Priorities No. 1, No. 2 and No. 3

If I was the czar of New Brunswick tomorrow, I would ask everyone to focus on job creation and economic development,” That would be priority No. 1. It would be priority No. 2 and it would be priority No. 3. That would be my signal. I’d say ‘If you come to me with anything else, you’re wasting your time and mine. What we’re going to do is focus on economic development, end of story.’ ” – Donald Savoie

From an interview series on economic development starting today in the TJ.

Read this interview.  Savoie is right on the money about getting the private sector more involved in economic development.  Not just in the development of their own businesses (although that is vital) but in the broader efforts to attract companies and grow key clusters in the province.

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21 Responses to Priorities No. 1, No. 2 and No. 3

  1. Gary says:

    Sure, Savoie’s theory makes sense but it’s nothing new and politicians know this already. The problem is that there would be one less golden egg for the MLAs would no longer be able to use for their ridings. That’s in part why BNB hasn’t been scrapped/fixed/reorganized.

    As far as Savoie’s priority #1, #2 and #3 – well I’m glad he’s not NB’s czar because everything needs to go exactly his way or else. He has some theories but I think he’s a little overrated and has an ego the size of Cleveland. He’s not big on listening and that’s the last thing we need now.

    Sure, BNB is out of date, out of touch and out of hand. There needs to be drastic changes made. Hopefully it’s the next department in line for changes. Hopefully these changes will be made before September.

  2. richard says:

    “There’s a menu of models today, not just one. I’ve taken note of the one in Nova Scotia ……They’ve been able to attract some pretty major investment.”

    Yes, but NS has petroleum revenue from offshore drilling. How much does the petro business (the success of which had little to do with Business Nova Scotia) have to do with NS’s apparent success? More so, I’d venture to guess, than ED origanizations in NS. In NB we have a tougher job.

    BNB might need revamping into a business-led results-based model, but first I’d like to see some evidence that business in NB will run with the ball, as opposed to using BNB as a gravy train. All depends on which business persons you choose to run the organization, i.e. not the dinosaurs. After all, the head of the Fton Chamber was reported as saying that the Graham tax cuts would have a great impact on business. He clearly does not have a clue; is that what we could expect from a business-led BNB?

    I also noted that Savoie said resource industries have a role and should not be written off. Seems they are doing a good job of killing themselves off; another great opportunity flushed away by NB.

  3. Anonymous says:

    Nova Scotia is hardly an example for effective ED. They have more failures and scandals than NB and only a few successes. The current model is new but it is premature to declare it successful.

    NB does need to revamp ED but copying others and assuming it will work here is dangerous. We could start by reducing redundancy, defining responsibilities and implementing accountability for ROI. Then we should elimin(e reactionary efforts and prioritize proactive measures. Start rewarding winners and forget the losers. Leverage more Federal funds. Engage leadership in ED (that means involving the Premier before the photo ops).

    If we got that done while we developed a NB model, we’d be making progress

  4. Anonymous says:

    I find entirely misleading this constant comparison between BNB and NSBI.

    David, I am very interested in hearing your ideas about the role of the Nova Scotia Department of Economic and Rural Development in the success of NSBI.

  5. I think that straight comparisons between BNB and NSBI are impossible because BNB is NB’s equivalent of NSBI and the Nova Scotia Department of Economic and Rural Development. However, I do think that NSBI’s lean model that reports to a board of directors is a better structure than a government department when it comes to interaction directly with industry (like attracting firms to the province, etc.). I have seen NSBI at work and what I have witnessed is a highly professional, crisp and focused organization. Now, certainly there are folks that do not like aspects of NSBI. As for the Nova Scotia Department of Economic and Rural Development, I don’t know much about it.

  6. Samonymous says:

    True to the vein of democracy as it currently sits in New Brunswick. “I would ask everyone”, er dictate to them, what is good for them. And if somebody “comes to me with anything else, you’re wasting your time and mine.”

