It's The Economy, Stupid

First the good news. The latest report from Transport Canada confirms that the Greater Moncton Airport has become the major airport in New Brunswick. In September 2004, there were 3,152 commercial flights out of Greater Moncton (domestic and transborder). There were 2,261 in Saint John and Fredericton combined.

In addition, our flights per capita (a statistic that I have watched for years) are starting to creep up. In my opinion, flights per capita is a key economic statistic as it compares how the local population is interacting, in relative terms, with the outside world.

In the early 1990s, before WestJet, CanJet, et. al. there were less than 10 flights per month per 1,000 population out of Greater Moncton. Now that number is up to 26 flights per 1,000 population.

Of course, the ongoing issue of transborder flights is a major problem for Moncton. Despite having a catchment area of over 1 million people within a 3 hours drive, Moncton only had four (4) transborder flights in September. Halifax, by contrast, had 981 commercial transborder flights. Fredericton had 123 and even Saint John beat out Moncton with 15, commercial (non-private or government) transborder flights.

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Did you know there are over 400 companies employing some 16,000 in New Brunswick in the food production business? Over 100 of them are right here in Greater Moncton. It is a major economic generator for the province.

However, according to one expert, New Brunswick’s food companies have been very slow to embrace the health food market even though the industry is one of the fastest growing in the world with global sales of over $300 billion per year.

For example, many of our seafood processors could be extracting oil from fish livers to serve the fast growing market for Omega oils.

From an economic development perspective, I have to ask where is the provincial government on this issue? Why aren’t they encouraging producers to look at this untapped market?

‘Innovation’ is the buzzword in New Brunswick from the Premier’s Office right on down. Everyone loves to throw it around like it means something. However, when it comes to this very practical application of innovation in one of New Brunswick’s top industries – there is almost no effort to make anything happen.

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According to Statistics Canada, almost all population growth in Canada from 1971 to 2001 was concentrated into four areas of Canada: Extended Greater Toronto, Greater Montreal, the Calgary-Edmonton Corridor and Greater Vancouver. Collectively, the rest of Canada grew only slightly or declined during this thirty year period.

Some suggest that this is a natural phenomenon – the increasing urbanization of Canada. Places like Atlantic Canada, northern Ontario, etc. are destined to decline.

Interestingly, our neighbour to the south has seen the opposite trend. While the top urban areas in Canada have increased significantly, the top urban areas in the U.S. have only grown moderately. In fact, New York, Boston and Chicago (their big three urban areas) all had tepid population growth over the past 15 years.

The top growing area for the past 15 years in the U.S. has been the southwast: Nevada, Arizona, Idaho, Utah and New Mexico. The southeast has also grown strongly – places like North Carolina, Alabama and Georgia.

So in Canada – growth is in our top urban areas and in the U.S. growth is in their ‘New Brunswicks’.

I know there must be an interesting lesson here somewhere…..

Stay tuned.

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I recently heard that Moncton-based Hi-Tech Gaming was being acquired by Nevada-based IGT. This follows the blockbuster acquisition earlier of Speilo Manufacturing by another U.S. company, GTech.

Some economic developers shudder when they hear that a locally owned and controlled company is being taken over by a foreign company. They fear that the commitment to the local market will wane as the power base of the company shifts to another community – typically in another country.

I, on the other hand, applaud these moves. This is one of the best ways to attract foreign investment into the community. This is beneficial in a number of ways including:

• The new money coming into the market may be spent by the sellers in the local market (they usually build large new houses and purchase waterfront property – which is good – but I am talking about investing in other companies in the community that need the money).
• With each acquisition more and more foreign companies are getting to know our market and its strengths – this in the long run will raise awareness of the community.
• If Moncton is a good place for business – and we think it is – these companies become prime targets for further investments (i.e. Speilo hopefully will become a major manufacturing centre for GTech).
• These foreign companies bring much needed expertise and know-how into the local market.
• Finally, and crucially, these foreign companies open up new markets and marketing channels for the products and services developed right here in Moncton.

