Are we a drive through province for creativity too?

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.

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4 Responses to Are we a drive through province for creativity too?

  1. This post is one that belongs in the category of posts (not just from here, but generally) that could be titled “we need to get organized around a smallish set of priorities.” When I read a phrase like this – “All doing their little parts – many quite well – but it rolls up to a system that isn’t working by any measure.” – the implication is that the many little parts should align to one grand scheme.

    This to me is the nib of the weakness of economic development strategies in general. When the effort is made to align resources around a single (or smallish set of) objectives, several critical factors fail.

    – most importantly, it pulls people out of their expertise zone. You can’t just convert people from being, say, education specialists to medical-treatment specialists. If investment is aligned along one priority, the people involved in the other priority consider themselves under-employed, or actually become unemployed, and move away.

    – almost as important, when priorities are being aligned, this is almost always done by people with no particular expertise in the domain around which efforts are being aligned. These managers learn about innovation only after it has been developed, marketed and offered at conferences, well behind the actual innovation curve. Actual experts are dismissed as impractical, or worse, impolitic.

    – and third, in environments like (but not limited to) New Brunswick, there is a significant pull of incumbents toward investment in their preferred industries despite changes in world conditions. Actual innovation in a region would probably erode their influence in the province, and so they oppose it. New Brunswick’s forests, for example, cannot compete with much faster wood and wood-fibre growing regions in the tropics, but any effort to transfer Crown land into, say, aquaculture and fruit production, would be resisted by existing leaseholders. And so the province remains mired with low-value industries that can’t compete.

    From my perspective, if we really want to reset the system, we should reassign the people currently engaged in trying to manage economic development efforts into support and service roles, and focus on providing a supportive and inclusive network of business and entrepreneurship services to designers, developers and creators or any product or service, and not just those the managers deem ‘align’ with a wider strategy.

    We should additionally examine services and supports for industry in the province with an eye to reducing our levels of support for incumbents, especially large incumbents, who should be able to compete on their own merits. Additionally, provincial resources, such as crown land and other assets, should be made available to the widest range of enterprise as possible, encouraging the support of new enterprises, rather that reinforcing the status quo.

    In other words, if we’re going to align, what we should align toward is not becoming expert in some specific domain or cluster activity, but rather, in becoming, as a province, expert in creating, growing and bringing to market new and innovative ideas no matter where they occur, no matter who has them, and no matter what industry they support.

  2. richard says:

    ” expert in creating, growing and bringing to market new and innovative ideas no matter where they occur”

    That is what is being attempted now, to little positive effect. As David has illustrated, we have large numbers of ED person-hours devoted to a very wide range of ED activities. That diffuse attempt has had very little payback.

    As to withdrawing support from ‘incumbents’, most of that ‘support’ is not wrt ED personnel, but is in the nature of direct payments or restriction of competition. Changing those will be extremely difficult politically as those outfits employ quite a few voters, not to mention control the press. Frankly, I don’t think that is feasible right now. We would have to have a more robust economy that is less dependent upon those players before that can happen.

    As the ‘diffuse’ approach to ED resources has failed, we should focus our investment strategies on certain sectors. One of those should certainly be natural resources – but we should put that focus on high-value products from those resources, not low-value products that generate low-wage jobs.

  3. Sandy Mackay says:

    As always, excellent comments from you David.

    I agree with Stephen’s comment “focus on providing a supportive and inclusive network of business and entrepreneurship services to designers, developers and creators or any product or service…”

    From an Arts and Culture perspective, there are actually hundreds of creative entrepreneurs in the province, small businesses waiting to be invited to participate in economic development- an “Industry Sector in Waiting”. Creative Exports from NB; it’s a crazy concept- arts and culture as an economic sector, ripe for development.

  4. Tim says:

    I’m in agreement that NB economic development needs more focus; but I’m not in agreement that this naturally means a discussion surrounding which industry support to rally around (and thus which one to cull). My concern is that such an approach would result in potentially a severe resource sucking, overly political, slippery slope. Government would recognize this problem, and therefore be incented to keep most economic development agendas under wraps.

    Like anything political and economic, I acknowledge there is no correct way to “Economic Develop”. Masses of people are drawn to rally around certainty; thus overly simplistic mantras can gain a life of their own.

    I’d like to see government focus more on investments that empower the people to create economic development…. having good fundamentals, such as a strong education system, government programs to encourage entrepreneurship, and incentives to leverage the unique resources of the region for greater economic value.

    Here is the inflation adjusted spending by the New Brunswick Government on Economic Development over the past 12 years (in millions):

    1999 417.27
    2000 154.32
    2001 127.76
    2002 144.99
    2003 112.62
    2004 135.08
    2005 139.18
    2006 153.32
    2007 158.50
    2008 163.10
    2009 210.30
    2010 213.80

    ..Or about $2.5 billion or inflation adjusted dollars!

    It’s about time we conduct a serious rejigging of this provinces Economic Development policies – and we are seeing the government making organization chances in this area. It is my hope that we will see something more innovative. The initial litmus test for me a “good program” will be once that can be fully transparent, yet rally the people.

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