I miss selling the soap

April 17th, 2014

I was making a presentation the other night over in Charlottetown to a group of business and government folk and was told there was a senior manager from a big multinational firm in the crowd and they were pitching him on the merits of doing business on PEI.

I sat by him at dinner and got right into the thick of the ‘pitch’.   I have to say it was a lot of fun.  I used to be in the sales business years ago – selling New Brunswick as a location for firms to expand their operations.  It was a pretty good feeling when you pursued a firm and got them to invest in the province.

I’ve told this story before but it is worth a second look.   I was the lead guy in Moncton trying to convince an IT firm to set up here.  The folks in Fredericton called me to say there was no chance they would put an operation in Moncton and that I shouldn’t worry about it.  But we made the case. They set up here (back in the 1990s).    A year or so later I was in a church meeting and a guy gets up and says he is so thankful that he was able to get a job with this same firm and that he wouldn’t have to move to Calgary.   His young daughter had leukemia and was being treated at the IWK and he wanted to stay close to family and friends here in Moncton.

That made it real to me.

Nowadays I spend my days pontificating and trying to sound intelligent.  At the end of the day, what really matters is that our economic development efforts should be providing people the opportunity to stay and build their careers here if they so choose.

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Federal grinchiness and economic growth in New Brunswick

April 14th, 2014

New Brunswick Tory MP John Williamson in Saturday’s TJ:

“MLAs from both provincial parties have approached my office to ease the employer requirements under the temporary foreign workers program, something I will not do”.  He “maintains the program is meant to be lengthy and burdensome, with employers required to pay a decent wage, travel costs and cover health insurance for foreign workers.”

To be honest, I am getting more fatigued by this issue by the day.  A few of us are trying to get politicians to think strategically about the role of immigration to foster population renewal, cultural vibrancy, entrepreneurialism, ambition and economic growth in New Brunswick and the politicians want to recite rote talking points.

Now, lest you want to slay my argument with examples, put away your sword.  I am not talking about individual cases but the principle.  When I talk to a trucking firm in New Brunswick and am told that it is easier to get TFW approval in Toronto than in Moncton for a trucker and therefore the firm will be hiring in Toronto for jobs that could be easily and preferably done out of Moncton, I am concerned.  When I hear the LMO process went from 2-3 weeks to 6-8 months for the exact same job in just a year or two, I am concerned.  When I hear that employers here are told they have to pay a national average wage rate in their sector in order to bring in TFWs and that would put the TFW wages above current employees, I am concerned.

But those are all side shows to the real issue.  The real labour market is starting to tighten – in the urban centres and in rural areas – despite relatively low rates of employment and continued net outward migration.

The federal government’s evolving view seems to be predicated on the view that if they clamp down in New Brunswick on immigrants and TFWs, that will force employers to push up wages or do whatever it takes to get recalcitrant unemployed NBers to go to work.  The issues related to skills, mobility, interest, etc. are not relevant to this view.  You tighten the screws and employers will respond.

That may work – and I stress may – with those employers that base their business only on the local market but for those in traded/export industries, they are likely to just move their investment elsewhere further exacerbating the problems in New Brunswick.

Minister Carr soldiers on saying he is focused on getting NBers the right skills for the jobs and doing better matching.  Good for him but there are ample signals all over the place that things are getting worse and we now hear there are thousands of jobs on the horizon – good paying jobs.  Who knows what will happen?

It would be nice for the federal government to actually take an interest in New Brunswick’s plight.  The fact that it’s economy has performed worse than all other provinces in Canada for six years should have bureaucrats and NB interested politicians in Ottawa reaching for their Sharpies and whiteboards instead of grinning like the Grinch and saying now is the opportunity to force the bums into work.

 

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The Curmudgeon’s Guide to Getting Ahead and related random thoughts

April 13th, 2014

I just finished Charles Murray’s The Curmudgeon’s Guide to Getting Ahead: Dos and Don’ts of Right Behavior, Tough Thinking, Clear Writing, and Living a Good Life.  It’s a short book and actually targeted at 20 somethings just starting out in the world (a fact I didn’t realize when I bought the book).  Murray is an American right-of-centre political and social scientist and his last book, Coming Apart, was a very good read.  It was a data rich commentary on the causes of the widening gap between the rich and poor in the US.

The Curmudgeon’s Guide is his view of how a young person today should start out on their own and has some interesting tips and ideas but I couldn’t help thinking that Murray (71 years old) is actually talking to my generation (40s).   Some of the stuff he talks about I think has actually mutated once or even twice since he was starting out.

