On nostalgia and breaking entrenched thinking

Bill Belliveau mentions my recent piece on the need to attract more business investment here in his T&T column today. I have never met Bill Belliveau but I enjoy his columns and his CBC panel discussions. I also think he is a very bright guy – part of the Belliveau clan that we could use more of, quite frankly. But I think he, like so many others, has a distorted view of this issue of attracting industry vs. growing local industry. Have a read:

Historically, New Brunswick, like much of Canada has relied on foreign investment, foreign businesses and foreign technology to fuel its economy. This is both good and bad as witnessed by the recent closures of the AbitibiBowater mill in Dalhousie and the closure by United Paper Mills Ltd. of Finland (UPM) of its mill in the Miramichi. UPM, one of the world’s largest forest products company, announced within days of its Miramichi closure, major new investments in Russia.

With all due respect to foreign investors and branch-office firms in New Brunswick, the only businesses that have survived long-term and grown in this province are family-owned businesses like McCain, Irving, Ganong, Pizza Delight, G.E. Barbour and a few shareholder-owned firms like Lounsbury, Blue Cross and Assumption Life.

Our major telecommunications utility (once known as NBTel) has moved its headquarters to Montreal-based Bell Canada Enterprises. The Fundy Cable Group is owned by Toronto-based Rogers Cable. NB Power continues to struggle as a provincially owned utility.

This is not to diminish the contribution of outside business entities and/or investors but only to make the point that we need to reclaim the strong “head-office” economy that existed in this province nearly a 100 years ago, we need to produce goods and services that can be sold around the world if we want to become self-sufficient.

A few things jump out here right away. 1) Belliveau is making the case that you can’t count on global firms to stay in your province and that 2) you can count on the local guys.

Let me take on these points. Belliveau says:

Historically, New Brunswick, like much of Canada has relied on foreign investment, foreign businesses and foreign technology to fuel its economy.

Wrong. We have had less than our share of national foreign investment for as long as they have kept records. And the little we have seen was tied directly to our natural resources – wood and minerals. New Brunswick has not been able to attract companies here (except call centres) based on the merits of running a global business here. The number of multinational firms such as Michelin or EADS or RIM that have set up in New Brunswick is close to zero. We have the walmarts of the world, but they are only here for the local market.

Belliveau also infers that multinational firms come and go while the local guys you can count on forever. The truth is that many studies have confirmed that multinational firms are far more stable that local firms. Far more. Local firms have an 80% chance of going under within five years. Multinational firms have an 80% chance of expanding within in five years (World Bank study).

Final point on this. Of course, I would like more head offices here. Who wouldn’t? They are more loyal, more stable and committed to the province. But you just don’t have global companies spring up over night? In addition, am I the only one who notices that when these guys talk about the great, local firms they cite examples of firms like McCain, Irving, Ganong, Pizza Delight, G.E. Barbour (all mentioned by Belliveau) that all started 40, 50 or 100 years ago? Where are the Barbours and Ganongs in the past 20 years?

Belliveau once again has missed the point. You can’t wait for local firms to get it done and there is no proof you can incubate mroe Barbours and Ganongs. We have a few, think Speilo, but it is a precious few. In fact, the new model for entrepreneurship is to incubate a good idea and then sell to a multinational. I could name hundreds of firms in Canada from small guys all the way up to Cognos – which just sold to IBM. I just can’t name very many from New Brunswick.

If Belliveau, et. al. have a magic wand that can create real entrepreneurs, I’d like to see it. Economic development policy in New Brunswick for several decades has been about nurturing entrepreneurship and we have seen almost nothing.

I have made my point on this in multiple formats and it basically goes on deaf ears. We always come back to the nostalgia. We forget the reality of the new global economy or we think it doesn’t matter here. We cite the closure of old mills in Northern NB as proof that you can’t trust foreign direct investment – instantly forgetting that many of these mills operated successfully for decades employing thousands in high paying jobs. Now we want to replace these high paying jobs and investment with more desperate attempts to grow entrepreneurs.

Why not try it my way. How about a serious strategy to reseed the economic base of our communities with a better mix of large, anchor multinationals? Alabama has done this with good success. So has Ireland. So has Kentucky. I fully believe – and have made this case as well – that the province’s ability to stimulate entrepreneurship will be enhanced with more multinational firms here.

