Taking politics out of economic development: redux

I know this is a theme I revisit every few months but it is worth it because I think this is one of those things we get wrong in New Brunswick (and elsewhere).

When I say keep ‘politics’ out of economic development, I am not talking about the high level.  At the highest level, economic development should be a foundational concern for government in New Bruswick.  I am talking about the low level politics.  The horse trading, the “can we win this or that riding” consideration, etc.

If governments are developing programs to stimulate economic development (tax breaks, grant programs, etc.), they should be designed to keep politicial interference to a bare minimum.  Let me give examples:

Politically-Motivated Economic Development Program – A multimillion dollar fund that has weak criteria as well as vague objectives.  The fund is likely to be doled out based on the lobbying efforts of politicians or other lobby groups.  To be distributed based on political considerations rather than merit. 

Economic Development Program with limited politics – An investment tax credit program that gives a 30% ITC for every $1 million invested in a project.  This is what it is.  No amount of lobbying will make a difference.  It’s fair and clear in its objective.

Now, many if not most politicians would completely disagree with me on this.  They would be of the “Jean Cretien” school of politics where it is the role of the MLA or MP to get as much for their riding as they can.

But it seems to me that politicians have enough lobbying to do without adding these funding programs.  They lobby for roads, health care, education, events, and other direct government activity.  They lobby for their own special interests.  One would assume they lobby for important big picture stuff as well.

Some will say that politicians need to have the flexibility to bias funding towards needy areas in the province.  I couldn’t agree more but you do that programmatically (40% tax credit instead of 30% tax credit) rather than based on lobbying efforts.

But when economic development comes down to lobbying or votes or other riding considerations, it will always lead to sub-optimal outcomes.  Businesses get frustrated and end up spending more time and effort lobbying politicians than they should.  Projects that may be suspect get funding because they are in the right riding and even the local economic development agencies end up being frustrated.

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One Response to Taking politics out of economic development: redux

  1. Scott Mackay says:

    “Taking politics out of economic development?” It’s hard, David. Studies have shown that economic development agencies and their spending levels routinely skyrocket during [and before] federal elections and then plummet after they are over.

    As well, there seems to be a correlation between ED [agency] spending and ridings where a seat isn’t safe in that the sitting incumbent needs a boost; or in an area/riding that the government hopes to snatch away from their opponents.

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