The most interesting thing for me, as a Canadian from a small urban area in New Brunswick, is his advice to the middle upper class young people that are reading his book.  They were pampered by their parents, went to all the right schools, worked internships but never grunt work.  The way he describes these kids – as if they had never been in contact with the rest of us.  He recommends they work a part time job in a restaurant or work in a resort as a waiter for a summer.   He wants them to immerse themselves in the lives of the ‘rest of America’.  This is actually a theme coming out of his last book.

For me this is a strange narrative.  I went to all the wrong schools, scrubbed toilets and flipped pizza all the way through university and then climbed my way from a temporary, two-month job at $12/hour working in government to a reasonably successful career where folks pay me a fairly good amount of money to provide my thoughts and ideas on various subjects.

I did have one interesting ‘internship’ that is usually reserved for high rollers. I’m not sure how it happened but I was a page in the Legislative Assembly of New Brunswick in 1991 and the other pages were high rollers.  One is a big time lawyer in Moncton and previously rumoured candidate to take over from Shawn Graham.  I’ll let you figure that one out.

This kind of mashing together rich, middle and poor in New Brunswick (and much of Canada) has definite benefits.  We don’t have the hard and fast class distinctions as in the US.  I went to school with all kinds.  I was kind of poor as a kid (not dirt poor) but I didn’t know it.  My dad always drove a new car and we lived in decent housing.  My kids today all have friends from all ‘classes’ such as that is in Moncton.  This is probably a big reason why we don’t have as much an issue with class distinction and social mobility.

But at the same time I worry there is a tendency to drop expectations to the lowest common denominator.    When a high school brings in a program for the ‘advanced’ kids, it is frowned upon by some.  When we do anything to separate excellence out of the pack, we have this gnawing feeling that we shouldn’t be leaving the rest behind.

But we need some folks to stand out.   To be excellent in business, entrepreneurship, the arts, etc.  We need to be a society where everyone has the chance to pursue their dreams but we can’t resent the folks that end up outperforming everyone else.

There has to be a Canadian way where you can have a good Gini coefficient and have an environment where some folks excel.  If the bookends are a highly stratified society where only a smaller and smaller group get into the top and a completely equal society where everyone waits in bread lines in their single pair of shoes, I think we have to find a middle way.

 

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Cruise control is a better deal in New Brunswick

April 10th, 2014

I’m in Ontario this week.  I have worked on five projects in the last year or so up here.  I’ll have to set up an office….

Anyway, driving mid-day on the 401 for about 90 minutes and I hardly was able to use the car’s cruise control.

Contrast that with the Moncton-Fredericton or Moncton-Saint John highway.  There are many times I set the cruise speed just outside of Moncton and do not touch it again until Fredericton.

Not sure what that says other than cruise control isn’t much use on some of these highways in southern Ontario.   Oh, and it also means those four lane highways in New Brunswick could use a little more traffic.

I think it was the Biz Council’s Susan Holt that recently said NB has the infrastructure for two million people.    That’s probably about right.

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New Brunswick’s GDP growth chimera

April 10th, 2014

I see TD was in Moncton yesterday predicting that New Brunswick’s GDP will increase to 1.5 percent next year after running at 0.5 percent this year.   Later in his speech he talked about how the province’s population will be in decline between here and 2021.

I continue to come back to the fundamental question – maybe the chimera – what level of economic growth does NB need over the next decade and what, if anything, can we do collectively, to influence that rate of growth?

I can’t get anyone to commit to a number.  Is it 2 percent per year?  Three percent? Four?

A decade ago we could at least expect 1.5 to 2 percent real GDP growth in an average year.  Since 2008, it has averaged around one half of one percent.  I contend that New Brunswick’s economy will be highly unstable at a long term growth rate of under one percent.  By this I mean it will be virtually impossible to balance the provincial books, keep a good quality of public services and limit outward migration of workers.   I suspect if anyone actually crunched the numbers we likely need in the range of 2.5 percent per year when all things are factored in.

And this population issue.  How can you have moderate GDP growth with a declining population when 60% or more of your economy is related to household spending?   It seems to me virtually impossible to have strong GDP growth in a declining population environment – unless you are Newfoundland and are pumping massive oil and plowing billions into a tiny economy each year.

We need to get some fundamentals right and then we need to have a long conversation with New Brunswickers.

