The big society and economic development

I have been following the big society idea in the U.K. with some interest – I heard another podcast last night as I was cooking/doing the dishes and waiting for my daughter at piano lessons.

It seems to me the idea of empowering local communities to make decisions and take greater control of their destiny makes a lot of sense but at the same time scale matters.

Take the example of schools.  I have been involved a little with the Moncton High School situation and I was blown away when I heard the province doesn’t even consult with the city about where to put new schools – not even as a courtesy.  This even though the city is obliged to provide specific services around the school such as sidewalks.    So a city may have a municipal plan and specifically state it wants certain types of services in certain areas (such as neighbourhood schools) which the province ignores.

There are a number of decisions that provinces make that are like this.    I think I mentioned before that I talked with a city manager one time who said he had not met the Minister of local government once in over two years.  And this was one of the largest cities in the province.  That’s crazy – these guys should be on speed dial.

The problem is that old paternalism – anyone who has worked at various levels of government knows about this – the feds – the province – local government in that order.  The province knows best.

My main point today was around the big society and economic development.     I have been thinking more and more lately that we need to better engage the business community directly in economic development.   It seems to me that businesses – particularly those that have built export markets, that have partnered with global companies, that have filed for patents, that have attracted investment, that have shown an ability to be efficient with resources – have some value to add to the process of economic development.

I have said it before – and it’s not secret – that I am not sure that governments are the best conduit for economic development.  Government has a vested interested in economic development.  Government is a key stakeholder in economic development – but I am just not sure it is particularly good at the mechanics of it.

Most government is about spending money.  We see a need in society and we build a program to fill it and we fund it with taxpayer dollars.  If you go up and down the halls of the Centennial Building in Fredericton you will find well intentioned bureaucrats developing and analyzing how government money is spent – in health care, education, transportation, etc.

Economic development is (or should be) about making money.   Why else spend taxpayer dollars?  For every dollar we invest in economic development we should be getting $3-4 back in new tax revenue or else why bother?

Anyway, I’d like to find ways to get business more directly involved but I am still a little reluctant because personal self interest is a powerful force.  For example, many New Brunswick businesses are downright hostile to the idea of attracting firms here – let’s say Google, Michelin, Boeing – because they worry about losing workers – or having to pay more for workers – or, one of my favourites, that there is only a small ‘pool of taxpayer money for economic development’ and it should be given to local firms.

In other words, many businesses are very interested in economic development as long as it helps them and not particularly interested in economic development in a broader sense.  The truth is that a lot of NB firms have benefited from a weak economy.  They have been able to pay lower wages, had zero turnover and had a government eager to give out money.   If there was a strong economy in New Brunswick, wages would go up, there would be more competition for workers and the government would feel less compelled to dole out taxpayer funds.

Having said all that, however; I continue to meet business leaders that are ready to get in the game – ready to help NB grow its economy and not locked into parochial thinking.

I think we should serious look at building industry groups/associations related to the sectors of the economy with good growth prospects and help them build the value proposition and the strategy for growing the sector.  Government would be directly involved with these groups and there would still be a major role for government – out selling the province, helping to fill gaps, etc. but the leadership would come from the sectors themselves.

The idea needs more meat on the bones but I think we need to start looking at it.  Instead of whining, let’s get these folks in the game.

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4 Responses to The big society and economic development

  1. richard says:

    “the province doesn’t even consult with the city about where to put new schools – not even as a courtesy”

    That really is astounding, especially in a province as small as ours. However, we have a province where a large portion of the population is administered by remote bureaucrats who do not report to local government, but instead are the local government. In that situation, paternalism should not be a surprise; nor is it a NB phenomenon. In Canada as a whole, municipal govts have little say in how the province spends money in the muni’s backyard. In that environment, it’s no wonder that ED bureacrats have not had much success.

    Wrt getting the right business people involved in ED of their sectors, perhaps if the fellows heading up Invest NB could identify those individuals and get them on board, that would be a start. I’d suggest particular individuals would be more valuable in this respect than trade associations directly. Perhaps someone like Fred McKenna could get them on board, as you suggested previously.

