Bunches of three

Three examples of economic development or economic development gone wild.  First, Alberta cuts its oil & gas royalties to the bone again to stimulate new development.   Depending on how you read this article, it looks like over $2 billion worth of cuts.   In an economic sense, this is exactly the same as a tax incentive or any other kind of incentive.  It’s worth cash money for development and it’s forgone revenue for government to stimulate new economic activity.   New Brunswick hasn’t got oil so I still wonder why this province (and region) gets so much grief when it tries to offer some type of incentive to attract investment.

Second, I see the Tories and the Libs in NB are trying to one up each other on who can dole out the most tax dollars for risky, near bankrupt companies.  The Tories are crying foul over Atcon, the Libs are firing about about Atlantic Yarns (close to $80 million).  The Tories are crying about the $60 million Caisse bailout and the Libs are pointing to the $60 million to AV Nackawic.   I think in all of these cases (except the Caisse) the government felt its back was against the wall because these very large employers were threatening to close and put hundreds of people out of work.  I still think government has to be very careful with taxpayer money – particularly when it comes to what economic developers call ‘troubled’ companies.  Maybe in these cases you have to let the company go under and you use the money to attract a company with a great, long term business model.  Consider Daewoo in Nova Scotia.  There is no doubt the Libs and the Conservatives are equally bad on the bailout side of the ledger.

Third, I see Siemens is moving a 550 person plant from Ontario to North Carolina.  There are a few things going on here.  The article talks about the tax incentives offered by North Carolina.  That may be true but Ontario has always bellied up to the bar on incentives (usually with the Feds in tow).  No, I think this is about moving from a union shop to a non-union shop.  Siemens will save millions per year on a 550 person payroll.  If this is the case, what’s the alternative?  I don’t like the race to the bottom mentality.   The other thing about Ontario – and this is pure speculation – is that deal with Samsung that gave them lucrative power contracts and hundreds of millions of incentives to set up wind energy in Ontario.  I suspect other large wind energy players (like Siemens) would have wanted to take a crack at that business.  Just a random thought but when a province aligns its business (wind power) with a specific vendor like that it is bound to annoy other players (I read an article that a number of smaller Ontario firms are upset about the Samsung deal).

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5 Responses to Bunches of three

  1. Economic facts the few ever discuss:
    1. Work that is simple will be automated.
    2. Work that is merely complicated will be outsourced to the cheapest source of labour.

    That leaves work that is complex. This type of work requires passion, creativity and initiative and cannot be commoditized. This is enabled by education that is more than schooling; people who are engaged in their work and demanding more than mere jobs; and a society that embraces diversity.

  2. mikel says:

    “New Brunswick hasn’t got oil so I still wonder why this province (and region) gets so much grief when it tries to offer some type of incentive to attract investment.”

    When NB lowered the Corporate Income Tax to the lowest in the country I don’t remember that much ‘grief’ being doled out-certainly not by the media.

  3. Anoymous says:

    One big difference between the Alberta approach and other jurisdictions is that, in general, Alberta does not to pick winners and losers. The business environment is set for all the companies in an industry sector and then they are let alone to compete.

  4. mikel says:

    Lowering everybody’s corporate income tax is hardly ‘picking winners and losers’. Keep in mind that even in the case of Atcon, these were loan guarantees, which means they wouldn’t be news if the company stayed solvent. I suspect that if you dug hard enough you’d find SOME Albertan businessmen with the connections to get similar deals in Alberta. The country bailed out their meat processing industry to the tune of over a billion dollars, when these companies in NB were going under I don’t remember the federal government ever stepping in like they have for prairie farmers during droughts and cattle during the mad cow fiasco. In forestry its ‘just the market’. It reminds you of Bernard Lord bending over backward to keep Nackawic afloat, but when mining in Bathurst was hard hit, it was ‘just the market’.

    Again, Alberta is no different than anywhere else, like the US financial industry they are happy to tout the wonders of the ‘free market’ until something goes wrong-then the bailouts come. The big difference is that NB is a pretty small pond in a ‘have not’ province, so when Atcon goes belly up, it gets nasty. In SOME ways its kicking your own when their down, although in other ways we know nepotism plays a large part-but that’s true of virtually EVERY government, and not just in Canada.

    As for the Siemens deal, I don’t mention this often because I can imagine the reaction in a business blog, but the day is fast approaching for the next generation to notice that the ‘value’ of the ‘free market’ isn’t nearly as substancial as once predicted. The ‘race to the bottom’ has already helped the US cannibalize itself to the point where its international clout is far less significant than it once was, and in case people have missed it, there is an albeit small but growing number of democrats who have been pushing cancelling NAFTA.

    The big difference between Canada and the US is that the US CAN virtually run an internal economy that supplies all its needs-it pretty much did so up until the second world war. It can do it again, although the business sector doesn’t like it because few of their profits are internal to the US. If you’ll notice, one of the conditions of Canada’s inclusion into the ‘buy american’ legislation was that Canadian cities and provinces open up contracts to american bidders. That was one of the more contentious issues in the MAI which was soundly rejected, now its policy with no more than a brief mention in the alternative press. Sorry for all the hyperbole:)

  5. Anonymous says:

    I will only say that it is incredible how some people talk with so much authority based on only superficial knowledge of an issue… (David, I am NOT talking about you – in fact, I really appreciate the provocative way you present the issues)

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