Bias against growth

I just finished reading the Times & Transcript report N.B. government faces financial ‘perfect storm’ published this weekend which outlined the massive increases in the cost of government payrolls in the next few years (so much for the government’s ‘hard line’ against the unions – but that’s another story).

The article quotes probably my favourite regional development thinker, Donald Savoie. Mr. Savoie is one of a handful of people around that really understand the economic challenges facing a place like New Brunswick.

But after reading this, my thoughts turned to a recent example in Nova Scotia that should be instructive to us all. In the mid 1990s, a study was done in Nova Scotia that predicted a looming shortage in teachers for rural Nova Scotia schools. The authors of the study concluded that if nothing was done there would be a massive shortage of teachers in our neighbouring province.

That same study was updated recently and the authors reached a different conclusion (I covered this in a previous blog but it is well worth repeating). They now conclude that because of the significant decline in students the province will not face a shortage of teachers afterall.

Now that’s a relief.

The rapid out-migration of our youth from rural towns is considered to be good news from a public policy perspective. Although there are no studies to confirm this, the same approach is being taken in New Brunswick. Let the rural towns die. Keep the workers that are there on life support (i.e. Employment Insurance). Hope for the best.

The problem, and my central thesis, is that a shrinking or stagnant economy is not supportable in New Brunswick, Nova Scotia or anywhere else where we need massive subsidization from a few small, successful urban areas in Canada. All we are doing is postponing an inevitable collision between increasing government services costs (as outlined well in the Times & Transcript article) and shrinking or stagnating economies. When this collision occurs, the province will be forced through a ‘right sizing’ exercise that will be painful for all of us – from the overpaid public servant (that’s not me talking, a recent study found the average public servant in New Brunswick makes 20%+ more than the same job in the private sector), to the average citizen that thinks they are ‘entitled’ to Employment Insurance, a hospital within 15 minutes, no wait times, excellent schools, great highways, cheap electricity, etc.

That is why I was so disappointed with the predictable conclusion of the Times & Transcript article. The author concludes there are four options to pay for the spiralling costs of public services in New Brunswick: PPPs (public private sector partnerships), increased taxes, user fees and downloading. All of these measures mean that the average taxpayer will have to pay more even though our real incomes are shrinking.

I am completely puzzled why the author didn’t add economic growth as a fifth option. In the private sector, if a company needs to increase its profits it can increase its prices (the four options mentioned by the T&T) or increase its sales (more sales at the same marginal cost leads to more profits).

My conclusion is the most policy makers, media types and experts believe in their hearts that New Brunswick is in an inevitable state of decline. Why else would they talk like this? Alberta is doling out billions in new funding for public services. Arizona (where I sit right now) is doing the same. Why? Because they can.

I subscribe to a different view. I believe that New Brunswick could significantly increase its share of foreign business investment. Could lead the country in economic growth. Could build whole new industries and attract top notch companies to move here. I believe this. But it seems that no one else does.

Frank McKenna did. He was on a mission to make New Brunswick the back office of North America. You dial 1-800 and you reach New Brunswick. You have a technical problem with your computer. Dial New Brunswick. You want to take a university course online? Go to www.newbrunswick.com. But that vision died a slow death with the media complaining about low wages (while paying the the majority of their people less than the average call centre worker) and dead end jobs. So the government went sour on the idea. And the vision tanked.

That’s too bad. Ireland’s economic reaissance began with that country begin the back office for Europe.

This is my last post from Phoenix. I will be back in New Brunswick this coming week and will continue to chip away at the notion that New Brunswick is a dead end province. To chip away at the belief that we can’t compete. To chip away at the notion of inevitability.

To chip away.

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