It’s The Economy, Stupid

I haven’t commented much on the deal lately because my opinion is well known but I did find the results of the new Radio Canada poll interesting. Particularly the set up question. Now it is possible that my French is not particularly good so I Google translated the question:

An amended agreement was submitted in January. Are you aware of the differences between the two agreements?

Half of the people said they were not even aware of the differences and only 17% said they felt ‘quite’ aware. That drops to 10% or one out of 10 among people under the age of 34.

This is the defining public policy issue of the day and half of New Brunswickers have essentially no knowledge of the deal as proposed? 

And then I get this stream of commentary about the ‘wisdom of the crowds’ and the shining example of democracy at work. 

And the other thing that is interesting about this poll is the deep division between Anglophones and Francophones.  On almost every question, Anglophones have at least a 50% more very unfavourable rate than Francophones.  Sometimes it’s double very unfavourable.

The final point is - and you can chop these things up in a thousand ways - the higher income reponders in Fredericton and Saint John tend to be far more against the deal and Edmundston-Woodstock is deeply against it but it is interesting to note that 35% of the respondents in that zone are retired.

The richer, older and anglophone are correlated with deeply against the deal.

I guess all these things make some sense.  The fact that only 17% of people say they have a good understanding of the new deal.  I guess that makes some sense.  The vocal and public opponents of the deal have little interest in people knowing the deal - there are still placards all over the place that read “say no to the sale of NB Power” even though NB Power is not being sold.

The fact that richer folks are more likely to be deeply against the deal. That makes sense I guess. 

The fact that older folks are deeply against it - I guess that makes sense as well. 

The high correlation between anglophones and deep dislike of the deal?  That card has been subtley played all along. 

The last point, of course, is likely the most important.  This is a relatively small poll - particularly when you chop it up into regions and linguistic groups. 

I think there is no doubt that the majority and a strong majority do not like the deal but when half of the people say they have no understanding of the difference between the first deal and the second, there is a fundamental problem.    A problem with how this is being communicated in the media.  A problem with how the government communicates complex public policy issues and a problem with how we tend to take the easy way out and go with our ‘hunch’ or gut feel on issues (I just read Gladwell’s Blink which is a good exposition on this issue).

PS - I can’t find a link to the full poll online.  If anyone knows where it is let me know and I will link to it here.

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My wife pointed out yesterday the obituary of a woman we knew from church.  She was a nice lady and lived a long and seemingly happy life.  But as I read the obit it was amazing to see that every brother, sister, child, grandchild - everyone mentioned did not live in New Brunswick. It was two paragraphs of Toronto, New York, California, on and on. 

Curiosity about that has driven much of my thinking about economic development for the last 20 years.  Why do places like New Brunswick chronically shed people - not for a few years or a few decades but for generations? 

It matters even more these days because 40-50 years ago the natural birth/death rate was tilted significantly to the birth side which compensated for the out-migration.  Now the birth/death rate is about 1:1 so we are going to either a) keep our young people, b) attract migrants, c) attract immigrants or d) a combination of all of the above.

Of course I am compelled to reiterate that I am not advocating efforts to force people to stay in New Brunswick.  I even chafe at those grants to keep new graduates in the province.  I think more, not less, New Brunswickers should spend time outside the province (I did and it was a great experience).  

I also think that we need to attract talent from across Canada and immigrants - this type of infusion I think would help a lot.

But in the end if the economy can’t sustain its local population, it’s hard to imagine it will be able to sustain immigrants (hence the significant out-migration rate among new immigrants to NB). 

Once in a while I will ask people in their 70s and even 80s about this and the usual response is a shrug.  “That’s just the way it’s always been in New Brunswick”.

Hence my curiosity.

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Give a man a fish and he will eat for a day.  Teach a man to fish and he will eat every day. 

The following is taken from a summary of the Federal budget:

Federal support for provinces and territories is at an all-time high, and it will continue to grow. For New Brunswick, this totals $2.7 billion in 2010-11, an increase of $591 million since 2005-06. This long-term, growing support helps ensure that New Brunswick has the resources required to provide essential public services, and contributes to shared national objectives, including health care, post-secondary education and other key components of Canada’s social safety net.

Actually the Feds are being gracious.  If they took into account the net EI payments to New Brunswickers (the net above premiums collected) and other transfers to individuals the amount would be likely well in excess of $3 billion in 2010-11 but I’ll let their spin doctors figure that out themselves.

When I read this my first thought was how much of that $591 million increase since 2005-06 went towards investments in building a strong economic foundation in New Brunswick?   The run on sentence below the amount is a clear indication.  Very little.  This funding, we are told, is for public services, national objectives, health care, education and the social safety net. 

Couldn’t they have slipped in a single word about ‘economy’?

