There is an excellent article in The Economist this week about the sometimes counterintuitive effects of infrastructure investment. The article cited areas in China where GDP declined when they were connected to excellent highway infrastructure. If you think beyond one level deep on this stuff you can see how this happens. Great four-lane highways make it much easier to bring in imported goods to displace locally produced goods. Economists might argue that in the long run this infrastructure leads to greater productivity and better overall outcomes but that is not always the case.
Think about New Brunswick. We spent billions on four lane highways over the past 15 years and the value of our exported goods has gone down (excluding oil and gas). Even the number of tourists has stagnated despite all the great highways. A cynic might say the only real advantage from all those brand spanking new highways has been to the outward migrants as they drive away.
The same argument applies to broadband infrastructure. The billions government has invested in the infrastructure has been in the name of making it easier for rural residents to participate in the wired economy. True enough but it also makes it real easy for residents to buy products from Amazon.com displacing local retailors (the FedEx folks benefit from the shiny new highways too).
We can’t always boil problems or solutions down to one thing. Broadband won’t solve rural economic decline and brand spanking new highways won’t arrest the decline in manufacturing. They may be necessary but not sufficient conditions to sustain economic growth.
This was the point in my column today about the new documentary CODE KIDS airing on CBC, July 26 at 8 pm.
I talk about a speech Premier Jean Chrétien made in the mid-1990s about the Internet and his government’s investment in broadband infrastructure. He said the computer technology revolution enabled by the Internet would be the great equalizer and that communities from coast to coast would be able to use this new technology to foster strong local economies.
I then say that for Atlantic Canada, at least, it hasn’t turned out to be much of an equalizer. Since Chrétien’s speech, across Canada the population has increased by nearly six million people. Atlantic Canada, by contrast, has seen a decline in its population.
I conclude in the column that we need to put David Alston in a plutonium-powered Bricklin and zoom back to 1995 like Michael J. Fox in Back to the Future. Alston could jump up on the platform after Chrétien’s speech and warn that we need to invest in more than the pipes. He could make his case for introducing computer coding in our elementary and secondary schools. If he had made this case back in 1995, think about the competitive advantage it might have been by 2014.
Upon reflection, I think we would need more folks in that Bricklin. In fact, I think one car is not enough. We need a hot tub time machine that holds a lot more people. Along with Alston, we would need Trevor MacAusland or Karina LeBlanc warning that along with the pipes and the people, we need an infrastructure to support startups and Nancy Mathis to intone on the importance of mentorship. Also in the hot tub time machine we would need Gerry Pond or Dhirendra Shukla advocating for the development of a proper capital infrastructure for IT startups. Alongside Pond would be Calvin Milbury warning that pipes, people, incubation and capital need to be supported by significant investments in R&D and innovation. We would need Dan Martell in the hot tub to make the case for building strong linkages been the NB IT cluster and the other established clusters from Silicon Valley to Bangalore. Finally, we would need to crowd Louis-Phillippe Gauthier into the hot tub to go back to 1995 and ensure that people understand the importance of attracting high quality IT firms to the province to augment the startup environment.
If we want to build a strong and dynamic industry of any sort, we need to understand the different elements of a successful ecosystem and work to connect the dots.
This isn’t a plea for a heavy handed, Chinese-style government mandated industrial growth strategy. It’s a summation of my view that successful economic development is fundamentally based on private sector investment and on efforts – from a wide variety of interested actors – to make the environment conducive for that private sector investment.
So get your bathing suits on and take a ride on the hot tub time machine back to 1995. Imagine the depth and breadth of New Brunswick’s IT sector in 2014.