“Mr. Prime Minister, it’s New Brunswick Premier David Alward on the telephone”.

PM: Groan.  Put him through.

Alward: Hello, Mr, Prime Minister.  Thanks for taking my call.

PM:  Hey, David, do you want my help selling shale gas to your citizens? I think with my charm and wit, I could convince them…

Alward (interrupting): NO, I mean no, Mr. Prime Minister, I know you are busy and shale gas really isn’t our top concern these days.

PM:  You’re telling me.  Geez, David, I see you only mustered a 0.1% GDP growth last year and no net new employment growth since 2006!  If Alberta had those numbers I’d be back living in Calgary talking about firewalls.  Is there anything I can do to help?

Alward:  That’s why I am calling.  A number of your plans are going to hurt…..

PM: Alward, let me stop you right there.  I know, I know.  A distant cousin of mine from Dorchester sent me a long list – hundreds of federal jobs cut, zero increase in transfer payments, millions cut out of other programs, proposed changes to EI and Equalization that will hit NB harder than most.  I heard it all.

Alward:  Exactly, but we have a new plan in New Brunswick for economic development centered on innovation.  You spend billions each year on R&D and virtually nothing in New Brunswick.  Think you might be able to direct a little more down here?

PM: Whoa there Davey boy, I just cut the main program that was used for health research in New Brunswick and we are cutting the NRC down there – so don’t expect much help from us on the innovation file.  You gotta pull yourselves up by the bootstraps.  All this cutting of federal spending will be good for you.  Haven’t you read all the good work from the boys at Frontier and Fraser?  I can’t get enough of that stuff.

Alward:  Errrr, okay.  We have this new agency, Invest NB, and we are really serious about attracting more international investment to the province.  Can you instruct the hundreds of international trade and investment officers to work with our folks at Invest NB?

PM: Ooops.  Another problem, there.  We just closed our DFAIT office in New Brunswick and moved it to Halifax.  In addition, our guys in the foreign offices like to sell our biggest assets – you know, Toronto, etc.  Besides, we have ACOA down there giving money to small and medium sized businesses. What more do you want?

Alward (exasperated): Mr. Prime Minister, New Brunswick is heading into a major economic crisis.  We need the federal government to partner with us to work our way out of this.  You are championing Alberta oil around the world.  You are relaxing environmental assessment to expedite Alberta pipelines – why cant you see your way clear to help us work on a New Brunswick economic development plan?

PM: Look, we put a billion into Hibernia and guess how that worked out (voice from somewhere is heard saying “Psst, Mr. Prime Minister, Newfoundland is now a ‘have’ province”).  Harrumph, Alward check that last statement.  Look at all the help we are giving to Newfoundland.  We’ve even agreed to pony up for the Muskrat Falls project.  Some of that should spill over to New Brunswick.  Hey, and how about that shipbuilding in Nova Scotia – just send your surplus workers to Halifax.  Problem solved.  Aren’t you glad you called?

Alward:  Mr. Prime Minister.  Canada is a vast country and each of its provinces have very different economies and are facing different challenges.  Why can’t your government tailor its support to our focus areas?  If you really want us off Equalization and EI, shouldn’t we work together on a solution that leads to greater economic prosperity here?

PM:  Look Alward, you have lots of people sitting around on EI.  When we bring down the hammer, they will move to Fort McMurray.  Problem solved.  Aren’t you glad you called?  By the way, I’ll send you the list of 718 reports provided to me by think tanks telling me that if we scrap EI and Equalization New Brunswick will flourish.  Isn’t that what we both want?

Alward (resigned): Thanks for your help, Mr. Prime Minister.  Long live the Queen.

PM: Cheer up, Alward.  I have a Senate seat with your name on it should the unfortunate happen in two years….

Alward:  Gee, thanks.

Based on my superficial logic, I think under Norton Saint John will emerge as more confident, youthful and optimistic.

Shelley Rinehart is a Saint John institution.  She won councillor at large by the combined votes of the second and third place candidates.  She will be a good addition to City Hall.

In Fredericton, Leah Levac beat out my old colleague Steve Kelly.   Andy Scott tells me Leah is one of the brightest people he knows.  Sounds like a good addition to City Hall as well.

Dawn Arnold, the brains behind the Northrup Frye Festival in Moncton, also won by a landslide in the Councillor at Large race.  She paid for billboard advertising around the city and I kept getting Facebook ads with her picture on them and she crafted a manifesto.   I suspect she could have won the race for Queen of the Universe if that was her goal.  It will be interesting to see her career trajectory – I suspect she has higher office in view.

Only about 40 percent of those eligible to vote actually voted.

Followers of this blog will know of my belief that local politics matters.  Because NB is a small province and because of decisions made decades ago, cities have limited political power.   It seems they don’t even have much influence on the location of schools and other provincial government buildings within the city limits.

However, people do not live in ‘provinces’ or ‘countries’.  They live in neighbourhoods – inside cities, towns and villages.  Just about everything that impacts their lives happens close to home – work, school, health care, shopping, parks, services, etc.

This reality matters now more than ever.  If people don’t like their city, they will leave.  Skilled workers have never been more mobile.  Nearly 13,000 people moved out of New Brunswick in 2010/2011.  The Moncton CMA lost 4,500 people to out-migration in 2009 (that’s over three percent of its population) – although it made up for the out-migration with an even larger in-migration.

The point is that cities need to be places that are attractive to live (as well as work) and that is where City Hall comes in.

But public concerns are only one of the problems.  The other is the lack of markets for new gas.    With the rapid expansion in the USA – they are now looking at LNG terminals for exporting US gas.   In BC, the new energy plan calls for a dramatic increase in shale gas development – but the markets are Asia.   As discussed in The Economist, in February Mitsubishi struck its biggest energy deal yet, with Encana, agreeing to pay C$2.9 billion to develop shale gas in British Columbia. The reserves, it said, may be enough to satisfy Japanese demand for nine years.

I’d like to see a little more of horsepower dedicated to thinking about potential markets for NB shale gas.  This is not a 12-24 month issue.   This is about 10-20 years out.  No energy firm makes huge investments without a long term time horizon and right now the market outlook for NB gas seems murky.

It is true that Sable gas is running out but the NS government is putting significant efforts into developing its offshore gas industry – the challenge, of course, is the price of extraction compared to onshore shale gas.  However, offshore gas doesn’t have the same NIMBY worries – with the exception of fishermen.

I don’t know a lot about it but the LNG infrastructure in Saint John complicates matters as that facility can serve local markets with imports of LNG.  The economics are complicated.

In the end, it would be nice to have a medium term plan to build local market demand for our own gas.

What’s that look like? I have written about this in the past in numerous columns and blogs but essentially my proposed model would be a hybrid where regional economic development strategies would be led by private and public sector leaders around the province and sector-specific growth opportunities would be championed by teams of private and public sector leaders.

For example, I would like to see industry leaders stepping up to identify sector growth opportunities and working with public sector partners to assess potential and map a plan for growth. This was the thinking behind Future NB, if you will recall and I don’t limit this to the standard basket of industries (ICT, aerospace, etc.) that we have been talking about for 20 years.

I’d like to see a few leaders in the legal services industry get together and assess the potential of New Brunswick becoming a national back office for legal services. I’d like to see leaders in the health care space get together to determine if there are niche segments of the industry where New Brunswick could provide services across North America. Right now radiologists in Ontario are assessing test results for the Government of Newfoundland and Labrador. I’d like to see our language translation sector get together to determine if there are opportunities to attract more of that high value, good wage sector to New Brunswick.

There are about 900 six-digit NAICS industries in Canada from soybean farming (NAICS 111111) to International and Other Extra-Territorial Public Administration (NAICS 919110).  I wouldn’t rest until every single industry group was assessed for potential opportunities.

I tell you this because some people think ‘private sector involvement’ in economic development has been superficial at best in recent years and that it is time for government to step up and take control.   They see the private sector as only wanting handouts form government.  They cite the resistance of many NB businesses to efforts meant to attract investment to the province as proof that local firms are only focused on ‘looking out for themselves’ and not on growing the economy.

I think this is too cynical (although there are grains of truth).  In my view, effective economic development – forgive the cliche – rises all boats.  Attracting Google to New Brunswick would be good for the SMEs in ICT.  Attracting a few larger multinational life sciences research firms would bolster the potential of entrepreneurs in that sector.

I admit my model requires a greater commitment from the private sector – a commitment that may not be there in all sectors and regions of New Brunswick.

In the end, if firms are going to put valuable staff time and financial resources into ‘economic development’ it can’t be for philanthropy.   They have to see what is in it for them and that is okay with me.    NBTel spent a pile of money and assigned senior people to the efforts to attract customer contact centres and back offices back in the 1990s but they reaped a substantial reward from that investment.  I am not saying all opportunities will have such a well-defined case for private sector involvement but we need to frame the conversation in terms of mutual benefit.

Let’s pencil the private sector back into the economic development plans for New Brunswick.

As for folks who don’t like the Statistics Canada data or say it is ‘doctored’, I guess anything is possible but really if we can’t use Statistics Canada as a credible source of data – what can we use?

If I was a promoter of the film production sector in this region, I would want to do deeper research into these numbers rather than just sending a columnist nasty emails. Statistics Canada could be retained to do a broader output shock on the industry to trace where industry output is going by province and by industry sector. This data could be used to develop a broader understanding of the industry. A direct industry survey could be done to assess the extent of industry leakage – how much activity is leaving the province? Not a rah rah survey but an honest one. My point is that maybe some of the leakage could be curtailed and remain in the province.

In my view (I could be wrong), this industry eventually will need a far lower subsidy to GDP ratio in order to be sustainable. Instead of just crapping all over me why not spend some time trying to figure out how to have a sustainable industry long term?

Just my thoughts.

GDP Components: Motion Picture and Video Production, Distribution, Post-Production and Other Motion Picture and Video Industries (2008)*

Source: Statistics Canada.

Take Julia, Barack Obama’s sample lady and her progression through life with a government there to support her all the way.    Within hours of Julia’s debut, there was a massive social media backlash and the Heritage Foundation had “A Better Life for Julia” online and its proponents are saying it has had more traffic than the original Julia.

For the Americans, then, it’s not just a question of degrees (i.e. how much austerity, what types of tax increases, etc.) but a fight for the soul of America.

What I didn’t say in the column, but have said before here many times, is that on this issue New Brunswick’s small scale should be to our advantage.  In addition, the Canadian arrangement does act as a safety net – however wobbly – to ensure we do not become ‘Greece’.

It shouldn’t be that hard to get the private investment tap turned up a notch in New Brunswick.

It shouldn’t be that hard to foster an environment and create the infrastructure where entrepreneurship will thrive.  PropelICT has been specifically designed to convince folks with good tech-based ideas to go through their boot camp and put those ideas to the test.  We need more.

It shouldn’t be hard to attract thousands of immigrants over the next decade and flood the place with new talent and ideas.

It shouldn’t be that hard to attract more good quality multinational firms to the province given we have attracted firms like Thomson Reuters, Salesforce.com, Xerox, UPS, etc. in the past.

It shouldn’t be that hard to responsibly develop our natural resources over the next couple of decades.  We have a large reservoir of natural gas and other minerals and we should be able to develop them without negatively impacting our quality of life.

Having said all that, we need to debate and discuss our challenges and I will not shy away from that.   Burying our heads in the sand is not the answer.

We can get this done and even if we don’t, there is no doubt in my mind that in 50 years from now there will still be a ‘Moncton’ and a ‘Fredericton’ and a ‘Miramichi’.  There may not be a ‘New Brunswick’ as a provincial entity but people will still live here and call this place home.

The debate now is about what that place will look like.

When I google the term “It’s the economy, stupid”, I get the Wikipedia entry and then my blog.

So, does James Carville own the phrase because he said it way back when or do I own it because I have used it every day since October 2004?  If there was a big copyright battle over this, would I win?

I am not sure I have actually convinced many New Brunswickers that it is, indeed, the economy, stupid.  In fact, I probably should rework the term “It’s about a lot of things, but not the economy, stupid”.    I had hoped to move the needle on raising public awareness about the importance of the economic and economic development but after eight years of plugging away – there seems to be less interest than ever.  How many times has it come up during this municipal election cycle?  I mean beyond the boilerplate rhetoric.  How many municipal politicians will get elected because people think they have the strongest economic development platform?

Think back to recent provincial elections.  In the U.S. researchers now say there are only two measures that best predict the ability of a President to get re-elected: GDP growth and the unemployment rate.

In New Brunswick, re-election is based on not touching sacred cows or really annoying one of the special interest groups.

I’ll soldier on.  It puts food on the table and is certainly an interesting way to earn a living.

Only one province spends less of its avg. household income on shelter (mortgage, maintenance, utilities, etc.) than New Brunswick.   This province spends 23.7% of its avg. household expenditures on shelter compared to 30.4% in Ontario.  This is one reason why a lot of folks that earn a good income here resist moving to Ontario unless they get a $20k or $30k raise.

Just a few highlights.  New Brunswick households spend much less of their income (per $1,000 worth of spending) on income taxes than Alberta and Ontario – because those provinces have much higher income levels and therefore pay higher relative taxes.  In other words, if there was rate parity, paying more would be a direct sign of higher income levels.    The Nova Scotia and Manitoba higher taxes paid have to do with higher rates (and a little higher income).    But there is clustering between NS and NB on the chart – only a $14.50 spread between six provinces on this measure (taxes per $1,000 of expenditures).  BC is the outlier – it has higher incomes and lower avg. household taxes.  Again, don’t forget that this is relative.  On absolute terms, the average household in Alberta pays over $16,000 in income taxes compared to $10,076 in New Brunswick.

For those of you who chuckle when politicians wave credit cards and talk about not paying for health care – they should look at this survey.  The average household pays thousands per year through taxes for health care and then pays another $2,200 per year directly out of pocket for health care.  Adjusted for income level, New Brunswick households pay the third highest in Canada out of pocket – I suspect drugs are a culprit.

And for those who would suggest NBers pay less for utilities – nope – at least as a percentage of our household expenditures.   The average NB household allocates 80% more of its income to water, fuel and electricity compared to the average BC household.

Avg. Household Income Spent on Income Taxes (per $1,000 total expenditures)

Avg. Household Income Spent on Health Care (per $1,000 total expenditures)

Avg. Household Income Spent on Water, fuel and electricity for principal accommodation (per $1,000 total expenditures)

For those of us who wonder why this approach to drilling is going ahead just about everywhere in the world where there has been interest – the UK just announced it would allow the process in Britain.   New York is forging ahead despite enormous – unprecedented outrage.

As is the case with most NBers (including the docs), I don’t know enough about the science to say one way or the other but I continue to find it curious that of the dozens of locations where shale gas is being developed – NB is among the top two or three where resistance is the greatest.   I guess the opponents have done a great job – the BC natural gas strategy was hardly mentioned here – I didn’t see much coverage at all.

I have said it before and I will say it again.  If the masses do not want shale gas, it will be shut down.  We live in a democracy.  The Liberals are continuing to call for a moratorium as are the NDP.  It is political red meat.

No one has made even the slightest attempt to explain to me why this is okay just about everywhere but here.  The one place that really needs the economic activity.  You think BC needs another multibillion dollar economic injection?

I guess we know something the rest don’t.

I will say that doctors – of all public servants – should have an appreciation of the important link between the economy and our ability to pay for public services.

Provincial Comparison: Total, days lost (excluding maternity leave) – 2011
Both sexes/Total, all industries/15 years and over

Gender Split: Total, days lost (excluding maternity leave) – 2011
15 years and over

By Industry: Total, days lost (excluding maternity leave) – 2011
Both sexes
15 years and over

By Occupation: Total, days lost (excluding maternity leave)
Both sexes
15 years and over

So, assuming all of this data can be sliced and diced a variety of ways, here are some interesting points:

Alberta’s economic growth and new wealth has translated into substantial increased charitable giving.  Manitoba is a bit of an outlier as its was not proportional to its increase in charitable giving (in the aggregate).  NB had the lowest increase in overall charitable giving from 1997 to 2010.

Calgary with 1.2M people gives more to charity than Montreal 3.8M people.

