping, and the high freight rates continued until 1874 or so. At the same time Finnish forests started gaining value. Establishing sawmills was deregulated in 1857 and soon after that first paper mills were established. Majority of the land in Southern Finland was in the ownership of private farmers. Most the original farms were quite large, even though the fields may have been small. Forests have been an important source of the national wealth of Finland since 1860´s.
Finland suffered the last large-scale famine in Western Europe 1866-1868, but after that the general business environment was steady until the first world war.
The first commercial bank in Finland was established in 1862 and quite some time after that, the business financing was scarce. Many businesses that started in the 1860s and 1870s were still financed from private funds.
The business cycle particularly in shipping and in general in the Finnish economy was beneficial in the 1860s and 1870s. The Finnish economics were being liberated from the chains of the mercantilist politics of the past and new legislation was being enacted. What made it easier to expand businesses and to amass fortunes compared with the situation today was that no income or company taxes in the present form existed (income tax was levied 1865-1885 but the revenue of the income tax was insignificant). Mostly only immovable property and the import and export of goods was taxed at that time.
Several personal qualifications and economic trends coincided in case of Lars Krogius sr. when he set up his business in 1872. His father, who had died in 1861, had been a country judge, and his father´s inheritance likely helped him in setting up a business. He had excellent connections with the top tier of the society which is marked by the fact that in 1872, and repeatedly thereafter he was appointed the member of the diet. He had good education and a suitable international work experience to run a forwarding agency.
Later, in 1883 Lars Krogius sr. established shipping company FÅA which turned out to be a even much larger venture than the forwarding agency which he had set up in 1872. His sons Lars jr. and Ernst continued with his father´s businesses and expanded them. Lars Krogius jr. can be credited for example for establishing the first bicycle store in Finland in 1884. Krogius family members were actively involved in the family’s businesses until 1985.During the past two decades the name Lars Krogius has been associated with marine survey and consultancy services.
Panu Karhu – Manager of average agency of Oy Lars Krogius Ab 2001 – 2003