Throne speech odds, ends

I understand that in the Throne speech Premier Graham emphasizes the need to attract business here. This will, naturally, bring out the protest cries from the CFIB, the NB Biz Council, unions, and social policy types. Oh, and the Chamber of Commerce types who have been known to criticize efforts to attract industry.

So, I will put aside my “what are we selling message” to do some clarification for you on the process of generating economic activity.

You basically have six types of businesses. Let’s leave aside government for a minute (but don’t forget about government – it has been a major contributor to employment growth in the past eight years in New Brunswick):

Microbusinesses – 10 or less employees (local market only)
Microbusinesses – 10 or less employees (emerging as potential serious exporters)
Small to medium sized businesses (local market only) – under a couple of hundred employees
Small to medium sized businesses (exporters) – under a couple of hundred employees
Large businesses (local market only) – 200+ employees
Large businesses (exporters) – 200+ employees

Now, we know that 96% of firms in New Brunswick have less than 50 employees. We also know that Irving alone accounts for about 60% of all exports. When you add in the other big boys McCain, pulp mills, minerals and electricity (and seafood) you get up to around 95% of total exports. So that leaves 5% of our exports coming from everyone else.

Translation? Almost all of our micro to medium businesses do not export and therefore derive virtually all their business on local market activity.

Now, how do you grow an economy? This is a complex issue and hard to fully cover here but I have tried somewhat over the past 1,550 posts.

But I’ll pose this question. If you take an economy ceteris paribus and add 50 plumbers (assuming there were enough before), does that generate economic growth? No, that just divides the plumbing business up between more plumbers.

If you take an economy ceteris paribus and add 100 data centre specialists managing data from around the world for Google, does that generate eocnomic growth? Yes. In addition to the jobs in the data centre, you need 0.2 lawyers, 0.15 plumbers, one grocery store clerk and one civil servant.

I put this to my brother once. If you set up 50 small businesses in the Miramichi will that lead to the setting up of a pulp mill? No. If you set up a pulp mill, that will lead, however; to 50 new small businesses.

That in a nutshell is the issue. There are only two ways to grow an economy – attract economic activity here through investment and trade or make the economic activity here more productive. That’s it.

So, if all those economists and policy wonks at the CFIB would look at the successful provinces in Canada, they would see a symbiotic relationship between the small to medium sized local business and the multinational firms. When you attract international business (and I think you can actually overdo it – but New Brunswick has never been close to that except with call centres), they use local suppliers, their employees shop in local stores, their homes are constructed by local contractors, etc.

Sure, it puts upward pressure on wages. Sure it tightens the labour market. But that is a good thing!

Check this out. Scroll down to the bottom. You will see that only Newfoundland has a lower Ratio of jobs/population than New Brunswick.

We must crank up business investment in New Brunswick. The kind of business investment that leads to taxes paid. The kind that leads to good paying jobs that will attract immigrants and migrants. The kind that will move us down the road to self-sufficiency.

And I’ll debate that until my fingers fall off.

This entry was posted in Uncategorized. Bookmark the permalink.

0 Responses to Throne speech odds, ends

  1. mikel says:

    There’s another issue to look at however, and thats that with improved technology the be all and end all is not the number of jobs. It’s simply exportability.

    So lets look at another example. I pick up my own Mac at the computer store, and I fire up Garageband and croon to my hearts content. I set up a website and start selling worldwide instantanously.

    Example two, I pick up a copy of Flash or some other animation software and draw some toons and then, once again, ship out over the internet.

    As you’ve no doubt noticed, the number of GOOD FDI in most areas has decreased measureably. Not saying its not possible, of course, again, this isn’t to combat your raison d’etre (if you can spout latin then I can french), its simply to show that there are other very easy options which are not even being looked at on a macroeconomic level.

    As you said once before, you can’t make a provincial industry out of, say, selling homemade guitars. However, you CAN make them out of furniture makers, animators, in other words entrepreneurs. But what kind of province ignores all these huge industries in things kids love and talks instead about co op programs in construction? Well, I think we know what kind.

    One old guy was asked at the Council on Foreign Relations what the ‘jobs of the future are’ and he said that he talked to his son, who he said, ‘does something with streaming video’. Like he said, he doesn’t even understand what the heck it is, but his son makes damn good money doing it. That, of course, comes from education.

    Here in Waterloo Google has a sign up at the new Technology building, but no it didn’t come from the local or provincial government going to Google to pitch them to set up an office, it didn’t even come from the generous local subsidies we offer the increasing number of office buildings for such companies. It came because two guys got out of university and started up a technology company which had a product that Google was interested in. They bought it, and kept the guys on managing the office.

    Of course Google COULD pack up and move, but why would they when the guys who know the most about the product they are using are here. They aren’t going to pack up and move to San Fransisco just for the hell of it.

    The point is that there are two routes to FDI, and don’t undersell entrepreneurs. I like that Classifieds song that sings “there’s lots of artists here but noone making money”.

    However, you, I and others who talk about this have to face the fact that those groups you mention above are those with political clout. The government is not intentionally stupid (or maybe they are, I don’t know), but its clear that the status quo, despite the noises claiming otherwise, is entrenched pretty firmly in Fredericton. Until a political solution is found, there will be no economic one.

  2. mikel says:

    There’s another issue to look at however, and thats that with improved technology the be all and end all is not the number of jobs. It’s simply exportability (you can have a small operation that makes lots of money and lots of small operations creates that need for all the other jobs you mention above).

    So lets look at another example. I pick up my own Mac at the computer store, and I fire up Garageband and croon to my hearts content. I set up a website and start selling worldwide instantanously.

    Example two, I pick up a copy of Flash or some other animation software and draw some toons and then, once again, ship out over the internet.

    As you’ve no doubt noticed, the number of GOOD FDI in most areas has decreased measureably. Not saying its not possible, of course, again, this isn’t to combat your raison d’etre (if you can spout latin then I can french), its simply to show that there are other very easy options which are not even being looked at on a macroeconomic level.

    As you said once before, you can’t make a provincial industry out of, say, selling homemade guitars. However, you CAN make them out of furniture makers, animators, in other words entrepreneurs-and lots of them. But what kind of province ignores all these huge industries in things kids love and talks instead about co op programs in construction? Well, I think we know what kind.

    One old guy was asked at the Council on Foreign Relations what the ‘jobs of the future are’ and he said that he talked to his son, who he said, ‘does something with streaming video’. Like he said, he doesn’t even understand what the heck it is, but his son makes damn good money doing it. That, of course, comes from education.

    Here in Waterloo Google has a sign up at the new Technology building, but no it didn’t come from the local or provincial government going to Google to pitch them to set up an office, it didn’t even come from the generous local subsidies we offer the increasing number of office buildings for such companies. It came because two guys got out of university and started up a technology company which had a product that Google was interested in. They bought the company, and kept the guys on managing the office.

    Of course Google COULD pack up and move, but why would they when the guys who know the most about the product they are using are here. They aren’t going to pack up and move to San Fransisco just for the hell of it.

    The point is that there are two routes to FDI, and don’t undersell entrepreneurs. I like that Classifieds song about the maritimes that sings “there’s lots of artists here but no one making money”.

    However, you, I and others who talk about this have to face the fact that those groups you mention above are those with political clout. The government is not intentionally stupid (or maybe they are, I don’t know), but its clear that the status quo, despite the noises claiming otherwise, is entrenched pretty firmly in Fredericton. Until a political solution is found, there will be no economic one.