The percentage of people claiming any kind of charitable donation has been dropping – slowly – across Canada.

Sources: Statistics Canada. Tables 203-0018 and 111-0001 to 111-0003.

I wonder if Bernard Lord’s 10 year Prosperity Plan was long enough?  How about Shawn Graham’s 20 year Self-Sufficiency Plan?

There are two problems with the idea of long term government plans.  One, when they are launched with great fanfare, there is never any real effort to achieve them.  Let’s be honest, the prosperity plan became a slogan used in government press releases.  Everyone would include the line “as part of our Prosperity Plan”, but beyond that there was little effort to measure progress and very little actually done within the machinery of government.   Not to reopen old wounds, but as I have said before, the problem with the PP was that it didn’t say how the government was planning to implement it other than vague generalities.

The Self-Sufficiency on its face was a grand vision – 100,000 increase in the population, elimination of the need for Equalization, a salmon in every pot.  Beyond the fact it people immediately criticized its ambition, it also didn’t lead to a fundamental change in the way government was done – to line up with this grand vision.  I asked several Deputy Ministers about how the Self-Sufficiency plan guided their departments – the answer was “It didn’t”.    Note to politicians: If you want your grand plan to be realized,  you should bring along the people tasked with implementing it.

As for the long term view, why not set a bipartisan set of principles up front that are mostly agreed upon by your opponents?  Then, when they take the reins of power – nowadays every four years? – they won’t change direction.  Otherwise, as we saw with Lord, Graham and Alward, when in Opposition they campaign to repudiate the long term vision.    There must be a set of guiding principles that could be agreed upon that wouldn’t fundamentally change every four years.  I understand that bipartisan (multipartisan?) politics has no tradition in a place like New Brunswick but now might be a good time to start.  If the NDP were to gain traction, it could be forced upon us via minority governments.

Finally, on this issue of ‘consultation’s, I hope Gallant et. al. understand what this really should mean.  If not, read, Savoie’s work on effective political governance.  Consultation is all the rage but do we really want the general public to tell government what to do?    First, there would rarely be a consensus about what to do and when there is (i.e. everyone likes lower taxes) it doesn’t necessarily jive with reality.

Second, as a member of the aforementioned general public, do I want my ideas about health care or nursing homes or workers’ compensation programmes to guide the government?  Given that I know very little about them – beyond my personal observations – the answer is no.   Elected officials listen to their constituents and then set broad strategic direction for government.  Then they rely on professional, talented civil service to implement that strategic direction.  When the elected layer of government – gets too embedded in the machinery of the public service it is bound to be problematic.  That is why we are supposed to hire highly talented leaders for government departments and agencies.  The Premier and his elected colleagues set direction and then rely on their professional bureaucracy to implement.

I have been thinking quite a bit in the last few years about culture, connectedness and how it impacts our economic development.  Some people look at their community or province and see something of unique value that we should work to protect and nurture.  Others shrug and say they were born here but could take it or leave it.

Or as someone once said “There are two types of New Brunswickers.  Those who like it here and those who can’t wait to get out of it”.

Does having a strong affinity to a place make you want to fight to protect its economy?  Not necessarily.  There are those who have had to leave NL or Cape Breton and never really leave – they remain Cape Bretoners in their heart for ever – but that feeling hasn’t translated into a stronger Cape Breton.

Like most people, I know a few folks living in Fort McMurray and one old friend is involved in politics out there.  His Twitter feed is filled with comments and links about building a stronger sense of community and local culture.  They have the strong economy but many folks still feel like they are just passin’ through – even after living there for years.  The objective of local politicians is to build infrastructure and make investments to create something of value beyond the economy – community.

We may have the reverse problem here.

DFO cuts haven’t been announced yet but they are coming and will hit hard as well.

The National Research Council (NRC) is expected to cut back its New Brunswick operations. The Canadian Institutes of Health Research (CIHR) is cutting its Regional Partnership Program, which is the main federal source of funding for health research in New Brunswick.

What bugs the people I talk to about this is the seemingly indiscriminate nature of the cuts.  If the feds didn’t need the hundreds of employees in NB they are now cutting, why did they put them there in the first place?

I guess it is somewhat inevitable that all these things hit at once –  fed transfers flatlined, hundreds of jobs removed, provincial austerity – at a time when the private sector economy is weak.

Federal government public administration employment across Canada

Source: Statistics Canada. Table 281-0024 – Employment (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified using the North American Industry Classification System (NAICS), annual (persons).

GDP Per Capita Growth 1999-2008

Source: Based on Statistics Canada CANSIM Table 381-0015 Provincial gross domestic product (GDP) at basic prices in current dollars.

Between 1947 and 1951 overall prices in Canada increased by an average of 8% per year.  From 1973-1982, prices increased by an average of 9.6% per year.

If you had a billion dollars in debt in 1973 by 1982 it would only be worth about $400 million – in real terms.

However, since 1993, the annual inflation rate has only averaged 1.9%.

As a result, in the last 10 years, if you had a billion dollars in debt in 2002 it would still be worth $830 million – in real terms – in 2011.

There are economists that suggest a big round of inflation is on the way which will dramatically cut the value of outstanding public debt.

Trouble is it cuts the value of everything else too – in real terms.

So, I don’t expect any large scale inflation in the coming years.  There will be few short cuts to eliminating deficits and curbing debt growth.

What I should be blogging about:

-The federal budget pointed to EI changes to come.

-The provincial budget shows flatlined transfer payments from the feds.

-The province announced changes to the Crown forestry.

-NRC – leaving Freddy and Moncton?

But it’s hard to carve off enough time.  So, the lightening round looks like this:

We need to change the EI system but I think the process of change should be driven bottom up and paying particular interest to the places that will be hurt the most.  Don’t just impose from on high. How about a Royal Commission that goes into a lot of these small communities and talks about the need for change?

The feds austerity is going to bite – tight transfers, lower direct spending, fed job cuts, cuts to EI, etc.  Should have reduced exposures in the good times back in the early mid 2000s.

Not sure I like this new policy of ensuring all sides are pissed off (Crown forestry).  Applying the arbitrage principle to public policy is not the way to go.

NRC?  I don’t like all the rumours but it really is hard to say without knowing actually what is being proposed.

Referring to the payroll rebate offered to the firm, the tweet said: “So that’s $2,770.95/job/yr not counting interest or opportunity costs etc. 5 years & out. When will governments learn.”

The email said:  ”This is exactly the type of firm we need in Atlantic Canada.  The company offers high wage, engaging career opportunities in the knowledge economy.  I hope we see much more in the near future as Nova Scotia surely needs it.”

These are the bookends.  I talk to more people about economic development that just about anyone around and I can tell you there is more polarization today than at any time in my 20+ year career.   A growing number of people believe that government should not be involved in economic development at all – even more believe the government shouldn’t be in the grant/loan/tax break game.  On the other side, there are folks saying governments – particularly in the Maritimes – aren’t doing enough and what they are doing is not working.

So I come back to this issue I have blogged on before and may some day turn into a book and that is this issue of determining the value from economic development.  Not wishy washy, feel good rhetoric but actual dollars and cents.  We put in $X and we got out $Y.  We spent $20 million on economic development this year and we estimate an incremental $40 million will be generated in new tax dollars.  NSBI puts $3.5 million into Keane Inc. but that project will generate $20 million in tax revenue for governments over the five years of the agreement (or whatever – that last one is fictitious).

Now this approach won’t necessarily change people’s mind on the role of government in economic development.  Those against will still talk about opportunity cost, disincentives, ripple effects, etc.  However, at the very least, we would know if there was a positive tax benefit for tax dollars invested.  Then we could have the debate about all the other things that people worry about.  Right now we don’t even know if there is even a basic economic rationale for all the bucks we through into economic development.

Of course, the biggest concern with this – and it comes up just about every time I talk with folks in economic development organizations – is that most of what they do ‘can’t be measured’ in the way you would measure the tax impacts of a new Keane expansion.

But I am increasingly hard lined on this.  While you may have a hard time measuring the value of chunks of activity – the overall ROTI must be positive or the public is right to question why we put the money in.

Heck, maybe someone can make a case that a negative ROTI is acceptable in certain cases.  Maybe they will say I am not considering the huge social costs associated with weak economies (i.e. social assistance, et. al.).

Maybe they are right but if we have the numbers, then we can have the debate.  Without the numbers we will continue to argue the points mostly on rhetoric.

The first table shows total enrolment in New Brunswick by program area.   More than 4,600 enrolled in Humanities and 486 in math and CS, nuff said on that.

The second table shows the comparison of university enrolment across Canada adjusted for population size.  NB went from above average in 2001 to well below average in 2009.  Check out BC.  It’s a fascinating trend.  That province dramatically ramped up bums in seats over the decade.  They used to just take NB graduates.  Now they are paying for their own.  It’s interesting that SK is shifting to much more college level training in the midst of their resources boom.

The graphic just shows the enrolment in NB Universities over time.

The last table shows community college enrolment adjusted for the size of the population for just mathematics, computer and information sciences programs.

Total Enrolment by Major Program: NB Universities (2001, 2009)

Source: Statistics Canada.

Total Enrolment: Canadian Universities (per 10,000 population)

Source: Statistics Canada.

Total Enrolment: NB Universities (1992-2009)

Source: Statistics Canada.

Total Enrolment: Public Colleges (per 10,000 population) – Mathematics, computer and information science programs

Source: Statistics Canada.

The first is on the elect-ability of the NDP.  I was having a conversation with a colleague who is a devout NDPer about the Broadbent Mulcair feud this week.    In my opinion, when the NDP adopts a more ‘centrist’ approach, that is when they can get elected.  Darrell Dexter in Nova Scotia is an NDP – he raised taxes, implemented labour friendly policies and expanded specific social programs.  Some folks are furious with him as evidenced by the editorial pages of the Chronicle-Herald.  Yet, he has for the most part been a sober, centrist leader with a strong focus on economic development and making a more efficient government.  They are pragmatic about natural resources development – a senior person in the government told me they are glad to be a “couple of years behind New Brunswick” when it comes to shale gas development but they are moving ahead to develop that resource as well as other mining – and a big push for more offshore oil and gas exploration.

In New Brunswick, the NDP – my aforementioned colleague partially agrees – is comfortable as the conscience of the left with no real ambition to form government.    If they elected someone like Dexter as a leader, they could be in power – IMO – within one or two election cycles.     As a permanent, marginal leftist party they can take hard stances on BNB (scrap all incentives), taxes (raise ‘em on the high income earners), environment (no to anything that involves digging holes or cutting trees), etc.    In my opinion, a healthy democracy features parties that cater to a broad spectrum of views but in our system – you can’t form a majority government – like the NDP has now in four? five? provinces – if you sit out on the fringe.  Now, my friend tells me that he thinks the public in New Brunswick is more left leaning than I give them credit for and they will embrace most of the platform although he doesn’t believe the party will form government any time soon.

While it’s not a good segue, I will address the number of shale gas reports/stories that people are sending me.  I get a couple a week referencing potential environmental problems with shale gas and a couple talking up the economic benefits and lack of environmental concerns.  I am not qualified to arbitrate this issue in any way – others posting to this blog have much more direct experience – so I appreciate the links but I likely won’t comment that much on specific reports/studies unless there is something new.

Suffice it to say there are concerns but right now they are more hunches than hard data.  Certainly there are the traditional environmental risks associated with any nat gas development such as leaks but the broader concerns about water contamination, localized earthquakes, etc. are hotly debated and will likely be well into the future.

Finally, I saw an interesting statistic this week that I thought I would pass on to you.  While New Brunswick still has far fewer high income earners (no matter how you define that), we did see a spike in the number of people reporting $100,000 or more in total income between 2006 and 2009 (the most current time frame for available data from Stats Can).  I thought this was mildly interesting.  The trend actually holds going back to 2000.  New Brunswick has seen a faster rise in the number of folks earning $100k or more in that nine year window even though the economy has been quite weak through the period.  Median income is up 43 percent in NB versus 34 percent across the country.   I don’t want to speculate on what is driving this growth but I might look into it deeper in the weeks ahead.  Certainly a tightening labour market drives up wages as a general rule and the recession didn’t hit here as hard as a place like Ontario but there could be other things going on as well.

Increase in the number of high income earners (% change 2006-2009)

Source: Statistics Canada.

“Unconventional shale gas exploitation is a Ponzi scheme that will destroy this province just like it has everywhere else it has been used. Banks don’t write mortgages and insurance companies won’t insure properties within range of drilling leases, making everyone’s homes worthless in these areas.”

I understand that this rhetoric will act like red meat to a small group of folks in New Brunswick but I have to think that the average person in this province will be increasingly wary of this kind of way-over-the-top language.  In fact, the shale gas industry is active in hundreds of communities across more than 20 U.S. states and Canadian provinces and most of these communities are benefiting from good paying jobs and tax revenues.  There are some issues that have come to light and governments, industry and environmental groups are working to ensure that regulatory frameworks address them.  The notion that shale gas will ‘destroy the province’ just like ‘everywhere else’ – will ring hollow to anyone who does even the most basic research.

I understand why they are doing this.  They know where to hit.  In the Miramichi there are signs saying that shale gas will wipe out salmon.    In the end, people are not as stupid as some other people think.

Right now the activity in shale gas is in the R&D phase (just like Quebec, by the way).    The commercial drilling using fracking is likely several years away if not further.  We have time to get the regulatory and oversight framework right and as the Moncton Chamber says to figure out how to maximize the benefits to New Brunswickers.

But self-employment, a pretty good proxy for entrepreneurship, has been waning somewhat in Canada in recent years.  The ratio of self-employment to employees has declined by 12 percent since the late 1990s – not a huge decline but it is a trend given that from the mid 1970s the relatively intensity of self-employment rose steadily (increasing by 50% from 1976 to 1998).

There are only three industry groups that have increased the intensity of self-employment since the late 1990s: education, information and the biggest gainer – finance, insurance, real estate and leasing.

Historically, the stronger provincial economies have tended to have higher self-employment levels.   Newfoundland and Labrador still has the lowest ratio of self-employment to employees in the country – it will be interesting to see if that culture changes now that the Rock is a growing economy.

I use the ratio of self-employed to persons employed in a business or other other organization. I could have used self-employment as a percentage of the total but increasingly I like these hard number comparison.  It is relatively easy to visualize 100 employees on the one hand and 18 self-employed persons on the other.

Overall, in typical NB style, the recession didn’t have much effect on wage growth trends.  From 2003 to 2007, wage rates grew by 15%  and from 2007 to 2011 they grew by 15%.  But, there were big winners and losers.

Senior management occupations saw a sharp increase since the recession as did sales and service occupations, wholesale, insurance and related occupations.  Financial and clerical wages also went up much faster post 2007 than pre 2007.

On the downside, professional occupations in business and finance saw only modest wage growth since 2007 – Wall Street impacts hitting home up here?  Check out health occupations.  After well above average growth rates for years – going back to the late 1990s, health care occupations are among the worst for wage growth since 2007.

Average Hourly Wage Growth 2003 to 2011 by Occupational Group – New Brunswick

Includes overtime and both full and part time employment.  Source Statistics Canada.

On an industry basis, the goods producing sector continues to suffer the effects of recession.  Wage growth has been below average for all industries in the goods producing sector.  On the services side, transportation and warehousing is witnessing strong wage growth as is the finance and insurance industry.  Because professional occupations in business and finance are not doing well (chart above), the wage growth must be among non-professional staff (theory).

A couple of other interesting industry wage trends.  Check out business, building and other support services.  This is where the call centre industry sits (for the most part).  It looks like the lower end wage jobs are going away and that is pushing up the overall average.   Interesting that public administration wage levels have grown more strongly since 2007 given what is happening in allied public sectors – health care and education.

Average Hourly Wage Growth 2003 to 2011 by Industry Group – New Brunswick

Includes overtime and both full and part time employment.  Source Statistics Canada.

Employment Trend: Business Support Services (NAICS 5614) – Canada Wide

Source: Statistics Canada Table 281-0024.

The number of these outsourcing telephone call centres picked around 2008 and has dropped since.  From 2008 to 2011, there was a drop of more than 160 of these estalbishments across Canada with declines in all provinces except nova Scotia.  Ontario lost 73 of these establishments.