    Sigh$

  7. mikel says:

    What a surprise, an economic development professor says he is interested in economic development first and nothing else! As for comparisons, let’s look at results. RIM, numerous financial backoffices, etc. New Brunswick….uh, cue crickets. Apart from the call centre in Edmunston I really haven’t seen anything in the ED field except handing out more money to Irving and rewarding resource companies.

    The RIM example is always good, you can look up the article but in it they say that RIM was very impressed with NSBI. They spent years in contact with them, but of course have the educational infrastructure, which is what RIM is most interested. It seems clear that the NB government is only interested in educating for resource management, construction and transportation. So its easy to compare when you look at results.

    But its all a moot point, who here thinks the NB government would read this and say “Wow, why didn’t we think of that!”. The bureaucratic model is fully entrenched, and its going to take more than some blogs to change that. Savoie, like David, has been saying this for years and its gotten nowhere.

    And if you look at recent announcements for Irving, etc., plus the slashing of education and health and social services, it seems pretty clear that this government IS only interested in economic development (of a very specific type). Have they done ANYTHING in any other field that is memorable?

  8. Samonymous says:

    People in here talk as though NSBI created RIM. RIM was not the product of NSBI, nor was it the product of the TPC nationally. Government came late to that exercise.

    But as you know, it’s never the RIM’s of the world that we worry about as they did well before government cash got sunk in, and would do well if they pulled out. It’s the losers that we pick who are the ones we should worry about. As John Manley said:

    ““The problem with government intervention is not picking winners and losers, the problem is governments can never shake the losers. They sink big money into something and then they keep throwing good money after bad.

    The approach we’ve taken is quite different. Never is it really big money. It always puts the worried money in first from the private investors and we’re picking sectors where Canada has reason to believe we’ve got some critical mass, and if we marshall our resources correctly, we can become world leaders.”

    In Canada, none of the leading provincial economies have government’s playing the corporate welfare game. Alberta has legislation banning these types of handouts, while Gordon Campbell has effectively shut down all corporate welfare programs and related funds. Not to mention, Premier Wall who has been curtailing his use of corporate welfare incrementally. Sadly, Premier McGunity has taken the opposite approach cancelling corporate tax cuts planned by the previous government (adding additional ones) and putting selected business interest ahead of those of Ontario taxpayers. Same happened here with the recent loan extension for Atcon Group and the $18 billion loan — ooops I mean right off — to Irving.

    Maybe they should back off and let a few more RIM’s create themselves instead interfering in the process. Not to mention, as Mr. Morley indicated today, government does not do a good job with the economy, the private sector does. But did we really need an NSBI to tell us that. This is one camper who doesn’t think so.

  9. mikel says:

    That’s COMPLETELY WRONG. RIM was very much a government creation (I don’t mean by that that some bureaucrat said ‘hey lets start a blackberry service’). Government sunk $40 million into RIM before you ever even HEARD of them. They were a creation of the University of Waterloo, which subsidized all the research, these guys didn’t make inventions in their garage.

    Even more importantly, government immediately saw the value in RIM’s technology and government departments, suppliers, etc., were RIM’s backbone customers for MANY years. Cell phones were all around, nobody put a gun to our governments head and said we taxpayers should pay so that all those bureaucrats could run around wasting time doing business ‘online’ that all should have been done in public.

    But nobody EVER said government ‘created’ RIM. It’s a different argument, but essentially almost EVERY business creation is the work of a bank. Very few IPO’s take off before businesses are well established.

    As for ‘leading economies’, again, thats just foolishness. Albertans are already lining up at the trough because it very much looks like this year will be a drought that will wipe out the agricultural year. And again, several years ago when ‘mad cow’ hit, virtually billions disappeared into the Alberta meat processing industry and the entire country bought into the ‘buy meat’ campaign which benefitted Alberta.

    Thats besides the point that David has already listed all the various business programs that Alberta provides, but in Ontario its the same as everywhere. Large scale subsidies are used when corporations are in trouble. Sometimes they are allowed to fail and the government doesn’t care-sometimes its GOOD when they fail, like in the case of Nortel that was way too ‘public’.

