Despite the newishness of the provincial and now federal governments, I sense a subterranean melancholy among a lot of folks involved in the development of this province. I talked with another old timer recently who suggested that New Brunswick’s only competitive advantage – cheaper to do business and lots of people willing to work a lower wages – was all but disappeared. He cited the growing number of NB-based manufacturers importing Romanians and other east Europeans to work for $11/hour in their factories. He also mentioned the slow erosion of call centre jobs. How does a place like New Brunswick compete for business investment and win?
I think we need to get back to fundamental thinking on this stuff. It’s no time to panic. 1) There is a pool of global capital. 2) Companies and individuals want to invest that capital in locations and industries where there good profits to be made. 3) Jurisdictions need a share of this investment in order to support their economy and the tax revenues needed to pay for public services. 4) Jurisdictions that have a track record of attracting investment* are those where there is a clearly defined case for profitability.
I think it is important to get back to fundamentals. We get all bogged down in the minutiae and even theatre associated with the practice of economic development and we forget the most fundamental issues. We need to be a place that can attract enough business investment to support our community and social objectives and in order to do this we have to be a place where there is a clear understanding of the profit potential of investing here.
Guys like me argue that a focus needs to be put on specific sectors of the economy. In other words, New Brunswick cannot be a place for every type of business to have an outsized profit potential but it could target specific industries and clear map out the path for profitability here.
If we think fundamentally, we can ask how come we have 600 people working in economic development spending over $200 million a year – conservatively – among all levels of government – and we have no net private sector job growth in a number of years? Why we don’t have this conversation is simple. We have atomized economic development into dozens of different actors, diluted accountability and set up a system that allows fingers to point in every other direction but inward. Quite frankly, I don’t even blame the actors involved. Most of them are trying to carve out their niche in complex and byzantine world. Someone told me recently that there are companies in New Brunswick that can access financial incentive programs from almost two dozen different government departments and agencies (depending on the industry they are in).
Do we want a forest products industry? I think we should – it tends to pay relatively good wages, supports rural communities, involves good, honest work and has a very solid multiplier effect throughout the economy. But if we want this industry to thrive, we have to foster the conditions under which the actors can make a good return on their investment. Sure, there will be good and bad years and broader market conditions will upset everyone but at the end of the day if it is structurally more profitable to invest in South Carolina, or British Columbia or Russia for that matter that is where the investment will go.
Do we want to grow an IT industry? I’m not talking about computer maintenance, ten dollar websites and government gravy. I’m talking about companies investing here (and starting here) that build products and services for global markets. If so, we have to be a place where they can make a buck and then we have to go and tell them they can make a buck here.
I could go through the list. Aerospace? Life sciences? We have been whipping these rhetorical horses for years and none of them are moving ahead in any sustained way. Obviously, we are either not that good a place to invest or we are not selling ourselves to the right decision makers. To risk a bad pun – it really isn’t rocket science.
We love to get all bogged down in bureaucracy and programming and all the other trappings of process. There are dozens of funding programs. There are hundreds of people do program development, business plan analysis, small business counselling, financial audits to support grants and loans, sector specialists, on and on. All doing their little parts – many quite well – but it rolls up to a system that isn’t working by any measure. When I tell this to my colleagues some get quite indignant. They argue they are doing good work. I don’t doubt it but when you look down from above all they are doing is – at best – keeping it from getting worse when economic development per definitionem is supposed to be about making things better.
So let’s remain optimistic for a little longer. Andy Scott is trying to build some heft into the intellectual and academic research side of economic development. Hopefully the academics will be able to get through in a way that guys like me can’t. The provincial government seems to understand most of this stuff – in fact the last government seemed to as well. Maybe there is serious interest in rethinking this stuff.
I think we need to take out two sheets of blank paper. On the first, we should sketch out what we want to do – at the highest level – to get us on some kind of path to economic sustainability. On the second sheet (it may be more like a book) we need to tally up all the agencies, departments, extra-government organizations, funding programs, etc. etc. etc. (don’t mind me my daughter was in the King and I) and truly reset the system. We may or may not be able to consolidate much of what I call the ‘banking function’ under one roof. We may be able to get far more leadership and industry support from associations and other industry groups. We may be able to consolidate our ‘innovation’ assets in a single entity. Whatever. We just need to keep our eyes on the ball.
Right now we are too busy trying to help under 25 year old entrepreneurs leverage Facebook into business contacts or rural small businesses hook up to the Internet.
*Again when I talk about investment this is in the most generic sense – it’s money flowing in – it can come in the form of capital for local entrepreneurs to expand or multinationals setting up here.