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Bronze Age corporate tax breaks

April 7th, 2014

I’m reading an entertaining book right now called 1177 BC: The Year Civilization Collapsed.  I had to chuckle this morning when I read about the Egyptian kings around 1,300 BC exempting ships bringing traded goods out of foreign lands from paying taxes.  There are several examples of this written down.

Imagine that.  Corporate tax breaks to incentivize trade and investment over 3,000 years ago.

You can almost see an ancient version of Kevin Lacey from the Canadian Taxpayers’ Federation lobbying the Pharaoh to stop the horrible practice of corporate tax breaks and complaining about the growth in the size of the state.

The more things change, the more they stay the same.

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Cooke-ing with gas: Firm size and ambition

April 3rd, 2014

Long before natural gas started to be used in New Brunswick as an energy source (at least in its current incarnation), my father used the expression “now you are cooking with gas” when he was talking about something gaining momentum.  I asked him recently what he meant by that and he replied it was an old expression he had heard from his father.

It turns out that most folks with a natural gas oven/stove tend to prefer it much more than the electric alternative.  Again, a rarity in New Brunswick, in many places around the world, natural gas is the dominant source of residential energy.

I digress.  I was trying to explain my title to this blog and suggest that Cooke Aquaculture is now “cooking with gas” as it now says global sales are approaching $1 billion per year.  in the finfish aquaculture industry, that makes them a major global player.

I started my column in the TJ this week with this:

I have observed over the years the bigger a firm gets in New Brunswick, the more of a target for criticism it becomes. This is not just a problem in our province, but it does seem to have even greater resonance here.  For the most part, we romanticize small business. The small firms are helmed by altruistic, hard-working, roll-up-the-sleeves entrepreneurial New Brunswickers who live alongside us in our local communities, drive trucks and drink Tim Hortons’ coffee. By contrast, the big firms are headed by rapacious, “one per cent” millionaires always using their power to put it over on the rest of us.

I was on News 91.9 this morning explaining myself.

In fact, I did receive two emails after the publishing of this column suggesting that Cooke was a bully, an abuser of the environment and a purveyor of low wage, low skilled jobs.

I’m not here to defend Cooke’s business practices.   I have been told by folks that should know that the firm is well respected in its industry and has been doing a lot to ensure it limits the impact of its environmental footprint.   But that is not my point.

My point is that New Brunswick’s economy is roughly $28 billion per year (GDP in real terms).   It is not strong enough to support the population here in terms of providing enough jobs nor is it strong enough to generate enough tax revenue to pay for public services and infrastructure.  Therefore, we lose young people every year to outward migration and we rely heavily on the federal government to help pay for public services and infrastructure.

We need to grow the $28 billion.  In a perfect world, we would have an economy large enough to pay for public services without equalization and give young people the opportunity to stay at home and build their careers if they prefer.

The lesson of Cooke is that we need more of them.   If we had 100 more firms bringing in $250 million or so each in export revenue each year that would boost the GDP by roughly 60 percent and we would be living in a different province.

So we need to think about the 100.  Where will they come from? IT firms?  Services?  Natural resources? Manufacturing?  Imports? Home grown?

Small businesses, as I have said ad nauseum,  are critical to the health and vibrancy of local economies but if you want to grow your economy you have to bring more money/investment in and that doesn’t happen by recycling more of the existing business activity.

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Scrap NSBI for more co-operative enterprises?

March 25th, 2014

On many occasions, I think the Canadian Centre for Policy Alternatives adds a lot of value to the debate in Canada but their recent proposal to scrap NSBI and put the money into expanding “co-operative enterprises across the province” is not particularly bright.

There is a certain level of irony when a think tank located in the urban centre with by far the largest inflow of money to fuel the local economy advocates to scrap the only agency in Nova Scotia meant to attract inflows of money into that province.

The Ottawa economy lives on inward flows of cash.  Billions of dollars from the rest of Canada is sent there to be spent in the local economy on the federal government and the vast amount of related spending.

But Nova Scotia, we are told, should focus on small co-operative enterprises in the local economies around Nova Scotia.  Because recycling the few dollars there should give us the growth boost we need (?).

It certainly is possible that co-operative enterprises in certain industries could become exporters and bring in money to rebuild weak local economies in Nova Scotia but I wouldn’t hold my breath.

I like co-operatives and have argued they can and should play a role in the regional economy.  There are industries that are suited to this form of business and I think a cohort of folks who like this kind of business structure.