Of course this is a non-partisan issue. The Liberals under Martin and later Cretien doled out hundreds of millions in new money to help NB pay the bills (hiring thousands of new health care workers) but very little for investments that would have helped build that strong economic foundation I am talking about.

I am tempted here to launch into a discussion about Ontario and the federal panic when the economy of that province started to teeter a little.  It was all about the economy in Ontario.  In New Brunswick, it’s about the social safety net.

I also don’t want to go into a line by line analysis but we know that ACOA spending on economic development is down.  We know that federal spending on R&D in New Brunswick is the lowest in the country.  We know that federal agencies such as Invest in Canada barely mention New Brunswick.  Most of the big federal funding programs that are meant to catalyze economic development all but by-pass New Brunswick.  There are a few.  The NRC is doing some interesting things.

Why raise it now? 

The reality is that Minister Flaherty has hinted that federal cuts are a comin’ and NB Finance Minister Greg Byrne has been quoted in the press as being concerned about this.  He should be.  New Brunswick gets 41% of its annual budget from the Feds - more than all other provinces in Canada except little old PEI which gets 43% (and we are closing that gap).  Obviously if the feds start choppin’ (and some say they have already started with the AIF) it will disporportionately impact New Brunswick.

Wouldn’t it have been interesting if we had used that fish story in New Brunswick circa 1997 when the federal gravy started to flow again?   What if the Feds and the Province had said we have a golden opportunity here to plow a pile of that federal revenue surplus into economic development so that when the next big recession hits (say around 2009), New Brunswick will have dropped its need for federal transfers down to 30% or 25% of its budgetary needs.

Because the problem with the Feds using their funds just to jack up public spending is that when they start pulling back, the expenses are still there.  We still have to pay for the doctors. 

I don’t know why this doesn’t seem to make sense.  Maybe I’m the loon here but one large Microsoft software development studio will generate the taxes to pay for 100 doctors year after year after year.  That new Daewoo wind turbine facility in Nova Scotia or the new Samsung deal in Ontario is far more beneficial to the provincial economies in the long run than short term cash for expenses (by the way NS got the Daewoo facility for far less than what Ontario had to pay for Samsung - I guess having that old TrentonWorks infrastructure was the deal maker).

I’ll end with my old argument (it may not be overly robust but it’s all I have).  It seems like it is far easier for the Feds to give money to cover the costs of government services than it is to help support economic development.   My hunch is that if they give NB $100 million for the ’social safety net’ Ontario won’t even notice but if they give $100 million to attract a KIA plant to Saint John - every think tank from Cornwall to Kenora would be crying bloody blue murder.

That’s a hunch.  I don’t know if it is true or not but it is a working hypothesis.  If you were to do an analysis of the top 500 investment attraction projects with at least a few million in federal funding in Canada over the past 15 years (auto plants, aerospace, software, etc.) I would bet there would hardly be a single one in New Brunswick.  I would be curious.  If there are any federal spinners out there it would be nice for you to share this list with us.  Of the billions and billions given out through TPC, auto, sustainable technologies, etc. to attract or expand multinational investment in Canada, how much was given to multinational companies to invest in New Brunswick?

In the end, New Brunswick has a pile of things going against it - no oil, no gas, dwindling natural resources, federal interest in only propping up the social safety net, lack of belief among NB leaders that we can really achieve economic development, etc. 

How to break through?  Who knows.  We keep talking about it here to no avail.  Maybe elsewhere in the dimly lit halls of power in Ottawa someone is getting through but I wouldn’t count on it. 

Back in the late 1990s Kevin Lynch came to Moncton.  I think he was the federal DM of Industry at that point.  I remember it as if it was yesterday.  About 30 of us were huddled in a cramped boardroom to hear what he had to say.  I was shocked when he didn’t dole out the usuable pablum about how the feds are such big supporters of NB.  He basically told the people in that room to stop whining and go out and fix the economy.  Stop coming to Ottawa with your hat in hand.  I swear he said this - not verbatim but pretty close.

Done for now.  It’s Friday night and my wife has a foreign movie for us to watch.

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This is from APEC’s commentary on the federal budget:

The Atlantic Canada Opportunities Agency (ACOA) is being given $19 million per year, starting in 2010-2011, to extend its Atlantic Innovation Fund (which provides funding for businesses and research institutes to develop and commercialize new technologies) and to support its Innovative Communities Fund (which helps communities adapt to new economic realities and opportunities). However, this announcement appears to imply a substantial reduction in funding. Launched in 2001, the original Atlantic Innovation Fund provided $300 million over 5 years, which was renewed at the same level of funding in 2005. Neither was there any announcement to renew the broader Atlantic Investment Partnership which also included funding for trade and investment initiatives.

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Like most throne speeches the one yesterday was vauge on details.  However, there were a few interesting points related to economic development.

