I have been arguing we need a more coordinated sector-based approach to economic development. Even as I argue this, new research is emerging that suggests a ‘cluster-based’ approach to economic development may not be as effective as fostering a more international approach – more international partnerships – not a regional approach – may be a better way particularly for smaller jurisdictions. That is the argument put forward by my good friend Peter Lindfield in his column today.
I don’t have a problem with this thinking in theory but I still maintain that competitive advantage is an industry thing – not an economy wide thing. There may be some attributes of competitive advantage that are common to all industries (say a low Canadian dollar or a low cost operating environment) but when you look at the things that make an industry competitive- its management talent, its workforce, its innovative capacity, its access to infrastructure, its ability to develop markets, build international partnership, access VC, etc. that tends to be quite industry specific.
So when people talk about policies that create competitiveness – and at the same time eschew sector focus, I don’t understand the thinking. Bernard Lord cut small business taxes to the bone – a classic example the thinking that you create ‘general conditions’ and the investment will flow in. It didn’t. Shawn Graham cut personal and corporate income taxes and the investment was supposed to pour in. It didn’t. Lord had some vague ‘innovation’ agenda – not even as vague as Graham’s – and where did it get us?
If you don’t like the word ‘cluster’ then scrap it. If you want your firms to look outside your borders to connect into some kind of ‘international’ cluster and build partnerships with companies and institutions abroad, fine. But the idea of sector focus is not incompatible with that.
What I am saying is that the leaders of our key growth sectors and the various government and educational institutions that impact their potential growth should get together and map the conditions under which that sector could be successful and achieve significant growth for the New Brunswick economy. I am saying that has been done very weakly in the past usually with no accountability or even rudimentary measurement of what is success or failure.
I firmly believe the old model is failing or has failed. I am told weekly by economic developers at all levels that with some exceptions such as shale gas ‘we have nothing to sell’. They will tell me the high value of the Canadian dollar, the increasing pressure on costs and a tightening labour pool is eroding any advantage they had in the past. This is forcing many of them to invest outside NB and others to drive a productivity agenda to get more efficient. Others are holding on hoping for 75 cent Canadian dollars again but I don’t think that day is coming.
I say we need to answer that question ‘we have nothing to sell’ and answer it head on. If we think there is potential to grow the ICT sector, then let’s have a clear plan with a well defined path to get us there. If we need a special tax break for that sector, bring it on. If we need to pump up a certain type of graduates, bring it on. If we need to set up research chairs at the university in specific ICT disciplines bring it on. If we need to set up an ICT partnership with Bangalore, bring it on. If we need to have ‘sales staff’ in Israel trying to bring investment and partnerships, bring it on. If we need to have a government as model user, bring it on.
But do this as part of a plan that at least most of the key stakeholders can agree with. Because very little of what I describe in that paragraph can be done by one organization.
If you don’t like my approach, by all means, bring on alternatives. I’m all ears. But back it up with evidence. Just cutting taxes and crossing our fingers won’t work – it’s been tried.
By the way, for those of you who think I am some kind of big government guy picking winners and losers, remember the core of my approach has the private sector leading and the government and education institutions supporting industry growth strategies. Let’s just to be clear about that. In my Pollyanna-ish world there would be a private sector funded industry group – maybe even on a regional basis – with funding from government and other stakeholders that would develop a growth plan for their sector and government and education would plug in where there is a fit but industry itself would lead.
My economic development colleagues are rolling their eyes but I still think in the longer term that is the best model.