But it is folly to think that Nova Scotia should avoid the General Dynamics, Lockheed Martins, Airbus’, Michelins, etc. in favour of co-operative enterprises.

I know the CCPA has a problem with concentrated corporate power and doesn’t like big business.  But they should at least understand how economies work at a basic level.  We need lots of new investment and new income flows into Nova Scotia if the economy is to revive – not a focus on recirculating the money that is already there.  If the government isn’t going to flow in the money (like Ottawa), we will need the private sector to do so.

And NSBI is the agency right now meant to do that.

Giddy up.

 

 

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North Dakota and the good life

March 25th, 2014

If  you recall the report the New Brunswick Chief Medical Officer wrote about shale gas industry, you may remember among the grab bag of warnings was that shale gas would bring an epidemic of sexually transmitted diseases to New Brunswick.   She was worried about the social impacts of man camps that appear to service the oil and gas industry in remote locations.

North Dakota wants people to forgo the man camps and move there permanently.   I this is absolutely the right approach.  Not only are man camps not particularly nice as places to live, when employment income is sent out of the state, it limits the local economic benefits.

This by the way would be particularly true in a place like New Brunswick where 80 – 90% of all tax revenue is derived from employment income.

So we need to learn from North Dakota and try and attract talented workers and small businesses to move here while simultaneously training our people and identifying SMEs with the capabilities to work in the industry.

Of course, this whole discussion might end up being moot.  An article in the Motley Fool magazine recently suggested that SWN’s exploration in New Brunswick and elsewhere recently has been disappointing and they are now moving heavily into an area in Nebraska where the gas is said to be wet.  In case you haven’t noticed, they aren’t lining up to explore for natural gas here.  Other than the resilient Corridor Resources in the Sussex area, who else is actively looking for oil and gas?

The opponents of shale gas – the real ones – knew this.  They don’t a moratorium.  They just need the CFOs of drilling companies to google “shale gas” and hit dozens of stories of the resistance in New Brunswick while the Nebraskans and the North Dakotans are welcoming the industry with open arms (for the most part).

At that recent conference in Moncton, Francis McGuire -who’s firm is drilling in the Dakotas – asked if we care more about our land and water than the North Dakotan farmers.  I thought that was interesting.  What do we know about shale gas that would still make 70-80% of us be resistant while the resistance in areas where the gas is already flowing is much less.  Of course there will always be resistance to any kind of oil gas or mining projects but in the main there is broad support in the areas where shale gas is currently in development.

I guess we know something they don’t.

 

 

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Do we need luggage or economic development?

March 20th, 2014

I just listened to a podcast discussing some of the many challenges associated with Jeffrey Sachs’ millennium villages projects in Africa.  If I had time, I would discuss this in greater detail but I did want to key in on one specific conclusion.  There is a small – but maybe growing – group of economists that believe there are some areas in the world that are not conducive to any kind of economic activity enough to sustain communities with an even moderate quality of life.  Their solution would be to pay the one time cost of migrating certain African populations to better environments.

This argument has been used in Atlantic Canada and I would argue continues to hold a prominent view among a lot of folks across Canada that think about regional development.  If you drive through Quebec to Labrador you will come across abandoned communities where there once was a mine and after it left, the whole community was razed and everyone moved on.  Joey Smallwood spent a pile of cash to close a number of tiny out-ports in Newfoundland for similar reasons.

The argument is pretty straight forward.  They say the Maritime Provinces have some forests, some fish, some minerals and a small number of tourism opportunities.   All equalization and economic development-related transfer payments should be cut and the region should re-equilibrate around these core industries and geographies.   In their view we would end up with a smaller but stronger economy and communities down here.   Following the argument of many prominent economists, government-led urban development should be left to the largest urban centres in Canada.

There was a federal government funded study a few years back that argued the feds should pay people to move from the Maritimes to the jobs out West.

They argue the best thing for this region would be more luggage and less economic development.

I never bought this argument.  This is not an inhospitable place to live.  It may not have the climate of San Diego but it is not a desert or Antarctica.  It may not have the urban amenities of Toronto or Chicago but not everyone prefers that lifestyle.

As for the scale argument that keeps getting thrown around, as I have pointed out many times, small and mid-sized urban centres have grown faster across North America in recent years than the largest urban centres.  You could equally make the argument that smaller urban centres hold more potential because they don’t face the kind of challenges that come with very high density and highly developed urban centres.

And, of course, we have the real world example of communities across New Brunswick that have shed population – and quite a bit – and they have not strengthened – they are much weaker.

 

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