Number of Telephone Call Centres in Canada (NAICS 56142)

Source: Canadian Business Patterns.  Statistics Canada.

There are easily 3.5 million jobs in Canada that are based in large part on the telephone.  That is just among non-professional occupations.  Of course all these jobs are not going to disappear over night and in fact many of them have been increasing in recent years.  However, in the medium to long term the Web is going to displace a large chunk of these jobs and replace them with Web copy writers, Web designers, etc.

Selected Non-Professional Customer Interaction Jobs (2006) – Canada wide

Source: 2006 Census.

It’s just a simple story but it touches on numerous themes – mostly a light touch – but enough to make you think.

I have been doing a lot of research lately into immigration and many of the subtleties in this movie made senses to me.

The truth is that New Brunswick is going to have to attract a lot of immigrants in the coming years. We shipped off 40,000 young people in the past 25 years or so (net out) and we will need to replace them with immigrants – just to meet the demands of the workforce.

I think this is an overwhelmingly good thing for New Brunswick but it will come with challenges. Some prejudices are hard to overcome. We will see an interaction of cultures like never before in our history as a province as even the early waves of immigration to the province were fairly homogeneous.

I joke with my daughter that she is like a delegate at the U.N. In her circle of friends there is a Tunisian, several Koreans, a couple of Chinese, a Yankee and even someone from Bouctouche. Not to mention the fact that two of her good friends speak Portuguese and German respectively. When together in a room, it’s like a New Brunswick Tower of Babel. This is coming for all of New Brunswick in the years ahead.

See Monsieur Lazhar. Just a simple story. No grand solution.

The energy file is just one example.  Take the following simplistic tables.  The first assumes a very high energy cost relative to sales.  This would be the case for a large forest products mill or fertilizer plant or any industrial process that uses tremendous heat.  A data centre might have a power cost ratio similar to this as well.  Assuming a base case where energy costs are 25% of revenue and the pre-tax profit margin is 7.5%, a significant increase in energy costs can kill the business model.  The second table shows that a 40% rise in energy costs turns the business model decidedly unprofitable.  I have a second set of tables where energy costs are only 10% of revenue (still a high percentage) but even at that a 40% increase in energy costs cuts profitability in half and takes a business model with moderate profitability and moves it into a marginal one.

This applies to other cost elements under the direct influence of government as well.

My point here is that policy decisions need to be made with an eye to their impact on economic development.  You may still have the view that we should ‘put the screws to those big industrial players’ but you should at least understand the economic implications.

I use this same economic model approach when I look at tax policy – it allows us to skim off the ideology and clutter.  When I looked at the impact of the corporate tax cut on the average export-based business, the cost implications were relatively marginal (less than one percent of total costs).   You can see how a company would be frustrated by high natural gas costs and not so interested in a tax cut when you do a basic economic analysis.

I am not saying that policy impacts on the margin don’t count (i.e. small businesses were mad they didn’t get some deal on energy costs even though energy is only a few percentage points in the cost basket for the average small business) but policy decisions impact different industries in different ways.  For example, small business tax cuts have far more impact on local businesses that only serve local markets (because they pay all their provincial corporate tax here) than businesses that have operations elsewhere and primarily export (and pay taxes elsewhere).

The same analysis can be used with the minimum wage discussion but here I would apply some caution.  Because the vast majority of businesses paying minimum wage are only serving local markets (i.e. retail, restaurants, personal services, etc.) there should be a case they could pass the higher costs onto customers.  I know this is fiercely debated but my point is that public policy decision making that impacts the economy needs to understand the competitive landscape.  If all the coffee shops are now paying $11 rather than $10/hour – they all face the same competitive environment.  If a manufacturer is now paying 20% more than his competitor in South Carolina – that will have a broader impact.

Base Case: Energy Costs @ 25% of Total Revenue

Adjusted Scenario: Energy Costs Rise by 40%

Base Case: Energy Costs @ 10% of Total Revenue

Adjusted Scenario: Energy Costs Rise by 40%

As would be expected, the agriculture heavy provinces – Alberta, Sask, etc. are heavy subsidy provinces.

It’s fair game to criticize subsidies but everything in perspective, folks.

Total Government Subsidies to Industry – Per Capita (federal, provincial and local)

Statistics Canada: CANSIM Table 384-0010. Government subsidies and capital transfers, provincial economic accounts, annual (Dollars), 1981 to 2009.

As a result people have a lot of opportunity to read my stuff and read into my stuff exactly what they want to see/hear.

So, I get an email this morning after my TJ column asking why I don’t like BNB.

There is nothing in there about BNB with the exception of the set up mentioning the bad loans and the calls for the elimination of ‘economic development agencies’.

My concerns around focus, accountability and measurement are targeted at the system not just BNB.

In reality, I don’t know much about BNB.  I have never done any consulting work for the department.  I used to know 80% of the folks there 10 years ago but now I wouldn’t even know more than a handful.

I want the conversation to be about how we do economic development in the province and that is a whole bevy of agencies and departments (itself a concern).

The other point in the email was that it would be impossible to show what I am calling a return on taxpayer investment for BNB efforts.  Too much of what they do, I was told, cannot be measured in a quantifiable way.

I have heard this argument a thousand times.  If there is no tax-based reason for economic development (i.e. $1 in = $2 out over time), they how do we measure success?   Jobs created?  No, I am told, because much of the work is business counselling and support that doesn’t end up with new jobs or taxes.

Then why do it?

I fear we get back to the same old debate I have been fighting for 20 years.  Economic development is about keeping things from getting worse.  We inject a couple of hundred million in taxpayer dollars into the economy through direct economic development agency spending and loans/grants to companies and then we say without it, companies would have went under or had to lay off workers.

I don’t buy this vision of economic development.  I think that reinforces the view of those calling for the elimination of economic development efforts because they would say even if companies went under or lost jobs, the economic loss to the province would be less than the cost of propping up that activity.

My vision for economic development involves smart people representing industry, government and other stakeholders collaborating to grow export-based sectors of the economy creating incremental economic activity, employment and taxes.

Under my model, if you say you have aerospace and defence as a ‘growth sector’, and you pour tens of millions into ‘growing’ the sector over a decade, you should see growth.  Maybe that doesn’t seem practical to some but it seems eminently logical to me.

I have read your article ” Recasting the Aging population as an Opportunity”. I am utterly excited to read your reaction to the older gentleman who told you in blunt term that he was tired of hearing that older people are a problem.
I feel exactly the same way he feels, and like this gentleman I rebuke everyone who dare saying that old age is a burden. Sure, it could be, but it is far from being the majority of us. Most of us want to be independent as long as we can. We also take the initiatives to stay healthy, physically and mentally.
We contribute to the economy of the province with our taxes, we were in the generation who save for our future. now we have money to spend which now can benefits the generation after us.

Yes, aging could be an opportunity if there were not so many biases against old age. I am 75 years old. I worked until I was 73 years old. I retired, not because I couldn’t work anymore but because I was then living 3000 plus miles away from my native New Brunswick. I returned because I wanted to die among my own. Naively, I thought I could also contribute to the wellbeing of those deared to me.
I am a retired nurse, have a master Degree in Nursing, I have worked in the health field all my life. During the last 20 years of my career, I taught in a USA Nursing School. I am fluent in French and in Enghish. With all that experience which I am willing to offer in contribution to help in my province, I don’t feelthat I am wanted. And the best I can do is to Volunteer for the Red Cross. They make me feel useful and and in return that makes me happy.

I totally agree with Robert Hormats, the United States’ Undersecretary of State for Ecomonic, Energy, and the Environment, who you have quoted as saying “we need to transform our vision of aging from a time of dependency to a time of continual growth, contribution, andsocial and economic participation”. Wow, what a refreshing thought.

It’s important to point out that Joe Nocera is not some right wing, petro-consultant.  He is a liberal columnist with the NYT.  He cites in his column Fred Krupp, the president of the Environmental Defense Fund, which published a report that concluded “the U.S. shale gas resource has enormous potential to provide economic and environmental benefits for the country.”

Nocera spends the rest of his column outlining some of the ways the process of extracting this gas can be done in a responsible fashion.

That’s all I am asking here in New Brunswick.  I never found that unreasonable.

I understand that shale gas has become a proxy for some larger distrust of government, et. al.   The folks who talk about Hydro-Quebec and fracking in the same breath understand this all to well.

But just remember the shale gas doesn’t belong to ‘government’ or to some American ‘company’.  It belongs to us.  We need our government to put the property environmental framework and monitoring regime in place.  We need our government to work to maximize the value of the resource to New Brunswickers (a loaded term, I give you) and we need high quality and responsible companies to pull it out of the ground for us but in the end it is ours.

But the real focus has to be the the transparency’s close cousin – accountability.  It is very important to know how the taxpayers’ money is being spent.  It’s even more important to know if it is being spent effectively.

Maybe red herring is too strong a term here but if you think about it, maybe not.   Focusing the discourse on loan repayment distracts from the more important question of whether the “$653 million in repayable loans, loan guarantees, equity investments and various forms of grants to companies” was a valuable investment for the taxpayer.

I have been hammering this drum for years.  This applies to the most abstract federal government economic development efforts down to the smallest municipal efforts.   We have got to focus on the effectiveness of the spending – the ROI for the taxpayer.

Most people would agree that $653 million would be a great investment if it led to two billion in new tax revenue.    Sure, many people are ideologically opposed to governments giving out money to companies.  Fine.  That is a legitimate world view.  Some of the most intelligent people that study this stuff disagree on this point.  But everyone can agree with basic math.  If $653M led to no appreciable increase in the provincial tax base – bad investment.  If $653 million led to a significant increase in the tax base – economically sound investment (even if ideologically not).

The problem is we don’t have these metrics.

Another big problem – in defence of BNB – is that it is called into intervene in many cases where no one else would dare go – Atcon, Fraser, etc. so you should expect a higher loss ratio.  I never liked the ‘lender of last resort’ view of the government and I never liked the hostage taking view of economic development.

We need to figure out where we have growth potential and build a broad plan to achieve that growth.  This is not the same as a Stalin Five Year Plan.  I am not talking about engineering an economic through central planning.  I am talking about taking steps as communities, as governments, as business groups – to make the province attractive for investment.

I have always said if there are gaps here that are restricting access to capital for companies with strong business plans, then the government should have some mechanism to fill in – maybe a ‘Bank of NB’ or an expanded role for the BDC or whatever.

At the same time, I continue  to be amazed at just how much of the economic development effort in New Brunswick is tied up in the effort to match companies to capital.  There are numerous government departments and agencies giving out money and they collectively have dozens of different funding programs.  There are literally thousands and thousands of man hours chewed up each year in New Brunswick (paid by the taxpayer) in the government banking efforts.

Donald Savoie in that article referenced above talks about promoting our 10% corporate tax rate.  That’s fine but not really a game changer.  As I have pointed out here many times, most large firms that set up here pay very little tax here anyway because their markets and the bulk of their operations are elsewhere.     The only firms that pay all their provincial income tax in New Brunswick are firms that are only operating in the New Brunswick market and that isn’t the kind of firm that is going to grow the economy.

But Savoie is on the right track.  I think tax-based incentives should replace almost all the cash funding provided by government now. If a firm needs capital and can’t get it from a bank, it should go the Bank of NB.

But I am not fanatical about that.  In certain cases – to remain competitive – we may need another type of incentive program.

Bottom line?  I think economic development efforts should be showing a positive return on taxpayer investment.  If for every dollar in, we are getting 20 cents out in new tax revenue, that should be the trigger to shut ‘er down.

Dr. Michael Haan has been cranking out new data on the Census.  He sent me the following charts.  The first two are from the 2006 Census (the 2011 data on this will not be out for months).

The educational attainment level around the province is what we mostly expect but there are a few interesting spots.   St. Andrews, Plaster Rock (I think), Saint-Jacques, Coles Island area?, I don’t know the specific CSDs but there are pockets of above average education levels in interesting places.

Same thing with immigration. Of course, 2011 is going to be very interesting because from 2007 onward we had significantly increased immigration.  Most of it, I think, is headed into the three southern urbans but the Census will tell.  In 2006, there were interesting pockets of immigration around the province.

The last chart here is very interesting because it gives you the 20 year view of population change.  There are some obvious trends but some that are surprising.  As I have been saying much of the growth in Fredericton is around Fredericton (as well as in the City).  You have above average growth in the CSDs around the city (with the exception of the large and sparsely populated area to the northwest of the city (otherwise known as NB’s grow/op cluster). Even around Moncton there were a couple of CSDs with big population declines.

That’s the world we live in.  If the province was named the best place for IT or finance or whatever – hallelujah.  Best place for mining?  Must mean lax environment standards and the crappy royalty regime.

Of course that isn’t the case.  According to the Ottawa Citizen story on it:

“New Brunswick shot to the top of the rankings as miners lauded the province for its fair, transparent, and efficient legal system and consistency in the enforcement and interpretation of existing environmental regulations,” Fred McMahon, vice-president of international policy research at the Fraser Institute, said in a statement.
My point is that my first reaction to this was negative.  And it shouldn’t have been.

I want New Brunswick to be a place where companies can invest with confidence.  The idea that NB is fair, transparent, efficient and consistent in the enforcement of environmental law is a very good thing.

This is what we can expect – maybe not quite as draconian because I think the government would likely debt debt to GDP rise to levels not seen since the 1990s in the wake of political realities – but even at that they will have to restrain spending in a big way for an extended period of time.

So, pick your battles folks.  You want to cut down shale gas, deduct $100 million.  You want to stop potash development in Millstream, deduct $25 million.  You don’t like the mine near Sisson Brook?  Deduct $10 million.  Looking to stop mining in northern NB?  Deduct $200 million.    You want to reduce the allowable cut on Crown land?  Deduct $25 million.

How about taxes?  The Tories already eliminated the cut on the top earners.  Now it’s your turn (and mine).  So far, the Tories are taking a death by a thousand cuts approach and looking to raise a host of smaller taxes and fees but soon they will likely realize this ain’t enough.

How about those spending cuts?    Swanky MRIs in Saint John – just the start.

Don’t look to the feds.  They have already said they were reining in health care transfers, looking to raise the age for OAS, considering EI reforms that would impact NB more than most, cutting their employment level in New Brunswick by hundreds and don’t forget the looming changes to equalization.

I like Blaine Higgs.  I think he will run a tight ship – the Higgs doctrine – every program in government will be framed in a new context of accountability and measurement.   Unless raw politics intrudes, the NB government is about to get a whole lot more efficient.

But, again, efficiency only gets you a few points.

The cyclical deficit will be fought with spending cuts and tax increases.

The structural deficit will need an economic agenda.

Giddyup.

Distribution of Immigrants into Canada by Province – Total from 1991 to 2006

Annual Immigration into Canada – per 1,000 population 1972-2011

Distribution of Immigrants into Canada by Province – 2011

Growth Rate of Annual Immigrants 2006 to 2011 – By Province

__________

Sources:
Statistics Canada. Table 051-0004 – Components of population growth, Canada, provinces and territories, annual (persons)
Statistics Canada, 2006 Census of Population.
Statistics Canada. Table 051-0004 – Components of population growth, Canada, provinces and territories, annual (persons)

It’s very interesting to me.  In the 1950s, poverty in New Brunswick was much more acute and visible.  The quality of our roads was among the worst in Canada – if not the worst.   We were paying teachers in ‘rich’ counties three times what they were earning in ‘poor’ counties.   One third of the population was essentially isolated and marginalized without even a French language university.

It seems to me that since the 1950s New Brunswick has made enormous strides on the social justice front, on the environment – think about the pollution in the 1950s and 60s an even the 70s, linguistic duality, public services, public infrastructure.  We now have more KMs of four lane highway than any other province in Canada (per capita).  Writers in the 1950s talked about the rural poverty and squalor - Wilber talks about ‘rural slums’ in his writings about that time.  How far have we come.