So are the naysayers right to be worried? Yes. Many times companies buy out firms and then close them or downsize them. It is a common occurrence. However, the risks associated with not becoming a global city; of not attracting foreign investment; of not leveraging these relationships into new jobs and economic opportunity are far too great.

So I say bring them on. I encourage all of Greater Moncton’s locally owned firms to consider bringing in external investment and expertise. This will bring much needed investment capital into the local market and give some form of payback for all the entrepreneurs who have been slaving away for many years for only a limited return.

I once heard a story of two partners in a local business who quarreled and separated the business into two different companies. The one partner sold 50% of his company to a Toronto-based investor. This partnership opened up significant new markets and opportunities for the Moncton firm as well as brought in much needed management expertise. In addition, it put several million into the pocket of the Moncton owner who then spent a large portion of it in the local market. The other partner would not give up any control and has not expanded, not generated any new investment and is plodding along trying to generate wealth out of limited after tax profits. Which scenario is better for the community? The one that led to millions of new dollars spent in the local market and to the expanding of the business or the one that has led to minimal growth and no new investment?

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‘Twas the night before Christmas and all through the house, not a creature was stirring not even a mouse – and I have the misfortune of my mindshare being occupied by Premier Danny Williams of Newfoundland and his crazy idea to take down Canadian flags in protest of the ‘humiliation’ that the Federal government has placed on Newfoundland and Labrador over the offshore oil & gas revenue deal. Is this just posturing by an ungrateful Premier or a last ditch, desperate attempt to fix the province’s long standing economic problems?

Before I answer that, indulge me by listening to a short story.

There is a region in North America that is endowed with unbelievable natural resources. This area is blessed with large stores of offshore oil & gas. This area has vast mineral deposits. It has large forests for timber. And there’s more. This area provides electricity to something like 20% of the entire population of North America. And if this isn’t enough, this area has (at least historically) one of the best fisheries in North America. To top everything off, the people are known all over for their strong work ethic.

Where is this mythical place with such abundance and economic wealth? Is it Texas? Is it Alberta? California? No, it’s little old Newfoundland and Labrador. Yes, the poorest province or state in all of North America. Yes, the same Newfoundland and Labrador that without the hundreds of millions of dollars in Equalization and Employment Insurance subsidies would be not much better off than your average third world country.

There has been much debate as to why Newfoundland and Labrador has not developed as a strong economy given its vast resources. Some blame the Federal government for mismanaging the fishery. Some blame Quebec for extorting Labrador in the Churchill Falls hydroelectric project. Some blame the very Equalization and EI programs that were in spirit created to help but in actuality have hurt.

I don’t claim to have the answers. I would, however; render an opinion. This fight between Newfoundland and Ottawa is not about more pogie or Federal welfare. It’s about a frustrated Premier voicing the frustrations of an entire province. Newfoundland lost nearly 10% of its population in the past 15 years. In addition, it sits with chronically high unemployment. Things must change or that province will cease to exist – it’s that simple.

So to the hundreds of Ottawa bureaucrats and politicians that are wringing their hands tonight lamenting the ungrateful Premier and his band of Newfoundlanders – here’s my message. At some point even welfare bums realize they must change their life or suffer the consequences. And when that bum decides it’s time to change, don’t bog him down in your bureaucracy with its disincentives to change – disincentives to improve – disincentives to take initiative. Instead of clawing back Equalization when a province like Newfoundland finds a little economic success – I say increase funding.

I think this is a golden opportunity for Ottawa if it would take its collective head out of the eggnog for a few seconds. Give Newfoundland what it wants – even more. But attach one condition. That the Feds and Newfoundland develop a partnership a la Ireland to put Newfoundland on the road to economic recovery. Set targets. Celebrate success.

Who knows. In 50 years, Newfoundlanders may be the ones bailing out Alberta after their oil revenues and their bloated egos have run out.

We can dare to dream, can’t we Premier Williams. Happy New Year.