To fuel the ingenuity of Canada’s best and brightest and bring innovative products to market, our Government will build on the unprecedented investments in Canada’s Economic Action Plan by bolstering its Science and Technology Strategy. It will launch a digital economy strategy to drive the adoption of new technology across the economy.

“drive the adoption of new technology” is one of those buzz phrases that needs to be used carefully.  Adoption is not the point.  We want to deploy technology to enhance productivity, drive innovation, better market access and/or increase productivity.  What is the strategy for leveraging technology? 

Our Government will extend support for advanced research, development and prototyping of new space-based technologies, especially in support of Arctic sovereignty.

Space-based technologies, Arctic soverereignty.  Two interesting areas.

Our Government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need.

Most people I talk to on this issue say it is not the lack of venture capital but the lack of good projects of interest to the VCs in a place lik New Brunswwick.

While safeguarding Canada’s national security, our Government will ensure that unnecessary regulation does not inhibit the growth of Canada’s uranium mining industry by unduly restricting foreign investment. It will also expand investment promotion in key markets.

Interesting how these two issues were tied together.  Remember the talk of uranium mining in New Brunswick?  A few placards and editorials and that went away.  I guess Saskatchewan gets a monopoly on uranium mining.  Who’d a thunk it?

As for expanding investment promotion in key markets.   Good idea.  Won’t do much for Atlantic Canada - particularly NB.  As I have said many times before the number of investment ‘leads’ coming from federal investment promotion to New Brunswick is approaching ‘zero’.  I don’t expect that to change.  I think I mentioned before the time I interviewed a senior Invest in Canada official who went way off script and complained about whiny Atlantic Canada and concluded by saying that when “we are in Germany pitching Canada to Siemens, we are going to focus on our assets - Toronto, Montreal, Vancouver, maybe Calgary but never Halifax or Moncton”.  Nuff said on that.

It will take further steps to support the competitiveness of Canadian manufacturers. And recognizing the strategic importance of a strong domestic shipbuilding industry, it will continue to support the industry’s sustainable development through a long-term approach to federal procurement.

This could be really good for Nova Scotia.

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The mayor of Kansas’s capital has unofficially changed his city’s name to Google. The decision to change Topeka’s name to Google was made via a proclamation signed at a city council meeting on Monday. In the proclamation, Mayor Bill Bunten declares that the city will be known as Google for the entire month of March.

Now, lest you think the guy’s gone totally cuckoo, there is an actual point to this: Google, you may recall, recently announced plans to build a series of superfast broadband networks in cities across America. Google’s broadband service will bring speeds up to a hundred times faster than what most people currently have — but not everyone’s going to get it.

Google’s planning to build its broadband networks in a limited number of communities. It’s calling upon city leaders and others to nominate their hometowns for inclusion. After all the nominations have been received, Google will select a handful of places best suited for its experiment.

Topeka’s mayor really, really wants his city to be one of those places.

As silly as this sounds, I kind of like it.  At least it shows some initiative.  How about we rename Moncton Hyundai, New Brunswick?  Or how about instead of Saint John we call it Microsoft, New Brunswick?

Yeah, maybe a bit too far.

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Do you remember that old movie The Blob with Steve McQueen?   It flashes through my mind these days whenever I hear an economic development official talk about ‘retention’. 

A few years ago, this notion of ‘retention’ started to become popular.  In economic development terms, it basically is defined as retaining a company or a certain number of jobs.  Many economic developers will say that it is easier to keep 100 than to attract 100.

I have blogged about this in the past so I won’t dwell on the theory except to reiterate my growing concern with this term and its use.   10 years ago you could go through 50 government press releases (BNB) and not see the word retain or maintain jobs a single time.  Now every second BNB press release talks about how xx dollars will retain yy jobs or support zz jobs or maintain them.

Again, I am not against this in every case but if we are bailing out companies with bad business models, I worry that we end up doing the opposite of economic development.  Economic development should first and foremost be about public policy and action that leads to growth.  If it becomes primarily about maintenance - at best we are just maintaining the status quo and at worst we are creating significant inefficiences by propping up bad companies.

I am not going to talk about Atcon because I know how important that firm is to the Miramichi and I know the kind of Gordian Knot facing the government on this.

But I am going to talk about BNB Ryan Donaghy’s comment in the TJ article:

Donaghy said. “We’re in the business of maintaining and creating jobs, and we were there yesterday and we’re going to be there in the future.”

Not to parse words here but to lead with “we’re in the business of maintaining ….  jobs” is concerning to me.  The first verb to describe BNB should not be maintaining. 

Where does this philosophy end?  Will every company going out of business get money from the government to be maintained? What is the standard used to provide funding for retention?  80% of all new start ups go out of business within five years.  You could end up spending a pile of taxpayer cash propping up hundreds of firms around the province with no growth.