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0 Responses to On nostalgia and breaking entrenched thinking

  1. mikel says:

    How about this, how about if ALL you guys simply admit that life is not made of absolutes. That SOME types of multinational investment can be good and SOME types of local investment can be good. For every example of a successful MNI I can spout a local startup.

    Keep in mind that ‘successful’ startups aren’t necessarily huge enterprises. Virtually any endeavour that makes money keeps people off pogey and there are TONS of examples of those.

    But lets be practical. We’ve talked about Ireland ad nauseum, if somebody has a STRATEGY that they used lets hear it. Like I’ve said, Ireland has the highest rate of poverty in the EU. I know many irish here in Toronto who came because they can’t stand Ireland. They aren’t bigots, they simply know that the impoverished of Ireland STAYED impoverished.

    For Kentucky, thats a weird example to pick. They are ranked as the 42nd friendliest place to do business. They have the 8th highest corporate tax rate, but like New Brunswick, that contributes next to nothing to their budget which now is in deficit (ironic that now canadians are far more anal about deficits than americans).

    They are home to some big automakers, so once again thats a completely different economy. However, its interesting to note that things are so bad at their flagship Toyota plant that Kentuckians are looking to unionize the plant-and Kentuckians are known as big union lovers. Meanwhile, critics are screaming at the Governors “bend over and grab your ankles” deal he had to make with Ford in order to keep it there.

    Hardly great examples. However, your opposition is warranted since Belliveau also plays way over the top. Fact is there is considerable interest that the ‘family owned’ businesses are BAD for New Brunswick’s economy.

    Of course the best proof is YOU. This blog is a daily testament to the power these guys wield over public policy. Like I’ve said, when the Financial Post printed a front page story on the tax deal that Irving got in St. John, virtually any company that got a call from NB thought “what kind of place is this?”

    The only exceptions are places like Molson, who were looking to dump the union in Barrie, and the high taxes and increased water costs-so enter New Brunswick. But IF you were so convinced that you were right then every day we’d hear about how wonderful Molson is. The fact is, it was at best a spurious deal, and I guarantee you that the secrecy of the government exists for a reason-they are probably paying far more to keep big industry happy than they let on-the 3% provincial revenue from corporations is proof of that.

    Ironically, in kentucky, several blogs I checked out mirror complaints right here-small businesses get taxed too much, large ones rape the state. Although not talked about at blogs like this, there is a real war going on worldwide, not against terrorism, but against multinational corporations. Not all are bad, there are LOTS of them, but getting the good ones is a pretty tough sell, and a crooked government like NB has a much harder time (by crooked I mean the LNG tax deal).

    That doesn’t mean all foreign investment is bad, and it doesn’t mean all local investment is good. In some cases it is economically neutral. But you are wrong when you say Bill is wrong. Ten years after confederation there was MASSIVE national investment in NB when most of the ‘local markets’ were essentially bought out by national interests. That now includes financial services, insurance, banking, and plenty of manufacturing.

    But now they are ‘old hat’ so you’ve forgotten about them. However, as I’ve debated about public insurance, the best thing about it isn’t even rates, its the fact never mentioned in the press, that when you pay your insurance bill it STAYS in the province, it doesn’t go to ontario, the US, or europe (I was surprised by that one).

    My long belaboured point is this, there isn’t just ONE way to grow and economy, and more often than not its not ‘growth’ that is required but just a different focus. Bill’s points are absolutely right, UPM was making lots of money, more than the year before, its hard to tout that as a success story, but because somebody robs your house doesn’t mean ‘people’ are bad because a person did something bad.

    I can understand your point, because obviously blogs have had some kind of impact, or at SOMETHING is going on in the business community because there has been a lot of those types of comments coming out lately. Of course they could be just taking advantage of the fact that its a new government which may have new policies, and may just be taking advantage of the mill closures to reinforce the idea that “Irving means ‘good'”. After all, Irving isn’t closing down any mills, in fact they’ve bought a few at rock bottom prices (then laid off most of the workforce).

    But of course we’ve seen that before-in the movies. The mafia were always telling locals how much better they were than ‘outsiders’. Sure, they were overreliant on their ‘customers’, but they always looked out for them and were ‘loyal’.