  2. At one end of the competitiveness spectrum and as I wrote in my column today, government makes indispensable contributions to economic development. The U.S. federal government is the world’s biggest venture capitalist by far. According to The Wall Street Journal, the U.S. Department of Energy alone has plans to spend more than $40 billion in loans and grants to encourage private firms to develop green technologies, including electric cars, battery technology, wind turbines and solar panels. During the first three quarters on 2009, private venture capital firms invested less than $3 billion combined in this sector while the DOE invested $13 billion. Even with this infusion of government (and private sector) funding, there is no guarantee that American firms will dominate these industries. In the solar panel industry alone China has earmarked more than $75 billion in grants and forgivable loans in addition to its own government-sponsored R&D where the private sector is a partner. Over the last few years, a number of California firms that were leading the R&D charge in solar panels have decided that acting as contractors to the large emerging Chinese firms in the same industry will be more profitable and they have pulled out of the race.
    These activities admittedly are at the large end of the scale, but the principle applies to every industry. WalMart has benefited from government involvement with collaborative R&D in supply chain advancements, process engineering and quality management. It has revolutionized the retail world.

    The role of sector associations is critical to driving growth and New Brunswick government and business need to place greater demand pressures on them. But the shift toward embracing the new industrial policy is a welcome acknowledgment of what sensible analysts of economic growth have always known which is that developing new industries requires a push from government. And without government, the likelihood that an industry can be a winner in any markets broader than their own back yard, is precisely zero.

  3. Tim says:

    I don’t have much time for a long in-depth post – but I agree with much of what you have said David.

    To add to this dialog, I think we need to more fully embrace socio-cultural driven grassroots initiatives. By this, I do not mean “left leaning”, but rather – highly inclusive, collaborative and entrepreneurial interaction. Industry associations are great, but they can also be very self-serving, and can propagate groupthink. What I would like us to engage in are programs that stimulate massive levels of idea sharing, open-source like IP development, and developing a broad grassroots sense of entrepreneurship and confidence in engaging in intellectual property creation.

    I like what I am seeing emerge in “MicroVC” like initiatives in the US. I would also like to see more NB’ers engage in creating “MicoNationals”; where one or two in NB’ers with an idea can pick and choose the best of the best from rest of world in various required services. Would the average NB’er with an idea know where to go? Or, have the confidence to try?

    I’m reminded of Coases famous 1937 paper “The Nature of The Firm” (or more specifically, the debate that has ensued since)… As the cost of transacting business externally increases, the size of the firm increases, and the operations become more general as the firm reaches to capture efficiencies. The opposite occurs when external transaction efficiencies increase, in such cases firms tend to specialize, and industrial supply links are incented.

    With the rise of the Internet, two debates emerged… One interpreted Coases ideas as a means to argue that firms would shrink…. The other argument being that these same technologies that make external links that much more efficient also made internal coordination equally efficient… so firms would remain the same size.

    I was a proponent of the second line of thinking, but with the rise of social media, and especially with what we’ve witnessed recently – I am now starting to place more weight on the first argument.

    My 2 cents…I would like to see the government role in stimulating a culture of innovation, entrepreneurship. Encouraging “MicroVC” like initiatives, competition, leadership etc. With the right stimulus, such a focus can be done quite efficiently, and in parallel with other initiatives. I think it has the best chance of creating longer-term sustainable impacts on economic growth.

  4. > The truth is that a lot of NB firms have benefited from a weak economy

    Absolutely. And it is the largest NB firms that have benefited the most. That is why they advocate policies that actively undermine economic development. It is only as the influence of the large companies has waned in Moncton that this city has been able to move forward. But they still hang around the neck of the province like a millstone.

    Meanwhile, while it may be true that government is not terribly effective at economic development (and that’s an argument we could have another day) it nonetheless remains true, especially in New Brunswick that the government is leaps and bounds more effective than the private sector. After all, why would you entrust economic development to companies who actually want to see people poorer and paid less?

    That’s why I don’t get this: “the leadership would come from the sectors themselves.” Why would you put someone in charge of steering the bus whose vested interest lies in driving it off the cliff?

    The leadership has to come from *outside* the private sector in this province. Let those who are interested in growth come along for the ride, but don’t put entrenched interests in charge. And if you don’t entrust this to government, or to the economic development agencies, well then, you’ll have to entrust it to the people – NGOs, unions, community groups, environmentalists, activists, the cultural sectors, etc.

    Ah, but that totally goes against the party line, doesn’t it. So it’s back to the guys who are going to drive straight off the cliff. And then you wonder why people lose faith in economic development.

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