    What we are talking about here though is NOT corporate welfare. What NSBI did was lure RIM to Nova Scotia, simple as that. PEI didn’t do it, NB or NFLD didn’t, neither did India (not this program anyway). So its worthwhile to ask what they did RIGHT, and like I said, type in RIM and Nova Scotia and there is a lengthy article on the process used to get RIM to invest in Nova Scotia.

    Keep in mind that’s not always a sure thing. At one point RIM was embroiled in a lawsuit that threatened their existence and they were laying off a LOT of people here. Recently the executives were involved in much the same type of stock shenanigans as Conrad Black was when he got locked up. But they weren’t seriously prosecuted and the Crown essentially gave them a pass.

    That’s sort of off topic because this isn’t (yet another) corporate welfare topic. It’s all about measuring the successes and failures of ED policies and the bureaucracy whose job it is to enforce those policies. It’s been months now since NB got a lot of press for lowering its Corporate Income Tax, so it should be a given to ask how many companies have called them up with an interest in relocating or investing, or how many have been responsive to invitations by BNB. IF tax cuts are the be all and end all, then we should see results in new investment in the province fairly quickly.

  10. Samonymous says:

    I won’t disagree with you mikel that Research in Motion [RIM] is a Canadian success story — a real made in Canada success story at that. However, where we part waves is how did it become a success story, through a narrow government led strategic initiative, via Technlogy Partnerships Canada, or did it create its foundation well before the government intervention.

    Your comment “Government sunk $40 million into RIM before you ever even HEARD of them” (emphasis on HEARD) leads us to believe that 1.) They would never have made it without that investment, and 2.) That government investments were critical to their overall growth (leading to the creation of their much sought after Blackberry products). Both of which are off-base.

    Anyway, my argument sides with the latter, in that, RIM was not a TPC success story…far from it.

    A closer look reveals much greater investment from the private sector before TPC ever became involved. In fact, the company received its very first Industry Canada contribution for $1.6-million during fiscal 1997/98 via the TPC, a heartbeat before the Blackberry hit the market. It received $38.6 million in total subsidies, most of which came after the Blackberry helped the company’s shares skyrocket (which solidifies my “they came late to that exercise” comment earlier). So to boast that TPC played a major role in RIM’s success, or as you say, you never “heard” of it until they joined in, is factually off-base if not absurd. TPC played a modest role, if that.

    Furthermore, it is well documented that “angel investors” (a word you hate mikel) unloaded $36-million of private capital from a special warrant in 1996 and $115-million when it listed on the TSX in 1997.

    As for Industry Canada? Well, they provided a meager $3.3-million in 1998/99 — almost 50 times less then the initial private sector investments and two years later at that. Later in 1999, an additional $250-million was raised by the firm when it listed on the NASDAQ stock exchange.

    The market was the real key to this firm’s success as private capital recognized the company’s potential. In the last few years, the company’s shares have skyrocketed and its shareholders aptly rewarded. This company did not need government handouts.

  11. richard says:

    Most of the ‘success’ stories in the corporate world are indeed at least partly due to government support. This comes about in a number of ways: through contracts to build strength in certain sectors, through subsidies (remember the higher gas prices we all paid to keep AB oil profitable back in the 50s and 60s? And the tax funds spent on tar sands R&D), through direct investments (PetroCanada was used to stimulate oil and gas developments off the Atlantic shore).

    The suggestion that everything will be just fine if taxes are lowered and let things work themselves out has no historical support. The suggestion that ‘corporate welfare’ has been abolished in AB or BC is nonsense – its like the legislation ‘fixing’ election dates: full of holes and a scam.

    Sorry, Mr Cirtwell, wrong again.

  12. Yeah right, let’s focus on economic development. But WHAT is economic development?

    We can’t staff technical jobs because our schools aren’t graduating qualified people. But does Savoie consider education part of economic development? We hire someone from somewhere else, the first thing they ask about is health care. Does Savoie consider health care to be a part of economic development?

