Here we go again

It’s no secret that ACOA, the provincial government and local economic development commissions in New Brunswick (and about a dozen other smaller economic development organizations such as the CBDCs, aboriginal groups, etc.) have been focused on creating ‘entrepreneurs’ for many years now. Back in the 1950s, 1960s and 1970s most of the effort was around attracting industry or at least helping established businesses grow through increased trade.

I have a theory on why this changed. Actually I think it was a multifaceted issue including things like the lack of success attracting industry here back then, the recessions in the 1980s/1990s and more recently the obsession by Industry Canada in the 1990s on Michael Porter and his clusters (he was paid an egregious sum of money by Industry Canada and came to the conclusion there were no – count ’em none – clusters in New Brunswick). If Porter is your guru and Porter is obsessed with growing clusters and you have none in New Brunswick, well, you do the math.

Anyway, I digress.

I think that governments decided in an era of 14% unemployment that encouraging unemployed people to start their own businesses would be a good way to reduce unemployment and actually limit their costs. You pay a guy 10k as a startup loan for his little new business and he comes off the EI rolls – at least for now. When I was at the Greater Moncton Economic Commission, I would say the majority of folks coming through the door were unemployed, couldn’t find a job and so they wanted to start their own business.

Bill Gates in the making.

Actually, all jokes aside, I thought this was crazy. I applauded the guys that turned these would be ‘entrepreneurs’ away because of a terrible business plan or not having thought anything through. In fact, I wanted the economic development officer that had the most rejections to get the prize compared to the guy who had the most new business startups.

The reason for this is simple. We have an 80% failure rate in small biz start ups in New Brunswick (within five years). Most of these people start small businesses. Most end up either going bankrupt or earning even less money than they earned when employed. Most – certainly not all – would have been far better off working in a medium to large sized firm that offers good pay and good benefits (hopefully a pension).

And, if economic development organizations had flipped their priorities (now 80% effort on small biz creation & growth/20% on attracting good quality, multinational firms) and put the majority of effort on attracting firms, we may have had good jobs for many of these folks instead of a shattered dream lubricated with false expectations and government funding.

Why am I mentioning this? Because in an era of 7% unemployment and people leaving the province in droves, I started to believe that our governments were figuring this out. Figuring that after almost 30 years of spending ultimately billions on ‘entrepreneurship’ and ‘export development’ New Brunswick still has the second lowest rate in Canada for small business startups that survive and grow. Figuring out that after 30 years of trying to help small NB companies ‘export’, we still have the second lowest rate of value added exports in the country (non-resources based). Figuring out that the best way to truly uncover and foster entrepreneurship is to have a healthy medium and large sized industrial base. These firms end up annoying some of their best and brightest, they leave and start competing businesses (look at Nortel for cripes sake – half the spinoffs in Ottawa are disgruntled Nortel workers).

In New Brunwick, we take kids with no experience (the BDC’s Young Entrepreneur Award winning and now defunct Skate to Snow in Moncton) and convince them they can be great. Or we take folks that are unemployed, scared about their future and we stuff a brochure in their hands telling them they can be an ‘entrepreneur’. Madness.

But now I hear there is going to be stepped up efforts to create more ‘entrepreneurs’. I hope I am wrong about this. At the same time, I read about a new RBC survey that found almost a quarter of a million (230,000) Atlantic Canadians are making plans to start up their own businesses, and 25 per cent (60,000) of these aspiring entrepreneurs hope to become their own bosses within the next year.

Groan. More people without pensions. More people trying to compete with Walmart for retail goods and McDonald’s for the restaurant biz.

We have created a monster. The entire workforce in Atlantic Canada is only 1.2 million people. 230,000 of them want to start their own business.

Groan.

I’ll finish with this. There are lots of great small businesses. I was at the Farmer’s Market this morning and made purchases from several. They are most lifestyle business owners. That’s fine. But you can’t predicate economic development strategy on this. Come on. Be serious.

Attract a few good 1,000 employee manufacturing plants or animation studios. Then all these restless souls that want to set up a cafe or make necklaces or have a bed and breakfast may have a market. But don’t encourage the setting up of cafes, making necklaces and establishing bed and breakfasts and hope that leads to the attraction of 1,000 employee manufacturing plants or animation studios.

Madness.

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0 Responses to Here we go again

  1. Anonymous says:

    You are quite correct, David. A lot of these start up entrepreneurial schemes are purely a tool for reducing the live unemployment register. Give them 10K and get them off the list. They still arent working but they arent listed as such officially. In a lot of cases the 10K is spent on booze or it might as well be.
    In other countries, a start up incentive is given that is knowledge based. Young (or old)entrepreneurs are given access to business advice from something like one of our Enterprise centers and they get a lesser unemployment payment that is at zero in year three. However, the economies that these people work in are not as disfunctional as ours and the pontential client base is a lot more than 750K.
    The economy should be placed on a more sustainable footing before we start giving away money to these people again and the thrust of this entrepreneurial drive should be at the trades and skilled market instead of the ‘Arts and Crafts’ industry. In other words, people who have some kind of qualification instead of ‘happy amateurs’
    Once again, we need to expand our horizons for industry and the economy in this province. We need to access markets that we are not accessing at the moment and have never accessed. We need to reduce our dependence on lumber, Irving etc in order to survive but I cant see this happening. We also need to look to markets outside the USA but this wont happen either.
    Entrepreneurs will do their own thing without any assistance from the government or the provincial purse, thats the definition of an entrepreneur. These people take risks with their own money. If the economy expands they will thrive in that market but they wont even try if someone is just throwing money at them for the sake of it.
    Also, Irving should be told to leave them alone to trade in peace.

  2. Anonymous says:

    I would agree and disagree. Getting money for a startup isn’t necessarily bad. So lets assume a 20% success rate, if ONE of those companies made it big then there are real changes.

    However, again, government is playing to its base. Putting lots of cash into HOPING that some big industry will think that NB is ‘the place to be’ is a big gamble. So, the thinking goes, do you gamble on the electorate, or on external possibilities.

    The government’s recent experience shows just how tough a sell this is. The potash of New Brunswick is almost literally being given away in exchange for some jobs. As you mentioned, the deal in Miramichi has the government putting up over one third the amount.

    So think of that from a taxpayers perspective. You would to switch from ‘giving New Brunswickers a shot’ to puttng MORE emphasis in getting multinationals to go to NB in deals that have the government giving away the farm.

    So the question is, which is ACTUALLY the better economic development initiative, and the potash and miramichi deals doesn’t work in your favour. Politically though there is some legroom in talking about animation. You’ve talked about ti a lot, the government has mentioned it some. So to steal some of Trotsky’s thunder, what needs to be done to foster that?

    Again I’ll make the television station pitch like TVO. Animation is not a huge technical job, I’m working on one with flash, and toonboom can be purchased for $400. So THAT accomplished BOTH objectives. Not only would foreign companies see a local area to sell there wares (something that doesn’t now exist), but local entreprenial skills can be fostered.

    To DO that, though, takes political pressure and work. Because we know Rogers and CBC wouldn’t want to see such a thing.