I realize I am simplifying this a lot but I still think the underlying principle needs to be strengthened.  Grants and loans to troubled companies should be a very small part of what business NB does.  And people like Ryan Donaghy should be very clear on this point.

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I listen each week to New Books in History - a really interesting podcast that someone on this blog alerted me to a while ago.  This week’s podcast is an interview with an historian from Nippising University in Ontario about WW2.  Her name is Hilary Earl and the book is The Nuremberg SS-Einsatzgruppen Trial, 1945-1958: Atrocity, Law, and History.

Don’t worry, I am not diverting into blogging about the the second world war.  I try to keep things relatively on topic here.

No, my interest as it relates to this blog is Dr. Earl’s description of her early life.  She grew up in New Brunswick and attended UNB before moving away.

The interviewer is from Iowa so she was using the standard ways to describe New Brunswick as a small place, east of Maine that no one has ever heard of.  She went on to say that “most Canadians don’t even know where New Brunswick is”.  However, she had high praise for her education at UNB.

This is another great metaphor for New Brunswick.  A place no one has heard of (even Canadians) with some good universities that are incubators for folks looking to leave.

One can’t help but appreciate the irony of her comments in the context of her now living in Northern Ontario.  One suspects that both Nippising University and North Bay are not exactly the topic of household conversation in Kelowna or Red Deer.   But I digress.

She’s obviously a talented scholar and like so many NBers did have to leave to pursue her career.

I hope that some day her description of New Brunswick will be more flattering - something about a really neat place in eastern Canada that is doing really interesting stuff……   It would be interesting to have 1,000 expatriate New Brunswickers describe the province as they remember it.

While some would say this is beyond the scope of an economic development blog I am more convinced each day that culture, connectivity and roots matter in the context of economic development. 

I’m just having some difficulty connecting the dots but there is something about how Dr. Earl described New Brunswick that crystallizes 140 years of history.

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CP is reporting that Daewoo is looking to take over TrentonWorks and the Nova Scotia government just gave a $20 million loan to the Halifax Shipyard to help it expand.    Both of these projects (the first one has not been formalized) could lead to hundreds of new, high paying metal bashing jobs in Nova Scotia.

I have said for a long time (remember Bryan Adams - “played it til my fingers bled”) that there is no reason why New Brunswick (and the Maritimes) couldn’t build a thriving and successful industrial economy.  There are alll these experts running around -including the heads of prestigious universities - saying the industrial economy is dead and we need to make New Brunswick a tech economy.

While the desire to make New Brunswick a tech economy is fine, saying the industrial economy is dead is silly.  Until “beam me up Scotty” is a reality, we are going to need cars, ships, planes, heavy machinery, energy equipment, barges, bridges, and thousands of other physical things that are fundamental to society.

That stuff doesn’t have to be manufactured in or near the largest urban centres - in fact there are good reasons why they shouldn’t.

The other point that shouldn’t be forgotten is that these industrial jobs (for the most part) are high wage jobs.  That is where we should focus.  I don’t see much future in trying to attract or foster the growth of low end manufacturing.   But the high skilled, high value stuff - certainly.

I’ll be interested to see the incentive package for the Daewoo project.  In the U.S. these wind turbine plants are getting tens of millions in grants from federal and state programs and also being guaranteed lucractive supply contracts (think Samsung in Ontario).

The last point has to do with the regional competition thing.  I think this is good for the region.  New Brunswick should point to Daewoo as an example when it is out pitching to a global audience.

And who know?  When Hyundai gets around to another manufacturing plant in Canada, maybe we will get a serious crack at it.

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I liked Sheila Copps in an Elizabethian Weir kind of way.  The kind where you disagree with them on most ideas and policies but like them as persons and as political figures.   Some people are just likeable - both Copps and Weir were scrappy too - maybe that’s another reason I liked them in their public roles.  Liz Weir would stand up in the Leg and thunder at Frank McKenna - it was fun.

Anyway I was thinking about Sheila yesterday after reading another diatribe in a western Canadian paper about the lazy and unmotivated Atlantic Canadians and how Albertan money is a crutch holding us back from our true potential.

When VIA Rail ran into some financial trouble a few years ago, the federal government was going to bail them out and Sheila proposed that instead of a bailout, we give all Canadians a return ticket on VIA Rail as long as they promise to visit a part of Canada they had never been to before.  Do you remember this?

She was, of course, laughed at and dismissed but I liked the idea. 

I have been grappling with the issues of national identity and patriotism for some time and I still haven’t resolved anything in my mind but I do think that being part of a country means something - and maybe having a basic understanding of that country is a starting point.  There are millions of new immigrants to Canada that have never been to Atlantic Canada - and wouldn’t be able to name a single city here.

I don’t know if you can force feed culture or national identity or patriotism.  I tend to think those things sort of bubble up over time. But I do think that we should at least make some limited attempts to understand our country and its regions.

I think Sheila was on to something.

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