And yet, New Brunswick all but completely missed the economic and population boom.  From the 1960s onward, New Brunswick’s share of Canada’s population growth consistently declined – moving into outright decline by 2001 (although 2011 was a pleasant surprise).  Think about the industries that drove the national economy – auto, aerospace, pharmaceuticals manufacturing – tens of billions were invested in these sectors over the decades – almost all in Ontario and Quebec (Nova Scotia carved off some interesting aerospace activity too).  Oil and gas.  More recently life sciences.

The only sector of the economy where New Brunswick was a clear winner over the past 40 years was the call centre industry.

Of course forestry and mining have continued to be important anchors of the economy – but relatively speaking they have not been major drivers of employment and GDP growth.  Relative to the size of the economy, they are both smaller in relative terms than 20 and even 30 years ago.

So, how come New Brunswick could – in many ways – outpace the country for social and infrastructure development (i.e. four lane highways) and almost completely miss out on the population and economic growth?

I have looked at the data in the 1950s and even income spreads between NB and the rest of Canada have narrowed over the last 50-60 years (not absolute net worth, however).

Whether I read Hal Fredericks “What ever happened to the blueprint for Atlantic Advance” or Savoie’s “Visiting Grandchildren”, Ralph Costello’s memoirs, or any of the stuff written at the time, I can’ t seem to put my finger on it.

There are lots of ideas floating around but I can’t figure out why NB would make such progress  in social progress and almost completely miss the economic boat.

Certainly transfer payments have something to do with it but again if you look at the post War period, federal spending accounted for 30-40% of total NB government spending – similar to now (although the size of government was puny relative to the overall economy).

Certainly, there was more appetite among politicians to tackle social justice.   And as for infrastructure, we have talked many times about NB and its country leading per capita spending on highways.

There is one angle I am pursuing – and have been for a while.  Much of Canada’s growth, of course, was fueled by foreign direct investment and immigrants.  Ralph Costello talks about New Brunswick industry back in the 1950s and 1960s (and I would say now too) being suspicious of national and international firms coming here.  I think there is something to this line of argument.  There has to be some reason why Ontario and to a lesser extent Quebec attracted the vast majority of FDI in the post war period.   I don’t buy the argument that it was federal policy alone that was biased towards central Canada.  I think our business community didn’t want the multinationals here and made that clear to their politicians.

Even today, many business leaders I talk to are suspicious of national and international firms investing here.  Let’s be clear, I’m not talking about attracting firms to compete for local markets.  I am talking about attracting firms to augment an export-based cluster.  NB firms still don’t like this because they worry the big firms will steal workers and push up labour costs (or as is a constant refrain – “take government money that should be doled out to NB firms”).

I had an amazing chat with a guy at the Moncton Club more than a decade ago who said he used to run a manufacturing plant in Moncton in the 1950s and 60s but in the 1970s his national union demanded wage parity across the country in all the firm’s plants so they closed Moncton and consolidated it in Toronto.

So, I think federal policy did have something to do with it.  I think NB business apathy towards growing strategic sectors by attracting key multinational firms also has explanatory value and I think unions also must shoulder some of the blame.

In the end, New Brunswick really didn’t want to grow – at least enough to make it a serious priority.

As a result, our youth left, few immigrants came, little investment was attracted and we went from the second youngest province in Canada in the 1960s (median age) to the second oldest today.

Now, much of our social progress is in jeopardy.  I am serious about this.  The number of Francophones is steadily declining – as much by out-migration as by natural decline.   Rural communities are starting to take on some of that rural slum feel again as they are morphing into retirement communities and no one – firms or government – is reinvesting in them.  The position among urban activists is hardening against any kind of rural investment in a way I haven’t seen in 20 years.

This is why I fight to attract industry and investment.  This is why I am passionate about animating our natural resources sectors which are primarily to the benefit of rural NB.

We need now to do with our economy what LJR did with equal opportunity.  We need to lead the country in thinking about innovative ways to foster economic development and attract the population to work in the related jobs.

Enough for today.  Real job to do.  Gotta put food on the table.

Anyway, she has a background in the oil and gas industry so I guess that taints her for some and gives her credibility with others.

For me, it was just a rational – demystified – view of the issue.

I was talking to someone last week who saw polling of NBers from before Christmas that shows the vast majority of them are opposed to shale gas development.

I continue to be baffled by that.

If someone from Cornell came to New Brunswick and put on a presentation about the perils of the forestry industry and talked about how cutting trees too close to rivers and streams would lead to a higher risk of water contamination – so we should put a full moratorium on all development – would the ‘vast majority’ of New Brunswickers agree?   I don’t think so.  We (New Brunswickers) would want government to build into the regulatory framework assurances that cutting would not happen too close to rivers and brooks.  The same goes with the protection of wildlife and a host of other issues that we care about.

So how come when it comes to natural gas, we allow ourselves to get so worked up?

I have no idea where this will end up.  I suspect that at the current price of gas, there will likely not be much drilling either way in the near future.

It would seem to me that if the vast majority of NBers are still deeply opposed by the time of the next election, the government would be very tempted to pull the plug.

My main point on this today.  I am very surprised at the lack of interest in this industry from a host of intermediaries that should be interested.  Very interested.

Where are the Enterprise agencies on this issue?   As far as I know there has been almost no commentary at all.  Even other economic development agencies.  Hardly a peep.  No talk about building the supply chain in New Brunswick.  No talk about using the proceeds to reinvest in rural NB. Nothing.

Where are the Chambers of Commerce?  Surely an industry that could bring thousands of jobs and hundreds of millions in revenue to New Brunswick should be a cause for Chambers?  I haven’t seen a thing.  Not even a ‘qualified’ thing such as “if the government yada yada yada”.

Where is the CFIB?   The oil and gas industry is the lifeblood for thousands of small businesses in Saskatchewan and Alberta.  Nada.

Where are the mayors?   I realize public opinion got out front of them on this one but it is still strange to me that at a time when rural New Brunswick needs growth industries – the rural (and urban) mayors are silent on this. I think this is a big mistake.  The mayors should be front and centre demanding the industry be properly regulated and monitored and working to ensure much of the economic benefit flows back into their communities.  Instead, nothing.

Are we so paralyzed now – at every level – from business groups to local government – that a campaign to shut down one of the more promising industries in North America – can zipper the mouths of every single group that the public looks to for insight?

This shouldn’t be the provincial government’s fight.  Public opinion will not be swayed that far by a government press release or speech.  The government needs to ensure a strong regulatory environment (like all natural resources), effective monitoring and enforcement and work to ensure that the province receives broad benefits from exploiting this resource.   But if every single organization in society is either against or silent on this issue – we never have a proper conversation.  I even heard – this is incredible – that one of the province’s universities was debating coming out as an institution against shale gas development.  I think that must have been an exaggeration on someone’s part.

All of those with an interest in the province’s economic development have a duty to speak up and be part of dialogue.  Even if they come out against the industry and are clear about their reasons, every one will at least know where they stand.

It’s a big mystery to me.

I’ve said it here before, Ontario is an economic powerhouse.  Name me another large economy that is booming right now that isn’t based in large part on non-renewable resources?  California? New York?  Illinois?  Florida?  Even across the pond – who is booming right now?  Norway, et. al.  Even Germany’s real GDP growth is expected to slow to one or so percent this year.

But the fundamentals in Ontario are strong.  The stored wealth, the % of the decision making for the Canadian economy.  The R&D infrastructure.  There is more R&D spending in Ontario than the rest of the country combined (including the Ottawa region).

The province got a little bloated before the recession and now needs to re-calibrate spending and taxes and it needs to build some new economic growth engines the way it has in the past.  It became the manufacturing powerhouse in the first 60 years of the 20th century, it stole the financial centre away from Montreal, it built the largest biosciences cluster in Canada in the 80s/90s/00s.

Of course McGuinty wanted to turn Ontario into a renewable energy powerhouse – he said it would be the next auto industry for the province – shale gas has really wreaked havoc on a lot of our assumptions circa 2005.  Even the whole NB Power/HQ narrative has been recast post the U.S. shale boom.  And nuclear?  Before shale, the U.S. had something like 30 more reactors in the planning phase.  Now?

But I digress.

The truth is Ontario will be fine.  Will it grow as fast as Alberta?  No, but it hasn’t for a while.  From 2006 – 2011 the Ontario population grew faster than the national average – and people were still call for the end of the world as we know it.  New Brunswick’s population growth rate was half the national average and there were parties in the proverbial streets.

I think the short term, this need to reboot Ontario will indirectly impact New Brunswick in a negative way.  We have talked about the negative impact on Equalization already but there will be other effects.  Ottawa will need to pump more and more ‘stimulus’ into Ontario – in the form of R&D and other spending.  I realize there is a broader Harper agenda but they won’t sacrifice Ontario.

I think a place like New Brunswick may be even more marginalized than ever.  NL and NS are forecasted to do quite well on our eastern flank and the west will be doing just fine.  Ontario will get a lot of focus and will double down on FDI for a while I would think as well.

Quebec is harder to say – the plan nord is expected to give GDP a strong boost every year for the next 20 years but the province is struggling under a lot of public debt and weak growth in several of its key industries.

New Brunswick needs to find new sources of economic growth.  I’ve said it before and I’ll say it again – this is the main impetus behind shale gas.  The sands are shifting under our feet.

The truth is that the rural population within the Fredericton CA is nearly 33 percent of the total.  The rural population in the Moncton CMA grew by more than 15 percent from 2001 to 2011.  While Saint John actually saw a slight decline in its rural population over the 10 years, there are almost 29,000 people inside the CMA living in rural areas.

As I pointed on in the column, this is a fact of circumstance.  Commuting is still relatively easy and comfortable.  Tax and housing costs – for the most part are lower.  Lots of folks like wide open spaces and not much noise.  In many ways its in our DNA.   I live in downtown Moncton but sometimes wish I was living on a hobby farm in Hillsborough.

My only contribution to the debate is two-fold: 1) property tax rates should be set based on the relative cost of property tax-funded services.  If a city is paying for services accessed by rural residents – for me that is fair game.  The mechanics of that are tricky as we saw with the sporting facilities in Fredericton and environs a few years ago.  There will always be some free riding – but it certainly can reach a tipping point.

2) Everyone should have a municipal government – accountable and able to provide quality services.    I don’t like the idea of LSDs.  Never did.  Never will.  I know they are convenient for some but I don’t think there is any other jurisdiction in North America that has such a large part of its population outside a formal municipal governance structure.  While I don’t have much expertise in this area, in my gut I think the lack of effective municipal governance has been a core part of our lack of economic development over the past 50 (? more) years.    Even the smaller and medium sized municipalities have very little authority and resources to get anything done.  I realize this is a problem of scale and that all of New Brunswick has a smaller population that dozens of municipalities across North America.  But there has to be a way to ensure strong local government that is reasonable resourced and able to address and influence local challenges.

There is too much shoulder shrugging these days.

But the report is really meant to start a broader conversation about the right framework for this development.  It’s not just about economics – damn the torpedoes – but you can’t either just eschew any time of development because there are potential risks.   As I have said before, there were 10,000 workplace accidents in 2010 reported to the workers’ compensation organization in New Brunswick.  If we came to the decision we can’t support any development that has risk, we wouldn’t leave our houses in the morning.

The other critical point made by this report – is that if something happens – if some form of natural resource development causes harm – the government has to have the back of the people.  It has to make it right.  I won’t go into the details of the report but you should read this part – it is not the normal kind of framing of this you would see from an industry funded group.

There are industry proponents making the case for shale gas, mining and wind energy (this is the most controversial these days – it was a big issue in Ontario’s recent election and there are many stories about the wind energy around Amherst and the anger among local residents).    That’s their job.  There are environmental groups that see their mandate as fundamentally about stopping shale gas or mining or more tree cutting or Costcos built on wetlands (the wind energy issue is a little more polarizing).

I am not sure folks at the hard end of these positions will ever come to some full fledged agreement.  I am not sure that is what we should expect in a democracy.

But for everyone else – the 90 percent of people in the middle that want both – natural resources development, jobs and taxes for public services – and protection of their environment  - those are the folks that want to be engaged in the broader conversation.

I hope this paper is one small part in this conversation.

Huh?

As always, statistics are about reference points and fine grain definition.  My reference point is 1971 (before Kurt was born) when the rural population in New Brunswick was 43 percent of the provincial population compared to 47 percent now (2011).  That is a statistical fact – as defined by Stats Can.

Kurt is talking about the CMAs in Moncton and Saint John and the CA in Fredericton and looking at the most recent Census period (s).

So, we are both right.

Where we converge in views is on the migration of the rural population closer to the urban centres over the decades (you may hear the term suburban but that could be urban or rural).

To make things worse, Stats Can is now moved away from the term ‘urban’ and is using the term ‘population centre’:

• small population centres, with a population of between 1,000 and 29,999

• medium population centres, with a population of between 30,000 and 99,999

• large urban population centres, consisting of a population of 100,000 and over.

The bottom line, of course, is the implication of these trends.   I think the ties between urban and rural will continue to strengthen – I think the immigrant population will likely to move into urban centres (unless we specifically target folks to live in rural areas like we did back in the 1970s).    Regional governance will smooth things out somewhat in terms of the cost and provision of services such as snow removal, garbage, etc.  The fight between the urbanites and rural purists will continue unabated over my lifetime.

The real challenge is Northern NB (not rural NB).

That area is clearly losing population and in danger of becoming a vast retirement community – or maybe not even that as there is a growing migration of retired northerners to places like Dieppe and Moncton to be closer to their grandkids.  If some people could sell their houses at a good price, they would move as well.

I think there are a couple of reasons why we shouldn’t give up on Northern NB yet and I think there are some good economic alternatives to throwing money from the top of the highest building in Bathurst and hoping the right people will catch it.

But you will have to read about it in an upcoming TJ column (hint: I have talked about these ideas here before).

Again, from the estimates, we are expected to have witnessed a population explosion in the age group 60 and older.  While the overall population was supposed to have grown by 9,800, the 60+ demographic was supposed to have grown by over 27,000 (or 18 percent).  The younger demographic groups were all in strong decline mode (according to the estimates).

It is possible the difference between the 10k (est.) and the 21k (Census) could be younger.   The immigrant population has tended to be younger than average.  However, I have looked at the migration data and it is still showing net outflows among the younger groups – for the most part.  I don’t have through 2011, however.

My guess is that the 10k more population we were not expecting will be skewed slightly towards the older demographic.  In other words, we probably have more than 30k additional 60+ folks around and maybe not quite as bad in the decline in the younger demographic groups.

Estimated Population Change by Age Group 2006-2011

Source: Statistics Canada.

I suspect the newspapers tomorrow will be replete with positivism about the pop growth rate even though we are continuing a streak of decades where we have underperformed the national growth rate for population.

If you set the bar low enough, any growth at all is exciting.

I did a Google News search to gauge media reaction and hardly a peep about ‘fracking’.   Some concerns were covered but I was surprised at how this seems to be a non-issue in BC.

“Matt Horne, director of climate change for the Pembina Institute, cautioned the B.C. government against its dependence on natural gas, which should be considered a “bridge fuel” to a future without fossil fuels.”

You will not hear environmental groups in New Brunswick talking about natural gas as a ‘bridge fuel’ to anywhere.

Some people have made the point that most of B.C.’s oil and gas industry is being developed far from the population base in Greater Vancouver and they argue this is a key difference with New Brunswick.  But there is  still considerable population in the areas with gas exploration and production and the government is talking strongly about protecting water resources and other environmental issues.

I have always maintained it comes down to people in BC or Alberta or Saskatchewan (and dozens of other places) having a better understanding of the link between these industries and their economies and public services.    When you don’t have an industry already in place, this is harder.  There are over 1,000 firms providing services to the oil and gas industry in Saskatchewan and six in New Brunswick.  When you have hundreds of firms feeding off the natural gas industry, you will get more support.

But that is chicken and egg and opposition parties are playing chicken with this important industry in New Brunswick.

I think it is fair for Harper to be raising this issue.  We need to talk about this.  All of these entitlements – from health care to public pensions – are taking up an increasing share of national income and will only accelerate in the coming years.

In New Brunswick, health care is something like 40 percent of the budget (less debt servicing) and there is about 19 cents in government transfer income to persons per every dollar of employment income.

I think it is fair to ask if there is an upper boundary on that and what it might look like.

