Economic Transformation in Atlantic Canada

The Public Policy Forum held a conference entitled Economic Transformation in Atlantic Canada this week in Ottawa. The web site only contains a backgrounder and the ACOA minister’s speech and I haven’t read much about it in the press. I guess other things are too important.

I will say are few things, however; about the backgrounder to the conference. It’s a 17 page summary of interviews the PPF made with a dozen or so people. I was blown away to see that there were no local economic development groups on that list and only one provincial economic development representative. There were a pile of ‘association’ employees, a few think tankers and a few private sector firms.

I will reiterate. The CFIB is a great organization but its interest is small business – not attracting business to the region. The companies that are here are focused on their own business and what would help it grow – not on attracting business to the region. The Chambers of Commerce are looking out for their membership – which has no firms from outside the region. And the universities, well, that’s the clearest of all. I don’t think I have ever heard a university chancellor, president or provost call for more foreign business investment into Atlantic Canada. They want funding for their costs and more speculative R&D.

So, it is no wonder that this backgrounder barely mentions the issue of attracting business investment. There was a cute point in the document where it states that one of the interviewees said we should follow the ‘Ireland’ model.

Cute. Ireland led the globe in foreign direct investment for something like 12 out of a 15 year people. There were years in the 1990s when Ireland had more foreign direct investment than Canada (we have six times the population and all of that foreign investment went into Ontario, BC and Quebec anyway).

So, if you want to ‘invoke’ the Irish model, you need to set this in the context of what it did. You can yak all day about ‘tax breaks’, ‘free education’, ‘streamlined regulation’, and good ‘marketing’ but at the end of the day, Ireland attracted billions of dollars worth of business investment into that country. In 2003 and 2004, Ireland attracted $41 billion in FDI compared to only $13 billion into all of Canada (OECD data) – and we all know where the bulk of that $13 billion went.

If the PPF had interviewed the GHP, EGM, ECBC, or most of the urban economic development groups, they would have gotten an earful about the need to attract foreign investment and less about helping small business, funding unversities, etc.

If the PPF and the Feds figure this out, we may end up seeing substantative change in Atlantic Canada. Ireland has a little more than double the population of Atlantic Canada. So, if we were to match their results, we would need to see about $10 billion per year in FDI into Atlantic Canada. At an average of 20,000 jobs per $1 billion foreign investment, that would be about 200,000 new jobs per year.

Now, considering that all of Atlantic Canada in the past six years has generated a net new 50,000 jobs, 200,000 per year (or 1.2 million over six years) would be a slight improvement, don’t you think?

Sounds a bit like prosperity (not the Tory lexicon version).

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0 Responses to Economic Transformation in Atlantic Canada

  1. scott says:

    Great post David. I am in full agreement that the Irish model is an ideal benchmark for FDI in Canada.

    The only thing is that New Brunswick’s economy right now is like a badly broken leg. In order for it to properly heal, the doctor should not be giving you rehabilitation exercises suited for an Olympic athlete..it would not be realistic. The best method is to restore mobility through training that suites the individual. Once they are on their feet and self-sufficient, then maybe they can look at and dicuss the rehab exercises for the Olympic athlete.

    I guess what I am saying is that maybe Frank McKenna wasn’t wrong in attracting jobs which are not immediately appealing to the region. But they are jobs!!

    We must build this province back brick by brick in order to restore its fiscal health.

    Donald Savoie said it best in his book “Pulling Against Gravity”:

    Natives of some pacific islands saw the arrival of American troops. The Americans cleared and leveled an oblong piece of the jungle, set lights along the edges, and, lo! after a while, a giant silver bird arrived, bearing all manner of gifts and things. This gave rise to a “cargo cult” among the natives, who, having seen what the Americans had done to attrack the silver bird, similarly set about clearing portions of the jungle and then waited by their fires, patiently and reverently, for the arrival of the bird.

    The analogy was obvious – don’t sit by waiting for the cargo to arrive. Make it happen.

    In that statement, Savoie identified the problem of the business sector as well as why we have economic woes here in New Brunswick.

    We are not ready. Therefore, comparing ourselves to other great economies is fine and dandy…yet, it is just that…unrealistic talk. We have to strengthen the factors that will allow NB’s economy to welcome foreign investment.

    In my opinion, we are not quite there yet!

  2. vivenewbrunswick says:

    If you’ve ever been to Ireland then you’ll know it certainly isn’t the wondrous xanadu that economists claim. Plants are closing in rural areas and the country literally consists of two cities. In Dublin you can barely afford a place to live, and the price of food is outrageous.

    Keep in mind also that Ireland gets 2 billion euros in subsidies for agriculture from the european union, which is quite a bit of scratch, New Brunswick gets pretty much ZERO in agricultural subsidies.

    In Dublin there is poverty everywhere, yet there is quite a bit of investment, however, a good percentage of riverfront and harbour investment has been due to one thing: U2. They are rebuilding the harbour practically on their own, and bring in tons of money. It makes you wonder whether when we talk economic development, we should be talking about teaching music and building the kind of home grown talent who keeps NB as an economic base and brings in worldwide revenues.

  3. David Campbell says:

    Quick reply to both Vive and Scott. Vive, I spent a week in Ireland last year studying the economic renaissance and I am aware of the challenges. However, the hundred billion+ in private investment combined with something like $23 billion in EU investments have made a profound difference. They have a 200,000 person shortage in skilled labour they will have to bring into the country (this is 2004 data and things did dip a little recently). So, the bottom line here is that even if we brought $50 billion in new private investment to New Brunswick we would still have problems. We would still need Equalization. We would most likely still have some rural exodus.

    For Scott, the Savoie analogy is interesting but what you need to realize is that there are most likely only a small handful of folks in this province that actually realize the need for investment. They talk about it ad nauseum but their actions shout louder than their words. So your point that we need to “strengthen the factors that will allow NB’s economy to welcome foreign investment” is very valid but if the policy makers really don’t see the need for foreign nvestment than you most likely won’t get much effort to strengthen any factors.

    The bottom line is this. On a per capita basis, the Tory government has increased government spending in New Brunswick faster than Alberta (they have spent more in absolute terms but their population has grown by 15%). If Bernard Lord spent as much time trying to attract business investment as he does trying to attract more Equalization, I think we could at least make a few steps forward.

    Leaving New Brunswick much more reliant on other province generated tax dollars especially when there is an obviously growing resentment of it, is not much of a legacy – in my opinion.