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The Trouble with normal is it always gets worse – Bruce Cockburn (1983)

Unknown to most casual fans of Bruce Cockburn, he is actually the quintessential contrarian railing against the Right and the Left. He is a pacifist with a gun collection. Against abortion but for a woman’s right to choose one.

But I digress.

The theme of this blog is the trouble with normalcy. Things are pretty normal in Moncton right now. Chugging along at a healthy pace. New retail. Some new manufacturing. A new bridge. Normal.

The problem is that normalcy can bring complacency. And in the world of economic development that can be deadly. The sense of urgency that was felt in Moncton in the late 1980s permeated all aspects of local economic development. The communities cooperated, rivals put aside their differences for the good of the area. Decisions were made speedily. Desperation is an excellent motivator.

However, now we see signs of the trouble with normal in the Cockburnian sense of the word. There is competition and in some cases outright hostility between the communities. Business leaders that once cooperated now squabble about the course of development. And decisions that once were made quickly and effectively are now taking years – if they are happening at all. This breaking down of the solidarity that was once Greater Moncton has not had a major impact on our development.

…As of yet.

How do you instill a ‘sense of urgency’ when things are humming along? When the local papers spew forth bright, cheery commentary with no critical thinking? I would argue that the stakes are higher now than they were in the late 1980s because now not only is Moncton expected to take care of itself, it has become the anchor of the provincial economy. If the Moncton economy falters, the provincial economy is doomed.

I would urge all the players involved – from the City/Town halls, to the economic development agencies to local business leaders – to put aside petty differences. To think about the community as a whole again. To re-engage themselves in the process of local economic development. To invest time and effort (learn from Saint John on this one). To make sure, darn sure, that the next 10-15 years for Greater Moncton are at least as successful as the previous ones.

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I hope I don’t sound too critical of the folks charged with developing the downtown. I know the time and effort that many people have put in. However, I am a little cranky. Greater Moncton has undergone a significant economic expansion over the past 10-15 years and the only evidence of that in downtown is what? – A call centre tucked off main street where no one can see it.

Downtowns are the focal point of a community. Some have said that the downtown is the truest reflection of the economic health of a community. In downtown Moncton, however; we have not had any significant new developments since the City Hall complex in the early 1990s.

Four years ago, Verdiroc was tasked with developing a grand vision for the development of a key section of downtown. Do you want to know what has bothered me about the Verdiroc deal all along?

Very simple.

It doesn’t seem like they want to put any skin in the game.

In almost any development opportunity, there will be some level of risk to the developer. That is a cost of being in the real estate development business. However, everything coming out of Verdiroc involves almost no risk on their part. A new justice building finance by the province (conveniently developed by them) and a new convention centre financed by government (conveniently developed by them). Where is the risk? The other proposed developments – as I read things – are just that – proposed.

Maybe it’s time to jetison Verdiroc and try and find a partner that will be a ‘partner’ – as in share the risk.

The future of the downtown is at stake.

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A recent blog posted here by yours truly questioned the idea that a strong arts & culture community is a direct economic development driver. Some of you took this to mean that I do not support the Bohemians. On the contrary, I am a huge supporter of the arts and I think a strong cultural identity is vital to a community’s growth over time.

As Statistics Canada has just released 2003 data on artistic industries in Canada, now might be a good time to assess how we are doing. Because you will undoubtedly never see this data in the local newspapers, you will have to wade through this painful blog once in a while to unearth a few real statistics.

As the table below shows, New Brunswick’s performing arts sector (music, theatre, dance and opera) is dead last in terms of theatre, music and opera revenues (adjusted for the size of the population). Now, some of this may be related to the fact we are a small province and cannot attract a lot of big productions. but that argument doesn’t hold when we compare to PEI, Nova Scotia, Newfoundland, Saskatchewan, etc.

In my opinion, we should be able to do better than this.

But as with all things, it’s a matter of focus.

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The Telegraph-Journal’s Lisa Hrabluk fancies herself a bit of a thinker. Instead of piling on the drivel, some of the time her columns reflect that she has taken the time to think the issue through.