I raised the idea of tying health care spending growth to GDP growth a few years ago – as a hard cap – allowing that individuals would likely go out and spend as much as their own private income on health care as they would like.  This doesn’t go over well, of course, but at least it is an idea.

I have talked about raising the age people can access public pensions – remember any all protection should be put in place for those in real need – poverty reduction should not be tied to age – but I am talking about people collecting pensions and other benefits who could/should work longer in life or who have enough private income to sustain themselves.

There is normally a lot of backlash to this kind of talk because people read into it what they will.  It’s like a Rorschach test – if you don’t like Harper – you will see this as part of his evil plan – if you like him – you will say it is a sensible time to have this dialogue.

In the end, people need to realize that all of the entitlement spending crowds out spending on other important things such as education, research, infrastructure – and even other important social programs.

Statistics Canada tells us that New Brunswick architectural firms have consistently higher operating profit margins (as an industry) than Canada as a whole.  This could mean there isn’t enough competition in that space.  It’s also interesting that the architectural services sector only generates about half the revenue per capita as Canada as a whole.  This most likely points to a few things such as the weaker overall economy and the unwillingness of firms/individuals to pay more for value added architectural work (such as green buildings).

I am talking mainly to local economic developers on this one.  It would be interesting to do a complete review of the local industrial mix to see where there are gaps/weaknesses/higher than average profits/lower than average profits, etc.   It may make sense for a local economic development agency to try and attract architectural firms in a situation where there was clearly not enough local competition.

We are also more reliant on EI payments – double the national average.

We also have more demand on our health care system because of a) an older than average population and b) higher incidences of chronic health conditions, obesity, etc.

We are a major user of the federal equalization program.

What do all these have in common?

They are all targeted for cuts/modifications by the federal government in the near future.

I have said that the feds will need to balance their budget and any cuts will fall harder on provinces that are more reliant on federal transfers.  In the longer term, changes to health care funding and federally funded pension programs will also bite harder in places like New Brunswick.

Don’t misinterpret this.  It’s just data.  If we need to reform OAS, so be it.  If we need to reform EI, let’s get to the table.  Most people agree that the health care system cannot continue to chew up an increasing share of national tax dollars.

My point is these things will inevitable hit places like New Brunswick hardest and it would behoove the provincial government (and hopefully the feds) to think about this.

You have an effective unemployment rate of well below 10 percent – this compares to 17 percent not that long ago in our history.

And, most of all, the folks that are in the positions of leadership – are mostly concentrated in areas of the province that are chugging along quite nicely – visibly they are doing fine.

So when the Premier talks of a huge demographic problem, a structural fiscal deficit, etc. – I don’t know how many people get it because I don’t know how many of them are impacted by it – particularly among those in positions of leadership in government and in our communities.

Some people that study the issues – get it.  Talking to folks in the health care system  - most of them get it.  They are bracing for a wave of boomers starting to need advanced health care services.

The primary and secondary education community gets it – they will be planning for wholesale decline in the coming years.

I don’t know if that trickles down to the average NBer, though.

Everyone loves the idea of ‘rebuilding’ unless that rebuilding impacts their lives personally.  Then, we shall see.

A while back I mentioned the grass roots campaign to attract Walmart to the Miramichi.  Before Walmart decided to move into small markets, there was a lady in the ‘chi who was adamant she was going to attract Walmart to her community.  There was a petition with thousands of names on it sent to Walmart – and she got her wish.  It was a remarkable display of public interest in attracting an industry and it made me wonder how we could possible leverage this kind of thing to attract other kinds of companies – manufacturers for example.

Anyway, Miramichi got its Walmart and has seen a fairly sharp rise in overall retail sales in the region since.  However, there has been a 15 percent decline in the number of retail business establishments (2003-2010).  That is a net lost of more than 50 small retailers even though retail sales overall are on the rise.

The same kind of effect happened in Moncton when Costco arrived in the 1990s.  That firm’s business model relies on enormous volume and that volume has to come from somewhere.

I am not a big fan of retail from the perspective of economic development.    It’s almost entirely reliant on local demand and relatively low paying (although Costco is said to pay the highest wages in the industry).    Some have argued that niche retail can attract people from outside the community – fair enough – but it’s not a major driver of economic growth.

And there are examples of smaller communities fighting fiercely against big box stores.  I remember battles in the early 2000s along the coast of Maine as certain residents were looking to keep Walmart out of their little communities of 4,000 or 5,000 people.

In the end, I think Costco is a positive influence.  People looking to move to Fredericton from any larger urban centre will expect Costco.  It’s not a huge deal but it matters.

And I categorically disagree with the government intervening in the retail market.    That is almost the last bastion of free market activity – I can point to very little government grants and loans or direct influence in the retail sector in New Brunswick – and that is a good thing.

I am sympathetic to those retailers in Freddy that have been hit by Costco and the nice little downtown core of shops might suffer but in the end the ‘greater good’ is what matters here.

Smaller retailers need to niche – find products/services the big guys don’t care about and pile on levels of service and other differentiation the big guys find hard to replicate.

So, it is not completely crazy to think that provincial governments will have to raise taxes and further erode tax competitiveness between the provinces.

And, as I say in the piece, this didn’t matter as much when it was grumbling local populations but NB, NS, PEI, etc. will have to attract tens of thousands of workers from outside their borders in the coming years and the level of taxation matters.

So  I will reiterate my main point.  I am not calling for provincial tax harmonization across Canada.  My point is that in a fiscal union like Canada, all provinces have to understand that the economic trajectory in other provinces will impact their own fiscal situation and when Ontario joins the have-nots – it could start to get really interesting.

There is a small but growing group of economists suggesting that all this debt has far more pernicious effects and use the example of mortgage default in the U.S. as an example.  Apparently, the average U.S. household has deleveraged a lot faster than the average household in Britain because it is a lot easier to default on your mortgage in the U.S. so hundreds of thousands of American families are just walking away from their mortgage debt -because they can.  To those of us outside the U.S., it seems strange that the people can deleverage by walking away from debt with virtually no negative impacts.   It raises the question of what would happen if everyone who had an underwater mortgage across the world just walked away scott free.

Nassim Taleb says there is no way to predict black swan events and therefore we should try to keep debt to an absolute minimum.  Imagine a world where there was 95 percent less debt.   90 percent of the finance industry would disappear.  Virtually all of the growth in the finance sector in the past two decades has been in areas meant to manage the risk associated with leverage/debt.

It is an interesting thought experiment.  Commerce would still continue.  People would still buy houses.  Consider the example of Brazil.  Because of hyper-inflation until the mid 1990s, banks did not offer any kind of longer term mortgages because they were impossible to price.   People had to save up to buy houses.  Families would chip in/loan the money – people would just wait.  They still bought houses but they had to wait a little longer.  The same was the case with other major purchases as well.  Now, that is changing because of the stable inflation and Brazil is starting to see worrisome levels of household debt, too.

But it is interesting that many of my relations in Brazil – in my age group – have a house and no mortgage debt.  I, on the other hand, am sitting on a fairly large mortgage with 19 years left on it.

While my views on this are evolving, I am starting to think we should look seriously at this issue longer term.  Maybe we should set as a goal across society to limit debt across the board.  From Millken and LBOs in the 1990s to investment banking in the 1990s, financiers have used massive leverage to make enormous profits until the bubble burst.  Maybe the morality of debt should matter.

-Bruce Cockburn (Waiting for a Miracle)

For the first 120 years or so of New Brunswick’s post-Confederation history, provincial governments blamed Ottawa for all their ills.  In the 1944 New Brunswick Committee on Reconstruction, there was a stream of data showing how the NB economy had dramatically under-performed the rest of Canada since 1867.

I just read yesterday a speech given by Hugh John Flemming before the Royal Commission on Canada’s Economic Prospects in 1955.  He had some zingers.

“New Brunswick has not shared to a proper degree in this great Canadian economic advance”.

“For nearly 100 years the relative economic level of this province has been steadily declining”.

“Three weeks ago I drove down to beautiful Fundy Park.  For miles along the route, crews were busy tearing up rails – owned by the CN Railway.  And why this retrogressive step?  Because, I was told, the Railway did not pay.  And this at a time when rich mineral deposits are being uncovered in Albert County, which, if they are developed, will undoubtedly call for more and better railway service – rather than none at all.  this is the kind of thing that we in New Brunswick fail to comprehend.”

“We all know that the St. Lawrence Seaway must inevitably further reduce railway traffic, both passenger and cargo, in the Atlantic region.”

and my personal favourite:

“Though it is my firm conviction that the great economic experiment undertaken by Confederation to make trade flow artificially east and west instead of naturally north and south [italics in the original] was like trying to make water run up hill – it has turned out to be like our own famous Magnetic Hill in New Brunswick – a definite illusion.”

There are many more but I think you get the point.  As Donald Savoie chronicles superbly in his book Visiting Grandchildren this kind of grievance has helped ease the pain for a very long time.

And it may all be true.  I have talked about this enforced east-west trade flow that was summarily jettisoned when it made sense for Ontario and Quebec.  Certainly the St. Lawrence Seaway – paid for by Canadian taxpayers cut Atlantic Canada off as a principal trade route (I heard last week that all international mail into Canada used to come through the Port of Saint John – if so, amazing).

However, complaining about the past doesn’t fix the future.  Understanding the past does – I firmly believe the federal government should be a partner in a serious new effort to promote regional economic development (note – more than the banking services to industry they are providing now).   I talk about how the shale formation that holds shale gas extends all the way to the northeastern tip of New Brunswick.  But do you think any government would think about investing in a pipe to the north?  Outrageous waste of taxpayer money.  Spending $300 million or more each year on EI payments to mostly seasonal workers in Northern NB is a good investment, then?

I’m not suggesting the government put a natural gas pipeline to Northern NB willy nilly but they could incentivize a company to run a test program up there to see the potential.  If it made sense, maybe a joint public/private sector partnership might work.  Of course, the anti-frackers would be out in full force to scuttle it anyway so it is probably moot.

But you get my point, maybe.

Natural resources development – forests, fish, minerals, oil/gas – are an important part of the national economy and they are particularly relevant as economic drivers in rural areas.

I have been talking with dozens of politicians, bureaucrats, business leaders, journalists, etc. in the past few years and I think this historical grievance angle has just about run its course.  I rarely hear it now – except for in an historical setting.

We need new, big ideas for the economic renewal of New Brunswick.  The feds need to be partner in this but the leadership must come from New Brunswickers.

I just finished an Ideas podcast where the speaker argued that the fear of communism led to the green revolution in agriculture as the wealthy class didn’t want the hungry to rise up against them.

A couple of years ago I read a biography of FDR where he supposedly said to the wealthy class about his social reforms “I am the only thing standing between you and the angry masses”.

This thread – the threat of communism led the west to develop the modern, welfare state version of capitalism – is one that I read and hear repeatedly when discussing late 19th century and 20th century history.

If this theory is correct, what do we do in  a world where the Reds aren’t a threat anymore?

Maybe a little Rosa Luxemburg isn’t such a bad thing after all.

Taleb: I present antifragility and the last one I call “Skin in the Game: The Ethics of Antifragility.” What happens is that some people in society have the option, namely the bankers, the managers of businesses, they have other people’s skin in the game, the left column. No skin in the game other than they keep the upside and transfer the downside to others.You can see this, the stock market has lost about $5 trillion over the past 10 years, comparatively because a lot of stocks were at a higher level compared to cost of funds. Managers of companies made $400 billion. Why? Because you have the upside and no downside. So they actually own the option and they benefit from volatility.

So, no skin in the game–in that category I put bureaucrats, journalists, corporate executives, bankers of course, and other people I call Fragilistas.

Now, people with skin in the game are citizens, people who have the upside and downside of their actions. If they don’t pay their mortgage, they lose their house. Or, if I make a mistake, then you have skin in the game. And of course my rule of ethic is what I write about, is to have the corresponding position in the market, so I don’t really care about right or wrong; what matters is the payoff. Anyway, so this is the middle column, people with skin in the game.

And of course the right column is an interesting column of people who actually don’t have upsides. They are there to take the downside of others. And they have the highest status in society, traditionally. Compare a banker who has upside and no downside, because they don’t have negative bonuses, to someone in the military. He doesn’t have a bonus and he has his life on the line.

Roberts: It’s a very beautiful insight. Honor is bestowed on those who take the bullet for others. Exactly. These don’t have to be a saint, a knight, a warrior, a soldier, a prophet, or a philosopher in the pre-modern sense. Or a maverick. You can be just like the babysitter who pushes herself and lost her life because she had a responsibility for the baby she was holding.  And you argue that modernity is pushing more and more people into the left column, the Fragilistas who impose their downside on others, and we don’t spend as much time on that right column. Our culture doesn’t do that. In fact, we look at those people sometimes as fools–they could have avoided that harm; they are idiots.

Taleb: Exactly. And in fact it’s the first time we have power for people who don’t have courage. It’s the first time in history in which the people on top have power without courage. First time. You cannot find that in any society. Take the knights. The knights were people who, their trade was that they were risking their lives. This is why they or lords were supposed to die first. And of course the United States was supposed to be first in battle. Not someone pushing a button. It changes the incentives. So, the only way you can have a safe society is by moving the first column, the left column, moving these people out of there, making it more accountable. It’s hard to get there, though. You can, with the legal system you can in various ways. But I think society will explode because then you start having a growing wedge between what is ethical and what is legal. And I name names in here; I don’t know if you want me to name them.

Roberts: It’s your choice. I’m willing to take a lawsuit. It’s your book. I name people who to me–for example, some academics can cherry-pick; they can give contradictory advice and retain the one, because they don’t have skin in the game; they don’t go bankrupt from the bad trade, so to speak. They are always going to be there. The problem is a Nobel Prize in economics. People are not penalized for being wrong. You cannot have a proper functioning. I just wrote a paper in a policy journal in which I show that without accountability, risks will keep going because people will hide them, and we had a system in ancient societies for that. That’s Hammurabi’s Law. Hammurabi understood risks very well. And it was as follows: if the house collapses and kills the owner of the house, the architect is put to death. Why? Not because to punish people. As a deterrent, because no inspector, no regulator, nobody will ever know more about what’s in a foundation than the architect himself. So, you can hide risks from society, you can cherry-pick, you can do a lot of things unless you have a direct responsibility for the results of your action.

That dynamic in the U.S. has bifurcated with the Tea Party taking it out on the bottom 20 and the Occupy movement taking it out on the top 1 percent.  The British thing about the middle being frustrated up and down the income scale is a new line of discourse – at least for me.

I’ve never been a big fan of this kind of sniping at those earning well below average incomes – even if much of their income comes from the state.  It’s always been distasteful for me but I do think societies need to craft labour market policies and income support programs in intelligent ways.

Unlike much of the research coming out of the think tanks, my view of the EI program is that we need changes because it seems to be the program has become a barrier to economic development.   However, I am very reluctant to recommend some kind of swift change that will move the whole country to some kind of standard.

There have been stories in the media about people that are waiting more than 10 weeks to get their EI cheques and not being able to provide Christmas presents for their kids.  One guy on PEI was carrying around a loaded shotgun out of frustration.

For many people – a higher concentration down here – EI is a relied about part of their annual income stream.  This isn’t a theoretical discussion about the impacts of a 2 percent rise in the HST.  If the government adopted the recommendations that came out a few months ago there would be tens of thousands of people in mostly rural Atlantic Canada that would see their incomes drop by 20, 30 and even 40 percent.

What we really need to do is get back to the point.  If we want to get more people working, how can we do that?   How can we evolve the EI program over time to encourage more work?

I guess some folks take a harder line – on the one percent and the 20 percent.  I prefer a nuanced view – at both ends.  We want people earning piles of cash to pay a reasonable portion of that income in taxes.  We want people to work if they can and contribute to society.  Having 100,000 New Brunswickers collecting EI at some point during the year – to me points to a labour market efficiency problem.   Having an 83 percent employment rate among 40 year olds drop to 40 percent among those aged 60 to 65 – is a problem.  In the modern world why are only two out of five people aged 60 in New Brunswick working?

I guess the conversation rolls on but if we could get our EI usage down – and employment income up – if we could see a gradual rise in employment rates among those 50 and older.  I think these would be a couple of good moves ahead.