    That’s the thing about this focus on “economic development”: it’s a totally empty phrase. What does he mean, really? Giving money to businesses? Handouts for the banks? Say it explicitly. Because it’s *all* economic development, not just the bit where his friends get money from the government.

  13. mikel says:

    Government investment didn’t just come from cash, they also trained their workforce and help legislate their initial funding through the Working Ventures Canadian Fund (itself a government creation enabling investors to bypass RRSP rules by increasing foreign content). Industry Canada also helped finance RIM’s partners Ericcson and RAM Mobile Data. Research is also highly subsidized.

    But to show what I mean I’ll use a small research company I am intimately familiar with. For the past ten years they’ve been bankrolled by the _______ family and other large investors. This company began because the university held a ‘networking’ conference showing off what the university ‘had for sale’. Person X organized the conference, and was asked to put ‘something in’. That ‘something’ was research that HE didn’t do-but his student did. That research was picked up by workers who were hired partly based on private money, but also because this guy was a prof and got public money for his students as well, most of whom were put onto projects somehow related.

    That company is now into cancer research, not because of the owner, but because worker X had an idea and used the plant data to apply it to animal research. Anyway, the point is that in research, government and private money is so intertwined its difficult to see who pays for what. Its true that the company gets most of its funding privately, but the company would never have existed without public subsidy.

    There is NO question that RIM would not exist without government. It is a research and development company using public airwaves. It was developed in the university system, with university contacts, with university graduates working their, on a C++ format that was entirely government subsidized, again, using wireless technology that was initially publicly created. THIS specific company recieved government money, and although we didn’t investigate, I have a feeling that government may have also helped in the patent legislation they were embroiled in. We can also add that their initial research was primarily done with co-op students, part of whose salaries was subsidized with tuition credits from UW.

    But I didn’t say the government gave them all their money, or even MOST of their money. They gave them SOME money, therefore thats ‘corporate welfare’, and again, we get into the argument that why in heaven’s name would any government ‘reward’ the Irvings and McCains and ignore the strugglers? It’s interesting that in the Irving case defenders are saying ‘but that money will mostly go to workers’ (no way of knowing that), but in the Atlantic Yarns case it was simply a ‘bad investment’. In the Irving case we KNOW that its temporary work, at least in AY’s case there’s a chance that it would be a PERMANENT success story.

    In RIM’s case, the REAL money would (will) come when the company is in trouble-and ALL companies are eventually in trouble. But the meat processing industry in Alberta bragged on how they created an industry with few government handouts or legislation, you can read the Royal Underground Commission, its hysterical. One day they were beacons of the free market, then the mad cow fiasco hit, and they were screaming for bailout money. THAT is modern capitalism-‘we want the profits,but we don’t want the risk’, so the profit is privatized and the ‘risk’ is subsidized or outright nationalized.

    Look at the Chrysler case, while the company is losing money, the government owns 60%, but they outrightly state that they want to ‘get out’ as soon as possible. Meaning, as soon as the company is profitable, it will be unloaded to the private sector again. I have little doubt they’d have done the same thing seven years ago when RIM was bleeding money (they were lucky that they had enough profit to sustain them, however, like I said, they unloaded about half their workforce).

    That’s not COMPLETELY irrelevant because it goes to what Stephen is saying-counting education as economic development. THAT is where critics usually part company, in defining ‘corporate welfare’, some see it as ONLY a cash handout, which is usually the least effective and utilized. NB is a perfect example because Irving essentially derives its greatest benefit from the lack of enforcing monopoly laws. Whenever I tell people here about New Brunswick and Irvings their jaws almost literally drop and they can’t understand how a single company can be ALLOWED to own so much.