Not this time.

In her Saturday column Time has come for province to rethink RDC’s role, Hrabluk adds her name to the growing list of mostly journalists and political opportunists calling for a reduction in money spent on regional economic development. I, for the life of me, can’t understand this. We are right to question ‘how’ the money is spent but we should be calling for increasing regional development dollars – not reducing them.

I have studied economic development for over 15 years. I have reviewed the programs in every province and U.S. state. I have travelled to Ireland to study the Irish miracle. I have written dozens of studies and reports on the issue of regional economic development – and one conclusion I can make. The areas that take economic development seriously (i.e. spend the most dollars) – by in large – get the best results. Ireland is a great example. But also Georgia, South Carolina, Alabama – U.S. states that have gone from the bottom of the pack to somewhere north of that – in as recent as 10-15 years. And how about Ontario. Study after study has shown the huge amount of government money that has quietly flowed into the auto sector, the high tech sector (talk to John Manley) and others. And let’s not get started about Quebec and its aerospace and biotech sectors. We shouldn’t leave out Alberta – whose agriculture sector (by the way agriculture is an industry, Mr. Klein) has recieved far more government pogie than any industry in New Brunswick could have ever dreamed of.

Conversely, places like New Brunswick and Maine spend the least per capita on economic development and they get predictable results.

Madame Hrabluk is a particularly troubling example of getting this issue dead wrong. She is heading up this so-called Next NB initiative which is supposed to dream up the New Brunswick of the next generation. Unless we get serious about economic development, build up new industries and reverse the population decline, Mme. Hrabluk’s 21 Leaders for the 21st Century may have to be content leading each other around – because they may be all that’s left.

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I had the pleasure of going to see the Festival acadien de Caraquet’s Ode a l’Acadie this weekend. It was awesome. These are truly gifted muscians and performers. However, as is usually the case, my mind wandered during a particularly slow song to economic development issues. These artists, each one, recounted the communities of their birth with great fondness. Places like Edmundston, Bathurst, Tracadie-Sheila, Mont-Carmel (in PEI), Caraquet. These communities have been incubators of top notch artistic talent. In addition, many (perhaps the majority) of New Brunswick’s new crop of successful entrepreneurs were born and raised in these communities.

Why then are we doing almost nothing to try and keep these communities alive? In just five years from 1996 to 2001, almost all of these communities suffered population decline (Edmundston down 2%, Bathurst down 6%, Caraquet down 4.5%, Tracadie-Sheila down 1%, Baie-Sainte-Anne down 5%, etc.). Yes, it is true that a large percentage of the Acadians have migrated to the Greater Moncton region but what long term advantage is there to emptying out these distinctly Acadian communities?

My Ode a l’Acadie goes something like this. The Acadians have shown tremendous reslience and have brought forward their culture in a powerful way – particularly in the last two generations. But the slow death of these Acadian communities (at the current rate of population decline, most of these communities will be almost non-existent in one or two generations) will prompt even faster out-migration and many people will end up in places like Toronto, Calgary and the U.S. where they will have a greater risk of losing their community and culture.

The great Acadian experiment hinges on having a vibrant economy on which to build this community and culture. Without a strong economic foundation, community and culture cannot thrive. We must do much more to fortify the economy of Acadie. Anchored in Greater Moncton but spreading northward around the top of New Brunswick and in communities in PEI and Nova Scotia. We need more business investment, more entrepreneurship, more skilled workers. We need less EI and other welfare schemes that provide some economic stimulus but in the long run only accelerate the decline.

While the Premier polishes his national image and his cabinet ministers like Elvy and Jeannot spend their days preoccupied with the minute details of government (potholes, hospitals, etc.), the underlying economic problems are going unaddressed.

This new economic assault on Acadie may not be as stark as the one carried out by Colonel Monkton (yes, in a small historical ironic twist, the namesake of the new capital of Acadie) but it may ultimately prove as challenging to Acadian culture – as once again Acadians are dispersed across North America – this time for economic reasons.

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