Economists are having a good debate about how much of the national tax take should be used as direct transfers to individuals.  This has been rising steadily for 50 years.   In New Brunswick, there is something like 19 cents of government transfer income to individuals (all sources) for every dollar of employment income.  That will have to reach some kind of tipping point.  It’s not about kindness, fairness or justice.

I think it is great that UNB is working on projects for NASA, and Russian and has a top world rating for GPS research.   Wonderful.  I think it would be even more wonderful if we were able to translate that into economic development.

Reading of the closure of The Bay in Moncton yesterday I was reminded by how much churn there is in any local economy.  In 2010, Maple Leaf Foods announced it would close in Moncton laying off over 400 staff.  ACOA announced a reduction of staff and another one is supposedly coming.  The feds reduced employment in Shediac and DFO is on the chopping block.  The Bay is a fairly big employer but conventional economic theory says that retail sales activity will be absorbed elsewhere – leaving not much of a net loss.

The big closures are visible but the reality is that businesses are opening and closing on a weekly basis in a place the size of Moncton.

For people like me that think a lot about economic development it is clear that government policy should not be tuned to try and keep companies afloat that do not have good business models.   I realize in smaller communities this becomes even more difficult but there are too many examples of failure that was propped up by government only to eventually fail anyway.

The Bay, which had excellent men’s shoes, was always empty.   Even during the Christmas season it seemed sparsely populated.   The business model for that firm is clearly not in small urban centres.

P.S.  I probably shouldn’t have used government facilities in the same breath as Maple Leaf Foods or The Bay.  The ‘business model’ approach doesn’t work well when thinking about government facilities.  The Public Service Pension Centre in Shediac (the one that lost 150 jobs in June of 2011) was put there as a legacy for a strong federal Minister from the riding.  Local stakeholders need to lobby to try and keep those types of facilities in their communities because locational decisions are primarily political in nature.

My basic thrust is that we need our business leaders – particularly those with export-oriented businesses – to invest more here, create jobs and expand.

I got an email from someone suggesting that I can’t just cajole business people into investing -they will invest if there is an opportunity and they will not invest if the time isn’t right.

While I understand that is the textbook answer, in the real world business decisions are a very human and subjective process.  How is it possible for Medavie Blue Cross – in little old New Brunswick – to have something like 1,500 employees and be providing services across Canada?  That was a deliberate decision from the leadership to take a calculated bet and thoughtfully invest and expand.  Why would ExxonMobil put more employees in New Brunswick than anywhere else in North America – as a percentage of the overall labour force (I am not sure about Texas…)?   Someone made a decision – however unlikely.

How could a small non-oil and gas drilling firm set up and expand from Moncton?  Major Drilling – I think is the largest or second largest – in its segment in the world.  Improbable would be an understatement.

It seems unlikely that a place like Fredericton could have the highest concentration of engineers in Canada – as a percentage of its workforce.   How is this possible?  Because firms built an expertise in New Brunswick and then built it into an export business.

My point is there are many examples – but not enough.  I think now would be a good time to ramp up our game.  I heard yesterday that something like half of the Fortune 500 firms were started in an economic slump.  Many of New Brunswick’s important industries were built during tough times.

My fear is a lot of business leaders – in their late 50s/early 60s – are starting to see retirement and Bermuda in their future.

BC was second best in Canada for growth in its university educated population and second worst for wage growth (among the 10 provinces).  The province has more than doubled its enrollments in university (from 1999 to 2009) and saw an 18 percent decline in college level enrollments.

At the same time, sectors such as retail sales, accommodation and food service, construction and administrative support services accounted for nearly 60 percent of the net employment growth from 2000 to 2010.  These sectors are far more likely to require college or trades education than university education.

Food for thought.

Growth in university educated population and average weekly wages (2000 to 2010)*

*those with a university degree.

Sources: Statistics Canada CANSIM Tables 282-0072 and 282-0004.

Yet, we don’t particularly like government or trust it to do the right thing (I won’t list off the many policy issues that have roiled people in recent months/years).

This paradox is fascinating to me.

I’m not a big government guy – I don’t hide it.  I have questioned why we need a non-means tested health care system where the richest get the same benefit as the poorest.  I know it seems to be sacrosanct but I never really understood it.  In fact, I don’t really understand the lack of means testing of public services in New Brunswick more generally.  I’d like to live in a world where we were less reliant on government but had assurance it was firmly there when needed.   There are myriad examples – in health care I can get everything from simple blood tests for free but when my friend’s daughter comes down with a very bad type of cancer, he’s out of pocket for drug costs.  Crazy.  I’d rather we all pay for the little crap – tests, doctor’s visits, etc. and pool the money to cover the catastrophic.

But I don’t have a loathing or deep distrust of government.  I think many decisions are made badly but I differentiate between the two.

Just like Brooks, I think government does become beholden to special interest groups – some more directly and others more indirectly.  And like Brooks, I don’t believe the easy convention that is this just about ‘big business’.  He uses the example of the seniors’ lobby but I could reel off dozens.  In fact, I am a special interest group – pushing hard for a set of ideas that, if implemented, will cost the government money and resources.

We need to expect that any person or organization that will benefit or be hurt by the actions of government will attempt to influence policies one way or the other – and these days (read my first paragraph) that means just about all of us – from the CFIB to the CTF to the CARP to the business lobby.

I think we need to have a government that has a clear outline of how it wants to govern and where it wants to take the province (or country).  I would encourage government to diligently limit the impact of special interest while realizing it is a part of the democratic process.  Any lobbying that has obvious pernicious effects on the whole to the benefit of the few should be avoided – even at political cost.

The rest of the lobbying – environmental, seniors’ groups, university advocates, the CFIB, public unions, chambers of  commerce, party donors – whatever – should be expected and placed in the proper perspective.  These voices are jockeying for position out there but the greater good does exist and all the lobbying should be put through the grinder of the greater good.

I get more visitors from Freddy Beach than anywhere else – 64 percent more than the next nearest source – Moncton.  Despite my twice a week column in the TJ, Saint John is a distant third in blog visitors – at 75 percent fewer visitors compared to Freddy Beach.  Toronto, Ottawa and Halifax pull up the rear.

I got a little kick out of one stat.  The average time spent on the site is around one and a half minutes which I hear is about normal for a site like this but my readers from Waterloo spent an average of more than 4 minutes – well above everywhere else.  I immediately recognized this as Mikel and his long, winding responses to my posts (he is from Waterloo, I believe).  Torontonians are the least impressed – leaving on average after only 55 seconds.

The last interesting stat is the fact that the majority of folks come to the blog directly – either by typing in www.davidwcampbell.com or through their favourites.  Second place is a good search.   An increasing amount of hits come from Twitter but not as much as I would have thought  - only about 1,000.

 
Employment Change by C.M.A. by seasonally adjusted 3 month moving average - December 2010 to December 2011

Longstanding readers of this blog will know of my interest in the role of culture and how it influences economic development.  Specifically,  I am interested in the mix of characteristics – the culture – of a place that makes it worth saving – or makes it worth fighting for.

I read a fair amount of history and there are many fascinating stories of peoples fighting – dying – to save their little corner of terra firma.

While not the same magnitude, of course, this thinking applies to places like New Brunswick.  What makes a person perceive value in their community/province – enough value to be worth saving?

For people who think the death of communities is not possible – just drive to Labrador through Quebec or some of the more remote areas of Newfoundland.  It is certainly possible for communities to completely die out and I think there is a strong possibility that there are communities – even regions – in New Brunswick that literally may not exist as any kind of real community within 50 years or so.

What makes people want to save a community – more specifically – fight for it to grow and thrive?   What are the cultural aspects that bind people to a place?  As Frank Drebin says, this is our hill and our beans.

There are symbols that make people proud of a place – Cape Breton Highlands, Rita MacNeil, foods, landscape – Cape Breton oozes culture – and elements to make people proud but its economy remains quite moribund.  I heard about an ex-Cape Bretoner CEO club that used to meet in Toronto and talk about their beloved home – but I don’t see these companies investing in CB in a big way.

But specifically to New Brunswick  - what are those symbols?  Who was the last really famous hockey player from here?  Danny Grant?  How about musician?  Author – some have moved away but retain their NB identity.  What makes NBers pround to be NBers?  What are those cultural markers?

I think of a guy like Kurt Peacock – he’s a diehard advocate for Saint John with the side benefit of really understanding how economies work.  That’s a rare mix in this province.  We need diehard advocates fighting all over the province but that understand fundamentally how economies work.

I meet many zealots in New Brunswick but they tend to be fighting for the environment (which is very important) or dreaming of fighting battles in Africa or other parts of the third world.  There are others that fight for social justice and the elimination of poverty.  Vital.    I don’t see this kind of passion for economic development.  I never have.  Once in a while I’ll get a call, email or blog comment by someone in an uproar about the economic challenges facing their community but it is rare.

It’s almost like people think our economic destiny is inevitable but everything else – environment, social justice, poverty, etc. has a changeable destiny. If we fight hard enough, we can eliminate urban poverty in Saint John.  If we fight hard enough, we can secure pervasive language rights in New Brunswick.  If we fight hard enough, we can really address our literacy problem.

Economy?  Nah.  That’s predestined.

If you don’t have an economy, the rest of your fighting the good fight will be like building a house on eroding sand dunes.  You will end up with a very strong house – great social justice, harmony between linguistic groups, a pristine physical environment – slowly sinking into the water.

In fact, that kind of sums it up right now.

There was virtually no growth in total employment across the province during the year but goods producing industries lost 7,000 jobs (December 10 to Dec. 2011) while service industries gained 8,000.

Accommodation and food service added 4,000 jobs.  That’s strange to me. Information, culture and recreation employment made a come back too with 3,000 new jobs.  Even public administration added jobs (1,000) – 2,900 from November to December 2011.  That is the calm before the storm I suspect.

The 7,000 drop in goods producing industries is hitting young males the worst.  Those in the labour market between the ages of 15-24 now face a 23.4 percent unemployment rate (compared to 11 percent among females in that age group).  Across the board women are ruling the labour market.  The unemployment rate among females 25 years and older is only 5.5 percent compared to 9.1 percent for males.

Weirdness on a regional basis too.  The northeast part of the province added 1,300 jobs Dec 10 to Dec 11 – while Saint John and the Greater Fredericton region (central NB) shed quite a few jobs (central NB dropped 4k jobs and SJ dropped 2,100 jobs). Greater Moncton added 3,400 jobs after a couple of years of weaker job growth.

It all adds up to a moribund employment picture.  Education, health care and public administration added 4,000 jobs over the year (combined).  I suspect that will retrench a bit as governments look to fight deficits.

The second chart, shows total employment just among those aged 20-29 in New Brunswick.  Employment in that demographic is actually been dropping since it peaked in 2002.  Again I don’t know the 2011 numbers yet but they are likely to be down again.   Across Canada, employment in this demographic is up by seven percent in the past decade.

You asked.

Total Employment (000s)  - New Brunswick (All Age Groups)

Source: Statistics Canada Labour Force Survey.

Total Employment (000s)  - New Brunswick (20-29 Age Group)

Source: Statistics Canada Labour Force Survey. 

This is a good question. There are a couple of answers.

First, many of the sectors of the economy facing shortages are at the lower end of the wage scale.  These are jobs for which it is difficult to recruit people into the province to take on.  Normally, many of these jobs are filled by second income earners in households and by student workers.  If we were growing our mining or IT or life sciences sectors, for example, that would attract families to the province and workers for those service-based sectors (immigrants and migrants).  We see this impact in Saskatchewan right now.  Adjusted for population size, that province is attracting more than its share of immigrants both for work its growth sectors and all the service industries that are growing as well.

Second, the economics of a shrinking employment base in New Brunswick combined with an aging population are not tenable in the long term.   In Newfoundland you may be able to get away with it for a longer period of time because of billions of dollars worth of oil royalties.  New Brunswick generates the money to pay for its public services from old fashioned taxes on income, profit and land (very little royalties).

We are about to have thousands of people leaving the workforce via retirement (and the resulting 40-50 percent drop in average taxes paid) combined with increasing health care expenses.  If we do not replace those retirees in the workforce and even grow the employment base, the base of economic activity will not be strong enough to fund public services.

It’s that whole dependency ratio concept.  You should have 3-4 people working for everyone not working in a society (again one with limited royalties).  If you get to the point where there are more people not working than working you have hit a massive wall.

Critically, we should attempt to garner bi-partisan support in the Legislature for any new long-term vision. In fact, it would be helpful if the vision put forward by the Alward government was developed and published by a bi-partisan committee of MLAs. The government and opposition parties could (and should) vigorously debate the best tactics to achieve the vision, but they would all agree on the broad outline.

I forgot this is New Brunswick and if McKenna proposed it Lord must be against it and if Lord proposed it Graham must be against it and if Graham proposed it Alward must be against it and if Alward proposed it than Murphy must be against it.

I used to talk about how the basic formula for the Irish economic miracle was hatched with a whitepaper in the 1950s and the broad outline was followed by successive governments through the 2000s.   Too bad the Irish banks decided to blow up the economy over there by exposing themselves to billions in toxic assets alongside a massive housing bubble.  The underlying FDI, entrepreneurial and R&D mix in Ireland was truly amazing.

Maybe I am just too cynical.  Maybe there could be a bipartisan ‘vision’ committee that would come up with the next iteration of a broad ‘plan’ for NB.  Then the parties could haggle over the best way to achieve the broad vision (i.e. substantial new biz investment, repopulation of a younger demographic, productivity/innovation agenda, etc.).

As governments changed hands, this broad outline would remain in place.

Yeah, that’s crazy talk.

I guess for new readers of this blog or my columns it might be helpful to boil things down once in a while.

Essentially, what I am pushing for is a few main changes in policy and approach in New Brunswick – and with some differences in the other Atlantic Provinces.

One, we have to be more serious about trying to attract business investment – and the resulting jobs and taxes from that investment.   A chronic lack of investment here has led to the need for large scale federal transfers, higher than average personal tax burdens (including sales tax), ongoing out-migration – particularly of young NBers, an ongoing lack of immigration, an inability to amass personal wealth and savings anywhere near the national average (which will come back to haunt us in 10-20 years out), lower levels of education in the workforce (as out-migrants are more educated), timidity in the business culture/an unwillingness to take risks, etc.

Two, this business investment needs to be primarily tied to export-based industrial activity.  More Walmarts, local accounting firms, construction firms and other business activity that is focusing only on the local market is essentially just reshuffling the deck and not growing the pie.  Sure, there are efficiency gains in there and we want a robust, competitive local market but a serious growth agenda has to be tied to exports.

Three, I don’t believe that economic destiny is inevitable.  There are those – in the halls of power – that believe places like NB are destined to be chronic under-performers because of geography, lack of natural resources, back luck, etc.  I think this fatalism has actually embedded itself into much of our thinking – I can’t tell you how many times people have said to me “why would company x ever want to invest here?”.    That is a question with both a negative and a positive answer – the problem is the positive answer requires more work and creativity.

Four, I believe the federal government could be a far more important partner in regional economic development.  Not with more subsidies, not more transfer payments and not even the dreaded “picking winners and losers”.   The federal government does almost nothing to promote FDI into Atlantic Canada.  The feds have hundreds and hundreds of people working in trade and investment offices around the world and you can go ahead and ask the NB government how many investment leads from from the feds each year.   I haven’t asked recently but the last time I did, it had been ‘years’ since a bonafide lead for FDI came from the federal government.    This has always been stunning to me given that Canada has attracted billions in FDI in an average year from hundreds of multinational firms.  Almost all of that investment goes into Ontario, Quebec and increasingly Alberta, SK and BC.

The big provinces in Canada – all of them – have foreign offices promoting their provinces for trade and investment.  NB has none.  We have 600 people here in NB doing economic development but none out there where the actual foreign companies with the investment are located.  I’d like to see the feds – through ACOA – do far more to promote NB in foreign markets.  This should be done in very close collaboration with Invest NB.