  2. NB taxpayer says:

    Belliveau also infers that multinational firms come and go while the local guys you can count on forever.

    That didn’t stop British Columbia after a slew of firms and investments moved out of there after the NDP government dropped a few budgets back in the late 90s.

    And I know, a friend of mine from Australia whose father is the CEO and owner of a few multi-nationals (and moved some business into Vancouver) moved out for that very reason (unfriendly business environ). He told me. And for the record, both his sons work on Wall Street and they love Vancouver, but they and their father will never do business there again. Shows you that being nice and loved get syou nowhere (advice to NB).

    Anyway, enough rambling. What I am trying to say is that you will always have turnover in business as long as the market goes up and down and political administrations are replace. It’s just a fact of life. But that doesn’t mean you pack it in because your province experienced a few setbacks in staple industries which you used to rely on.

    On the contrary, you go after direct foreign investment even harder and you work your tail off to make the province as hospitable as possible to outsiders, especially those that are seriously looking to invest.

    For instance, Gordon Campbell didn’t sit on his ass because he had a large debt in Victoria and a poor business climate to work with when coming into office. He made the tough decisions (slashed useless government programs, reduced waste in healthcare spending and lowered taxes) so as to turn it around there and make British Columbia more viable and strong again to ppl and businesses looking to relocate.

    However, that doesn’t mean that you can’t have a SME strategy so that small business aren’t always paying a considerable amount of their profits to failing industries and those that don’t need it via taxes (corporate welfare). At the moment, unlike BC and Alberta, we [New Brunswick] have a government that thinks spending and increasing the size of government is the way to go because being nice is much better than doing the right thing if you want to get re-elected NB.

    Unfortunately, what they tend to forget, all that spending comes from the result in increased transfers, equalization and high provincial taxes. All which have a negative effect on attempting to grow an economy. At that’s just a start at what’s wrong with that Beliveau attitude.

  3. mikel says:

    Like the Kentucky example the BC example is a useful one. The NDP was FAR from ‘unfriendly’ to business, its just that like that Kentucky Governor they didn’t ‘bend over and grab their ankles’ for CEO’s. Gordon Campbell of course does, and now British Columbia, like Ireland is one of those lovely useful examples that BOTH business interests AND social activists point at as ‘proof’ of what they are saying. British Columbia now holds the distinction of being singled out as the location of the first ‘third world’ location in Canada by the United Nations.

    Of course business people LOVE when ‘times are tough’ (for everybody else) but BC is now a joke, and obviously something else is at work in NBT’s scenario because IF BC had the good environment now that he says it does, then his friend would be back there. Instead, because it was bad once they will ‘never do business there again’, which means they are either poor businesspeople or left for other reasons they aren’t sharing.

    That, of course, is the best rebuttal of all to the ‘business friendly’ proponents, in a case like that there is simply NOTHING a province can do to entice those businesses-so why bother trying? Perhaps he’s thinking of sending the best hookers to them or lots of kickbacks, I don’t know, but if BC, with its horrible regulations that virtually NOBODY in BC likes, and which currently has numerous court cases in the wings (not to mention a Premier who was once indicted), then NBT has just told New Brunswickers why they should run fleeing from his entire ideology.

    NBT is right, CEO’s (well, Boards of Directors or whoever owns most of the stock), can always move out on a whim. And they can be as dumb as the next guy-or as ruthless. The difference is power. There’s a guy at Facebook who hates to see NB so ‘nice’ to those on welfare even though people have pointed out that those on welfare have dropped by more than half since the nineties, and the days of welfare being a ‘useful service’ that people would choose over jobs is pretty much gone.

    But he always posts it and he has lots of money and works shiftwork overseas, so he claims that one of these days he’s going to pack it up and move. Of course thats ALL he can do, but CEO’s can get cheesed out of not getting seated with the Premier at a function and see that as ‘an unfriendly business environment’ and pack up and move entire companies.

    And of course in an international business environment many CEO’s can look at the slavery conditions in other areas and say ‘why is there no slavery in Canada? Why is there such unfriendly business practices?’

    The reason, is of course the same reason David has caveats when he talks about foreign direct investment. That not everybody wants a return to the 1800’s and thinks thats a GOOD way to run economic policy (which of course it isn’t).