    And by the way, lower taxes ALSO is essentially corporate welfare. I mentioned this in the doctors case, although they broke their contract which would have let doctors bill more, that is closely offset by the lower income taxes. Money in your pocket is the same either way. Sorry thats so long and sort of off topic, but RIM is the perfect example to use in comparing economic development strategies between NB and NS. In the case of NB, I believe that the minister of the time said they weren’t even TALKING to RIM because they didn’t think there was any way in hell they’d invest there. THAT says it all, and the focus on education caps it off.

  14. Anonymous says:

    @Stephen Downes

    I agree. That’s exactly my point when I keep saying that it doesn’t matter how many times we reorganize BNB, how many NSBIs we spin off, etc., etc. What is needed is a comprehensive strategy where every department, crown corporation and government agency has an economic development mandate. If not, we will continue to depend on serendipitous success stories such as RIM’s.

  15. Samonymous says:

    “And by the way, lower taxes ALSO is essentially corporate welfare.”

    True, mikel. But only if it comes in the form of a tax credit (which is usually directed at a particular industry, or social demographic like the child tax credit nationally. Other than that, picking winners and losers is a game strictly reserved for subsidies, grants and loans administered by bureaucrats.

  16. Samonymous says:

    Does Savoie consider health care to be a part of economic development?

    Stephen;

    You make a good case as medicare, and many of our generous social programs, were extensively discussed in the bilateral trade liberalization talks in the 80s. Some on the American side saw it, and subsidies, as an unfair advantage and barrier to free trade.

    Similarly, EI was ruled inbounds with regards to the trade dispute/complaints put forward by New England fisherman accusing the Canadian of using a subsidy as an unfair advantage.

    So, yes, it should all fall into the discussion on the economy.

  17. Anonymous says:

    So credit RIM to university research (although I would claim that was one of several elements leading to success).

    Now think of the billions that go into university research each year for the last couple decades. At that rate of investment, we should see 1-2 RIM like successes every year; but we do not.

    Universities need to focus on providing top quality graduates. Ever since universities have become more interested in research centers and funding than education, Canada has been dropping in our global rankings for innovation and economic development.

  18. richard says:

    “At that rate of investment, we should see 1-2 RIM like successes every year; but we do not. ”

    I think that we do see RIMS every year, they are just in other fields of research. Also, we cannot produce ‘top quality’ graduates without strong research programs. The two go together.

  19. mikel says:

    Low corporate income tax is DEFINITELY corporate welfare. Taxes pay for infrastructure, and corporations use infrastructure just like everybody else. In fact, it can be argued they use MORE infrastructure than most people.

    RIM is a special case, economic development is not 1+1=2. If it were then EVERY region would have a bunch of RIM’s. I just listened to a podcast from the Carnegie Council from an african economist who has written a book about how blanket aid to Africa has been a huge mistake. Just shovelling money at things rarely works in the way people plan, again, thats why next door in Maine when the government wants a tax or bond or something then it specifies specifically where the money comes from and goes, then has a referendum. People choose whether to support X, and the process is (nominally) transparant.

    Universities are a whole great big issue. Nova Scotia at least TRIES. They have six universities in a small area, and RIM specifically said that that impressed them. NB still doesn’t even have a medical school, pharmacy school, architecture school, veterinary school, and spends less of its budget on education than ANY province. Money isn’t the WHOLE reason, but its at least part of it.

    That again comes back to policy. Keep in mind that McKenna essentially said the above, that every department was geared with the economy in mind, and like I said, it is VERY clear that New Brunswick’s government is very much a ‘business run’ government. Education is way down on the list, health care gets some shuffling, there are a few judicial moves, but every time a business gets some money or somebody mentions energy, its all over the place.

  20. Samonymous says:

    “Sorry, Mr Cirtwell, wrong again.”

    I’ll take that as a complement since you are probably the same Richard that labeled NB Politico a conservative. We all got a chuckle out of that one, even NBP himself.

    carry on as u were. 😉

  21. richard says:

    “NB Politico a conservative”

    Thanks Mr Cirtwell, but Liberal does not equal liberal. NBP is a conservative.

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