Five, but they need something tangible to sell.  NB has been trying to sell cheap labour as its main feature for decades.  Now that is a very hard sell for a variety of reasons.  We should be developing specific opportunities – like natural resources, regional distribution/warehousing, specific areas of ICT where we are building strengths such as social media, and other sectors where we can clearly define a value proposition.

Six, we need to get our economic development focus off of “being a bank for industry”.  See many previous posts for my thoughts on this.

Seven, we need a large scale innovation and productivity agenda.  See many previous posts on this.

Eight, we need government spending to be aligned with economic development priorities.  As I have said many times before, NB spends the most per capita on pavement and asphalt and the least per capita on R&D.

In essence, this is what I want.  I haven’t had much success but I continue to chip away.  Governments think if they carve off a few million a year and plow it back into the NB economy through grants and loans to local firms that is their role when it comes to economic development.  That has always been wrong-headed.  You have to start with your vision and grand objectives and then work down to tactics (such as grants to industry).  The current approach clearly hasn’t worked.

What do I want from Alberta?   An understanding that the “out-migration solves all problems” view of the world hasn’t worked.  For decades, the only economic development viewpoint I have heard from Alberta is that people should be encouraged-forced to move from places like NB to Alberta and that would solve all the problems.  However, we de facto followed that model for decades and all we ended up with is going from the second youngest province in 1971 to the second oldest in 2011.    If Albertans really don’t like equalization payments, they would be far more supportive of efforts to build a solid economic foundation down here.  In a country like Canada – with constitutional protections tied to the quality of public services, there is almost a presumption of regional economic development or far more transfers.

With that in mind, I was scrolling through the comments and came across this one from a guy/gal in Calgary (most likely a guy but who knows):

What a surprise that this was written by someone from Moncton.  Someone who forgot to end his little tome with the signature salutation:  ”Oh, and please send money Mother.”  …articles like this, are just code for “send the oil money down east”.

This is so fun it deserves a response.

The data is the data.   This column could have easily been written by someone from Red Deer.   The only difference is that if it was written by an Albertan – it would look like gloating because the data is very pro-Alberta and Saskatchewan.  When it is written by someone from Moncton – for this guy/gal it is “code for send the oil money down east”.

I think I might have relayed this story to you but it is worth repeating.  Back in the mid 1990s (was it that long ago?) I was shortlisted for a job running the Economic Development department for the City of Red Deer.  They paid for me to go out there and meet with them for a day.  I was given a tour of the city, we had good discussions and I must have met a dozen or more folks for mini-interviews.   In the early afternoon I was taken out for lunch with a bunch of folks – city employees, etc. and I felt one of the guys was trying to ask me something but didn’t want to come right out and ask it.  Eventually, he said something like ” we do things differently out here – do you think you are ready for our pace of life?”.

I was quite surprised by the comment – I have always been a 60 hour a week guy – and I have to resist the temptation to work more than I do – even now in my old age and so I wasn’t sure how to respond to this euphemism for laziness.  I don’t recall what I said that day but I didn’t get the job.

The point is that it is easy and comfortable – and IMO intellectually lazy – to try and boil down highly complex issues to simple constructs.   New Brunswick is a have-not province therefore “someone from Moncton” must be angling for more oil money.    New Brunswick has a higher percentage of folks using EI so all New Brunswickers must be lazy.

In the end, the guy/gal with the comment should at least be consistent in his/her viewpoint.  If New Brunswick is so poor and lazy, I wouldn’t be able to ask my mother for money because she doesn’t have any.

But one thing that has changed is where the provincial government gets its tax revenue.  The article includes a breakdown of tax revenue by source in 1952 (see the table below).  The amount of the provincial government revenue from property tax has only decreased a bit since 1952.  However, the amount of revenue generated from booze is down 83 percent.  Likewise, the 1952 government got a pile of revenue from car taxes and gas taxes.   In 2011, those taxes were marginal to the provincial revenue.  The sales tax – introduced in 1952 – immediately generated nearly 19 percent of provincial revenues – now it is only 15 percent.  This seems strange to me given the expansion of consumer spending in the intervening years but I didn’t go deeper into the data.

The feds contribution to provincial revenue has remained remarkable similar.  In fact, over the years I have looked at the data – fed transfer payments have been in a fairly close range of between around 34 and 40 percent of the total.

What can we learn from this?  I suspect if you increased liquor taxes 5.5 times – to get to the 1952 level – you would have a revolt on your hands.  Even though advocates of public transportation and environmentalists would like to massively jack up gas taxes, it is unlikely any government could ever get 16.4 percent of its total revenue from gas tax again.   We have talked about this in the past – you could dramatically increase gas taxes – or add a carbon tax or whatever – if you dropped other taxes to compensate – but no government wants to go there (although BC has a carbon tax).

Provincial Government Revenue (% of Total)

Sources: 1952 – Canadian Historical Review LXIX, 2, 1998; 2011 – New Brunswick Government Main Estimates.

-New Brunswick’s wage environment has been remarkably stable – the wage spread between NB and Canada in 2011 across multiple sectors was similar to 2002.

-The only provinces to lose ground in a significant way were Ontario, Quebec and surprisingly BC.  NS dropped slightly  as well.

-Public sectors in Ontario – public administration, education and health care have widening their wage spread with the rest of Canada (but not by a wide margin) since 2002.

-Manufacturing wages in Ontario – relative to the national average – have been declining steadily since 2004.

He says:

But he [Harper] will spend ever more money on jets and jails, while taxing less as a fraction of GDP than any federal government has since the 1960s, and sending a constantly-increasing share of money to the provinces, which can spend those dollars as they like. You can hear the air going out of the federal government’s —any federal government’s — ability to “encroach upon legitimate provincial jurisdiction.” From day to day this prime minister zig-zags in ways that would break a snake’s back. From 2001 to 2011 the line is as straight as a ruler.

I guess depending on how you interpret the statement “sending a constantly-increasing share of money to the provinces”.  I read that to mean ‘more money’ to the provinces but I guess if the top line revenue is decreasing then the share could also decrease.

But the bottom line is that in the New Brunswick government budget of 2001-2002, the province received over 40 percent of its budgeted revenue from the federal government and by 2011-2013 that share was down to 37.6 percent.  And it looks like that share will decline again next year and in subsequent years.  So, for at least New Brunswick, the ‘flat tire’ federalism that Wells speaks about isn’t about more money to the provinces it’s about less.

At a time, I might add, when the needs are increasing.    New Brunswick is facing a tidal wave of boomers hitting the prime health care years and we are down to 37 percent and decreasing?

I come back to my previous analysis.  The massive explosion of non-renewable natural resources revenue – to provincial and federal governments – is changing the landscape in fundamental ways and the flat time vision is not likely to work.

However, the landscape has changed.   The underlying main cost driver of health care – boomers – were not a factor in the early 1990s.  They are now.  They are moving full force into the years they will need health care and they will not stand for a weakening of the system (and they will fight tooth and nail against any effort to means test health care).

The other thing that is somewhat worrisome is the feds posture towards the provinces during a time of structural change in the economic base of the country.  When Ontario was in an immediate crisis – Ottawa came in like the Knights of the Roundtable with billion dollar bailouts, a new ACOA in southern Ontario, etc. but the slow burn – they are signalling less interest in doing anything.

I know that Harper railed against ‘side deals’ with provinces while in opposition but I think he will have to revisit that idea.  Each province has different issues – weaknesses – challenges – opportunities – and a passive and disinterested federal government is not the right posture now.  The vision of the federal government doling out per capita cash like an ATM – is not the best way to strengthen the federation.

I’m a ‘states rights’ kind of guy – because of the big differences in regional economies.  Quebec is in many ways fundamentally different than Alberta.  But there are national issues – health care is one of them.  We want a national system that is more or less robust – more or less equivalent, etc.

Hold your nose, but equalization is also one of those national issues.    Thank the great Budda Stephen Harper didn’t make good on his promise to take non-renewable resource revenue out of the equalization formula.  Every province east of Manitoba would have been hit hard by that (except NL).

Other countries go to war over the equitable sharing of natural resource revenue (think Sudan, Iraq) – in Canada we have equalization.

I’m not the great champion of equalization – as I have said many times I think it has been a hindrance to long term economic growth and prosperity in the Maritimes – I think it should be viewed as a transitionary program as governments work to renew their economic base – but I don’t seem much wisdom in cracking down on it now – when we are in the midst of this new economic reality.

We are already seeing the impacts.  The feds cut their portion of the HST and Nova Scotia feels it has to take those two points.

The ‘have nots’ will have only so much wiggle room on the tax revenue side and on the expense management side.  If the feds through action or inaction foster even deeper gaps between rich and poor provinces – it will not end well.

Of course as has been pointed out a million times in the past few days, Ontario is now in the have not club.  That changes everything.  Over 70 percent of the population – of the voters – are in have not provinces.  Eventually Ontario will wake up to this fact and then the sparks will fly.  We are not talking NEP again but you can bet the cream skimming will continue.

Look for equalization negotiations to pick up in 2012 before the 2014 deadline.

Someone sent me an email questioning my math so here is the raw data.  In the column I say Alberta has 15.3 persons over the age of 60 per 100 in the population when the actual number is 15.7 (a slight difference) but the 50% figure remains the same.

As I have said before, we don’t have good data (public) on the cost of health care per person over the age of 60 but we do know the majority of spending occurs later in life.  Ergo, NB is at a distinct disadvantage in this area.

Ah, do you remember the good old days when Ralph Klein was threatening to opt out of federal health care dollars altogether?  Good times.

Population 60+ – NB Versus Alberta

Source: Statistics Canada. Table 052-0005 – Projected population, by projection scenario, sex and age group.

This new reality is one that is heavily reliant on non-renewable natural resources revenue.    We are starting to see a Canadian version of Dutch disease emerging where resource sectors boom while manufacturing declines.

I have put together two charts – one shows the change in export intensity from 2001 to 2011 (based on the first nine months) and the second shows the change in employment patterns (2011 based on the first 11 months of the year).

This structural change in our exports profile will have an impact on many areas of society – foremost will be government revenue.  Those provinces with lots of non-renewable natural resources to exploit are well positioned, those without are not so.

 Exports by Sector (per $1,000 total exports)*

*2011 – using total exports from January to September.  Source: Statistics Canada.

Employment by Sector (per 1,000 total Employed)*

*2011 – using the average monthly employment January to November.

Source: Statistics Canada Labour Force Survey.

The last time there was a change to the social transfers – Ontario and other fast growing provinces argued the formula needed to be adjusted to accommodate provinces with fast growing populations.  It was unfair, that places like New Brunswick, with stagnant populations, received the same.   So the program was changed to favour McGuinty’s position and NB took a something like $60 million/year haircut.  Now, places like New Brunswick are arguing that they have faster growing aging populations and that should mean more per capita health transfers.    Good luck with that.    What’s good for the Goose is only good for the Goose.

Now Finance Minister Flaherty is going to peg health transfer payments to overall economic growth (i.e. if the economy grows 4 percent, the provinces get a 4 percent increase).    That sounds reasonable – I have been arguing for years that the growth curve on health care is unsustainable – but it is unlikely that provincial governments will be able to bring down health care spending increases within the overall GDP growth rate – so they will have to make up the difference.  This will put a far greater burden on the ‘have not’ provinces because their ability to raise more revenue is more constrained compared to a place like Alberta.

Even equalization – I talked with Finance rep a few weeks ago that said something like “Ontario moving into the Equalization pool is scary because that province could end up eating into NB’s share in a big way”.

The point is these things don’t happen over night (not usually).  The Harper government has already guaranteed the 6 percent health funding increase through 15-16.  They are now talking about after that.

The bottom line is that New Brunswick will not be able to rely on federal transfers to the extent it has over the past 15 years or so.

That brings us back around to own source revenue generation.  That comes from pulling more blood out of the stone (or turnip as my dad used to say) – through higher taxes – or from building a stronger and broader economic base from which to extract tax and royalty revenue.

Hence, my raison d’être.  

We have been chatting recently about this disconnect between the public expectations relating to public services and the social safety net and its support for the economic development efforts need to pay for those public services (and the social safety net).  There is no contradiction between protesting on one day to have a mining project scuttled and protesting the next against cuts to the local hospital.

Herron thinks social media has changed the dynamic in a fundamental way.  Chris Baker believes the traditional media – increasingly marginalized by those same forces – latches on to any wedge issues even harder these days because it brings them into relevancy and gains them more market share for at least a short time (I am paraphrasing – I hope I got that right).

I honestly struggle with this.  I live in a world of data.  I see a trend in data – i.e. public spending has been growing at an average rate of 6.4 percent since the early 2000s – and I try to draw conclusions based on evidence.  I haven’t (at least yet) ignored hard data and shaped my views on the number of  ’likes’ on a Facebook page.  In fact, I haven’t been particularly good at marketing this particular blog.

But, in my gut (yes – I am a victim of Gladwell’s Blink phenomenon) I think this new reality matters – the intersection between social media and public policy and at the same time people rushing back to the traditional media seeking credibility.  I think most people these days are shaping opinions based on what they read, see and hear on the Internet but they are coming back to the traditional media (CBC, Times & Transcript, Rogers News, etc.) to try and validate their hunches.

That puts even more pressure on traditional media to present the full contours of public policy issues.   How we handle health care moving from an era where 2,000 people per year moved into their retirement years to one where 6,000 are doing so?    The national economy is becoming ever more reliant on natural resources industries while New Brunswick’s traditional natural resources base is receding.   Richard Florida and others are telling anyone who will listen that only the mega cities will attract creative industries in the future.   New Brunswick still has the second highest rural population in Canada – and I believe in North America.  We still suffer from an annual migration of our young people.

For each of these you can easily see how a myriad of views could be proffered in the social media space.    Fight against health care reform at all costs – how dare they?    Fight against natural resources development – I just want to be left alone and in peace.    Forget about trying to attract the creative industries – people should move to where the jobs are in the MTV.    We should immediately eliminate any focus on rural New Brunswick and focus on our urban centres.  No, wait, our urban centres are doing fine – we need to pour more money into rural NB.    As one parent of three kids that all left NB recently said to me “oh well, it gives me a reason to visit Calgary and Toronto I never had before.”

I am glad that guys like John Herron are worrying about these things and calling me up while washing dishes to chat about them.

However, while not as meaningful the latter are valid forms of protest.

I continue to get haranguing emails about my stance on shale gas development – one person this week going so far as to ask me to show my wife the web page of a lady in Alberta who is suing the government for $3 million.  For him, I guess, that constitutes some form of proof of the evils of shale gas development.   Unfortunately, I had to inform him that my wife is even more supportive of shale gas than I am.  She doesn’t go for hype – she tends to be pragmatic.

But I continue to maintain that social license matters.  If the people don’t want it, you can be sure it won’t happen.  Even if the Tories continue, the Liberals will use it as their toll highway, or HydroQuebec wedge issue to get elected next time and then shut it down.

If you read Wilbur’s book on NB history since the 1960s, there were serious protests on a wide variety of environmental issues but they tended to be localized.  In the age of Facebook , Twitter and in this case – especially YouTube – you get widespread outrage in nanoseconds.   See Gladwell’s Blink for details.

But as Mr. Spock said, “as a matter of cosmic history it is more easy to destroy than create”.

You can get thousands of signatures on an anti-shale gas petition and the last time I looked the pro-shale gas Facebook site had a couple of hundred poor souls that like it.

If you step outside shale gas, I think this is a new kind of politics and social interaction.    These same techniques will be used to cut down other mining, municipal reform, toll highways, tax rises, health care reform, education reform – any of the big policy issues will be subject to this effect where thousands of angry people will mobilize against and there will not be an equivalent ‘for’ side.

But, that’s democracy.

It’s clear we are in for some tough times ahead as a result of government belt tightening and not much private sector economic growth.

There are some green shoots.  The new potash mine is one – I am hearing there may be more on the horizon.   Mining is a high value sector with the bonus of significant construction activity on the front end.

NBers need to hunker down and expect a few years of slow growth, little job creation and rising taxes.

He is a guy who understands that regional economic development needs to be about identifying, developing and promoting specific assets in a local area. Just trying to position a region as another ‘low cost’ location with a ‘great lifestyle’ is not good enough.

He has worked to promote natural gas – a key asset in his region, other manufacturing opportunities and natural resources. He was the first to connect the Millstream potash project with a potential investor that turned out to be the one winning the provincial RFP announced this week.

The company said without Enterprise Fundy they wouldn’t be in New Brunswick.

That’s economic development, my friends.

Interestingly, immigration (different than the migration chart below which is interprovincial) also picked up in the early 1970s and now again in the late 2000s.

I argue that given the wave of Boomers who are starting to retire and are about to retire, we need a massive influx of young migrants/immigrants over the next decade and more.  In the last 10 years, the population aged 65 and older in New Brunswick rose by about 20,000 people.  In the next decade, it will rise by something like 58,000 people.

Net Interprovincial Migration (four Atlantic Canadian provinces combined)* 

*There was migration between the four Atlantic Provinces but on a net basis this shows how many moved out of the region to other provinces in Canada.

Source: Statistics Canada CANSIM Table 051-0018.

One of the problems – and I find this worrying- is that many people seem to ignore government scientists and environmentalists.  Every state where the shale gas industry is under development is advised by internal and external expertise and I would find it easy to believe that one state/provincial government was blinded – but all of them?  Even NY now is moving towards lifting its ban on shale gas development.

I suspect that this will get a negative reaction but I have met a lot of government scientists in my day and for the most part I find them very credible.  They may on occasion be influenced by politics but to say that academic researchers or private citizens do not have vested interests would be crazy.

Anyway,  all that to say someone sent me a very interesting study on how scientists conducted a risk assessment on a type of oyster aquaculture in New Brunswick.  This is a tricky industry as well.  There are many opponents and many supporters and DFO scientists seem to do a robust job of laying out the issue, evaluating the current research and then drawing conclusions.  I particularly liked their risk assessment matrix.

DFO Habitat Management Program’s Risk Assessment Matrix

Alternatively, they will accuse me of sacrificing our environment on the alter of economic development.  That’s silly.  New Brunswick has made monumental strides in its environmental protection in the past 40 years.  In the 1960s and 1970s, NB factories were dumping toxic effluent into our rivers and air – now virtually nothing.  We were cutting trees right up to the edge of water ways and had no real efforts at forest renewal.  Now there is very little industrial pollution at all and our forest management practices (at least some firms) is world renown.

I refuse to agree that economy and environment is some kind of Solomonesque trade off – one or the other.  I also really dislike the idea of outsourcing our carbon emissions in the name of being green.  Sable Island natural gas is drying up.  It is distinctly possible that we will be importing our natural gas from the U.S. within a decade – and most like it will be gas extracted with hydraulic fracturing.    We outsource our carbon emissions and the economic benefits of the natural gas industry to the U.S.

Net Interprovincial Migration – New Brunswick – Ages 15-24

I thought I would take a look at the changing profile of NB exports over the past 20 years.  As we have talked about the refinery expansion skewed everything as it went from $600k sales in 1992 to over $8 billion in 2010.  So we need to extract the refinery exports to get a better picture and we still see that pulp, paper and paperboard has declined significantly in relative terms.  Oil and gas extraction (McCully and LNG) is now over $500M/year.  Sawmills are back to their historical role as as percentage of exports (around 6 percent).

NB Power is exporting less and less power to the states.  Aquaculture seems to have stabilized.   When the Brunswick Mine closes, you will lose a big chunk of exports.   You can see the impact of potash exports on Non-metallic mineral exports.

Of course we do not track services exports in the same way as we track goods exports and so the call centre exports are not shown here.

NB Exports (Percentage of total)

NB Exports – Less Refined Petroleum (% of Total)

Same for columnists.  I can write a dozen articles and they may never get read.  I write an article on shale gas on the Globe’s  Economy Lab and it is the most read story of the day.  Although, quite frankly, I wish the issue would go away because I also attract more hate email about this stuff.

I will say this about the media.  There is a kind of herd mentality to it.  If you do a Google News search for 2009 on the term ‘fracking’ you will get about 100 hits.  So far in 2011 you will get 5,000 hits.    Companies have been ‘fracking’ in New Brunswick albeit it in a limited way for years.  But apres Gasland, all bets are off.

I also searched for the term ‘hydraulic fracturing’ and the results were very interesting.  Virtually every single story about ‘fracking’ was negative – sometimes intensely negative.  Stories about ‘hydraulic fracturing’, by contrast, were about 50/50 positive and negative.    Of the list I scanned, hydraulic fracturing is the preferred term in industry and business publications and ‘fracking’ is the preferred term in normal media.

Don’t know what that means but it is interesting.

As normally the case in Canada, there is a wide variation in employment growth depending on your location.  Saskatchewan has led total employment growth 2006-2010 while NB pulled up the rear.  In CMA and CA areas, NL actually saw a decline – I didn’t check but I suspect much of that is in the CAs outside St. John’s.

For the most part, rural areas inside CMAs and CAs are doing well – double the national growth rate in employment from 2006 to 2010 but again there are swings by province.  Saskatchewan – which has the fastest employment growth in the country since 2006, actually saw a decline in rural fringe employment during the period (but strong growth in rural employment outside CMAs/CAs – probably related to the mining and oil/gas projects).

Rural areas not near an urban centre and not small towns (the last category below) were the only areas that saw a small employment decline from 2006 to 2010.

Employment Growth 2006-2010 – Total urban and rural areas

Employment Growth 2006-2010 – CMAs and CAs

Employment Growth 2006-2010 – Urban core

Employment Growth 2006-2010 – Rural fringe

Employment Growth 2006-2010 – Small towns

Employment Growth 2006-2010 – Rural areas

As might be expected Moncton saw less ‘destruction’ and more ‘creation’ compared to Saint John in the 1996 to 2006 period but you have to remember that much of the creation is influenced by the destruction.  If you lose jobs in manufacturing, for example, that cuts down consumer spending and lowers a whack of service jobs too.

Moncton saw the final purging of its railway history – with lots of jobs disappearing related to the CN Shops.  It also saw a structural shift in the number of secretaries as they migrated to call centres and were not replaced.   Don’t ask me why nannies and babysitters took a hit.  I have said for a while that Moncton’s wholesale sector has been in decline while it has been growing in Halifax.   Not sure anyone at city hall or anywhere else noticed.  You see that trend in the numbers here.

On the winning side of the ledger, call centres, IT, – some trucking occupation expansion – no doubt led by Mr. Armour and his related companies.   Insurance jobs in Moncton which have taken off in recent years – show signs of growth between 1996 and 2006.

Full list of all occupations for download here.

Moncton CA – The Net Effect (1996 – 2006) – 3 Digit SOC Codes

Moncton CA- The Net Effect (1996 – 2006)

But when we drill into the creative destruction – jobs going away versus jobs starting – you can get a very interesting picture of the structural shifts in the economic base of a jurisdiction.

One of my favourite examples of this is Saint John.  The CMA area from 1996 to 2006 saw limited net new job creation from 1996 to 2006 – under 5% – but profound changes in the occupational structure.

The following chart shows a few of the occupations that shed jobs and a few that gained jobs over the decade.  The economy lost hundreds of jobs in blue collar occupations (and hairstylists for some reason) but added several thousand in IT and call centre jobs.    As with other cities, some of the call centre activity stole workers from the secretarial pool – and those jobs were not made up.  There were 500 less secretaries in Saint John in 2006 compared to 19996.  There seems to have been a shifting out of lower end finance occupations (SOC B53) and into higher end ones (B01).

If you add up all the gaining SOC codes and all the declining SOC codes you get the following graph.  The gaining occupations (IT, customer contact centres, health, financial) added 13,700 (on a base, by the way of only 64,000 total jobs in the economy) and the decliners lost 9,455.

That is why that little three letter word ‘net’ matters.

By the way, because I like you so much I have created a PDF table of every single three digit SOC for the Saint John area and its 10 year employment shift and put it here.   You will note that travel counsellors is one of the fastest growing occupations in Saint John. I’ll let someone down there figure out why.

PS – enjoy this kind of data while you can.  The scrapping of the long form is going to make these kinds of Census to Census comparisons very difficult (required vs. opt in data).

Saint John – The Net Effect (1996 – 2006) – 3 Digit SOC Codes

Saint John – The Net Effect (1996 – 2006)

This blog has been around now going on eight years.  Thousands of posts, – on average about one a day going back eight years.

Let’s keep chatting.

Although I have to say that Kurt Peacock’s micro-blogging on Twitter is increasingly making this site irrelevant.  Wait until he gets free access to CANSIM next year.   He may lock himself in a closet and never be seen again.

It’s not a trick question.  It’s a straight forward question.

If you are full of glee because you were able to bring down an industry that might – just might – have been an important economic driver for the province, I don’t understand it.  If you are thrilled that you relegated hundreds of mostly blue collar New Brunswick males to have to work in Alberta or Labrador instead of their home province laying pipeline, building infrastructure, etc., I don’t understand it.   If you are happy to deny the government of New Brunswick potentially tens of millions of dollars in revenue to pay for public services, I don’t understand it.

If you soberly review the facts and come to the conclusion that the risks of shale gas development are just to great, it should still be a sad day.  We lose an economic opportunity – one that will be pursued all over North America – because we just can’t accept the risk.

For folks such as that, I respect your position.

For folks that are gleeful, I do not.

Dr. Thomas’ disgruntlement with the use of incentives to lure investment is well placed.

I have said it many times before but it is worth restating that my view on incentives is simple. It is very hard to unilaterally disarm.    Take the issue of digital tax credits.  These are widely used to incentivize digital media across North America.   NB doesn’t have a program and this is a main reason we have almost no video game and related development here.  The few firms that are here are threatening to leave (understandably) because in neighbouring provinces they can get 40 to 60 percent of their development labour costs covered by these programs.

Like nuclear weapons, if jurisdictions across North America got together and agreed on a framework to stop the spread of these incentive programs and eventually to reduce them, it would be a good thing.

I am not even sure companies would balk at this.   Most tell me the reason why they seek incentives is because their competitors receive them and they don’t want to be put at a competitive disadvantage.

In a world with no grants, low interest loans, tax breaks, etc. jurisdictions would have to compete on core value elements such as skilled labour, infrastructure, R&D environment, tax rates and others.

I think reducing or eliminating these incentives will be very hard but it is worth pursuing.  Dr. Thomas should petition the National Governors Association or other broader groups to get a dialog started.

If he can do a more comprehensive job of linking the incentive wars to the declining competitiveness of America for investment, he’ll have a stronger argument.

I’ll make one final point.  Many people say that the main reason why governments (at least in Canada) offer grants and loans to companies is the lack of access to traditional sources of capital. They claim banks are not interested in peripheral places and other sources of capital are also reluctant to invest in places like rural New Brunswick.  That may be so and, if so, I don’t see a problem with a government supported bank offering access to capital at normal market rates.

In fact,a  quick scan of the last eight budget shows very little discrepancy between budgeted and actual equalization.  Then this year – $150 million.  Curious.

That’s the problem.  Just looking at the provincial trade balance – if you extract the oil coming into the SJ refinery and the refined petroleum products coming out we have gone from more than a $2 billion trade surplus a decade ago to a $700 million trade surplus today.  And, of course, much of what we export is lower value added commodities while we import all the higher value stuff – cars, trucks, buses, computers, engineering software, whatever.

The big caveat is that the Stats Can export data doesn’t include services which would help the NB statistics – all the call centre stuff is export-based, as is some of our engineering and IT sector work.

I think I’ll write a more detailed column on this later in the week.

Anyway, I have a few thoughts on the Thrown Speech below for what they are worth.  I read the speech quickly last evening and picked out a few economic development-related sections:

“Your government has been working with industry to design a digital media incentive to help encourage economic growth and job creation in this important sector of the new economy. Details of this new program will be announced as part of the 2012-13 Budget.”

If you search this blog, you will see I make a huge distinction between a digital media tax credit and a film tax credit.  When I made this point after the last budget, I got pilloried by those who support the film industry but I continue to maintain there is a significant difference.

“It needs a pro-active, made-in-New Brunswick economic strategy that will invest in high-growth opportunities and ensure our labour force has the skills to match  industry’s needs so we can have more people working.”

Anyone who knows me will remember I really dislike this term ‘made in New Brunswick’.  I realize it is a political term that plays to a base of voters but I strenuously felt that Bernard Lord and his advisors saw this as a euphemism for “not Frank McKenna’s strategy” and I fundamentally disagreed with this.  New Brunswick needs to be more open than ever before.  We need a “made in the Globe” strategy – we need more investment, more immigration, more researchers – flooding into New Brunswick – all parts of New Brunswick.   So, if this term ‘made-in-New Brunswick’ is politics – fine.  If it means turning even more inward – not fine – but we have a hint below it may be the latter.

“The Department of Business New Brunswick will identify opportunities for growth and develop focused strategies for investment in sectors. These strategies will complement existing strategies in traditional sectors of the economy as well as charting a course for developing emerging, knowledge-based opportunities. This is not to suggest that projects in other sectors will be excluded from consideration, but rather, the focus will be on the potential for growth. This potential will be measured in terms of above-average paying job opportunities, higher-than-average investment in research and development, higher-than-average productivity, and higher-than-average value-added export potential.”

Standard boilerplate stuff but it does start to get us away from the watered down tea variety of economic development we have seen in the past.  We have something like 600 people in this province paid by government to do ‘economic development’ and they mostly provide banking services.  Forcing the system to think about how you grow sectors – the kind of investments that need to be made, the kind of alignment between industry and research, industry and workforce development, industry and investment attraction, etc. – is desperately needed.  If you don’t like ‘picking winners’, then let industry lead the process but ignoring the very real need for us to be competitive in specific industries would be a mistake.

“Working in partnership with the federal government, the other Atlantic provinces and private sector stakeholders, your government will continue to promote the strategic benefits the Atlantic Gateway and Trade Corridor can offer to international business and trading partners. New investment will ensure New Brunswick is poised to grow international air cargo and cruise passenger opportunities.”

How’s about working with Halifax on the Halifax-Detroit trade corridor?   In my experience, most of the ‘cooperation’ around the Atlantic Gateway has been each province jockeying to ensure they get as much of the pie as possible.  Drop that.   Just putting this region back on some serious trade footing – cargo coming in and going out – would be a longer term win even if the actual province on the coast got more of the short term benefit.

“In connection with, among other things, the objective of attracting out-of-province investments through trade missions and increasing the number of immigrants to New Brunswick, your government will make structured, targeted efforts to build on our international operations and networks for the benefit of our province.”

This, my friends, is genuinely new.  We have 600 people involved in economic development – we spend tens of millions of dollars – we have over a dozen different funding agencies and departments (in a province smaller than the city of Winnipeg) but we have nada – no resources – out there in the world where the actual investment, trade, research partnerships, immigrants, etc. is located.  I saw this as the strangest part of the system 20 years ago when I first moved back to New Brunswick.    Our idea of ‘market development’ is sending a few companies over to France for a week.

Even ACOA – the most logical of all agencies to be strengthening an international presence because of its cousin – DFAIT- seems to be pulling back the little work they did in investment attraction and international trade.

Anyway, this is about maturity in our systems and processes.  The big fear in development an international presence is that the people/resources will be far from home/far from oversight.  Well, we have 600 right here – close enough to touch and how’s that oversight thing working out for ya?  Deploy people.  Hire international experts.  Invest in targeted international markets.  Partner with ACOA.  Partner with the other Atl. Provinces.  Build relationships – university to university – industry association to industry association – Chamber to Chamber – diaspora group to diaspora group.  Be smart about it.  I’m not suggesting we move half the spending out of province – at least initially – but like just about every province west of New Brunswick – have a real international presence.

We’ll see.

I know people don’t like the word ‘greed’  - it is a term with a very negative connotation – but if we understand where tax revenue is generated and if we want to keep taxes low on those in the lower and middle bands – we need to get more folks at the higher end.

It is certainly true that folks earning higher incomes have a range of tax avoidance opportunities but in the end they still get large tax bills.

Smell a little better now?

Share of total income taxes paid by quintile – New Brunswick (2009)

Source: Statistics Canada. Table 202-0501 – Income tax, by economic family type and after-tax income quintiles, 2009 constant dollars, annual (table), CANSIM (database)