It's The Economy, Stupid

One of my favourite movies is The Bridge on the River Kwai – a wartime epic that features ultimate bravery and betrayal and, of course, ultimate American bravado.

At the end of this film, there is a climactic scene. You think the good guys will win, the bad guys will lose and they all will live happily ever after. However, the whole thing implodes and within a few minutes everyone is dead and there is one of the most fateful endings in movie history.

All that’s left at the end is one soldier half-crazed repeating “it’s madness, madness” over and over again.

This scene pops into my head each year when NB Finance Minister Jeannot Volpe takes his little road show around the province looking for the public’s ‘input’ into the next budget. He states up front that due to the massive increases in health care funding, they will have to find elsewhere to cut (funny there was no mention of the supposedly significant new funding from the Feds for health care). He wants to have people tell him where to cut.

Guess what. Volpe and the Government cut each year more and more out of areas that fund the long term development of the province (like economic development) to fund short term needs (like health care). We already spend the least in Canada on economic development but you can bet Volpe and his Premier will slash even more this year.

But in their defense, they won’t be around to deal with the consequences – let the next round of stooges take care of it. Trouble is. That’ s what the last guys said. And the guys before them. And before them. And that’s why we are in the mess we are in now. We have the third lowest economic standard of living of any province or state in North America. Without the billions in Equalization and EI over the past decade, New Brunswick would have resembled a third world country.

That Bridge on the River Kwai scene running through your head yet?.

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Canadian Press ran a story this week about Kitsault, British Columbia. Kitsault was built in the 1980s as a community for the people that were working in the rather isolated molybdenum mine. However, that mine was closed and the whole town was shut down. Now, someone is trying to revitalize the community.

It reminded me of my trip to Labrador last year. Somewhere in Northern Quebec, there used to be a town called Gagnon that at its height had over 1,000 residents. After that mine closed, the company that owned the town bulldozed the buildings and now the area has become a ‘ghost town’ complete with its legends. We walked around this spooky place and tried to imagine the school, health clinic, restaurant, bar and all the other amenities in this town.

It also reminded me of a story I read recently about the dozens of declining or abandoned communities or “outports” in Newfoundland as a result of the changing nature of the fishery.

You see, the foundation of any community has to be its economy. When the main employer in an isolated community shuts down (like Kitsault or Gagnon), most times has just shut the town down.

My question is simple. Can we just ‘shut down’ a whole province? You might be able to make the argument that Canada would be better off economically (and socially) if we did. We could have kept Gagnon going – put everyone on EI, encouraged some small businesses to set up and then established a long term Equalization formula that would send millions of taxpayer dollars up there each year – but what would have been the point? Those people left, went to more prosperous communities and were fine. You could argue that we would have forced them to settle for second best by having them trade high paying mining jobs for EI and welfare.

If we turned New Brunswick into a ‘ghost’ province, here would be the benefits:

• With each decade that goes by, the rest of Canada would save billions of dollars in Equalization and EI income support.
• Maybe the 100,000 New Brunswickers that receive EI each year (1/4 of all workers) and the 35,000 people that receive social assistance (7% of the working age population) would find better economic opportunities in Alberta or Ontario or British Columbia.
• As a result of our economic problems, New Brunswick spends the least in Canada on health care and education. If NBers were resettled in Alberta, BC, et. al. we would automatically have our families in communities that spend more on these vital social programs.
• For Canadian taxpayers, the money they would receive from not paying for Equalization and EI would put more money in their pockets than any Mike Harris tax cut.
• Provinces such as Alberta, BC and Ontario would have a ready supply of labour to fuel their economic growth (they have been leaching NBers for decades – this would just formalize the process).

Anyone who reads my blog will know that I favour a different model. One where provinces such as New Brunswick, PEI, Nova Scotia and Newfoundland are given support to turn their economies around not just keep them in the dumps. One where New Brunswick becomes like Ireland and transforms itself into a strong economy not reliant on EI and Equalization. One where we lead the country in education test scores. One where our health care is best in the world. One where our rural communities are models for rural development – attracting people from all over the world to live in their pristine and vibrant towns.

But barring an change to the status quo, I fear we are headed for ‘ghost town’ status. Oh, not right away. But as the population continues to decline, the first step will be to amalgamate NB, PEI and NS. Then, when some major economic crisis hits (recession or depression) it will hit us the hardest (as the last two did) and eventually there will be little will here or outside to save this place.

It’s not time to pack your bags yet. But you might start looking around….

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Saskatchewan launched a new official song this week entitled “We Love This Place!”. It’s an upbeat tune that symbolizes the deep sense of commitment and attachment that Saskatchewaners have to their province. The province is also running ads on TV with a similar message – upbeat, hopeful and successful.

However, the economic situation in Saskatchewan belies a different reality. Last year, the province joined Alberta and Ontario as a ‘have’ province – that is, not receiving equalization payments from Ottawa. In addition, there is very little ‘EI’ problem in the province. However, the population is in decline and that should be troubling to the people of the province. No matter how economically strong they are now, if the population continues to decline it will ultimately lead to serious problems.

New Brunswick’s economic problems are far worse. Not only do we have population decline, but we are indebted to other Canadians (now including Saskatchewaners) each year for hundreds of millions to help us pay for basic government services. We also use hundreds of millions of their money to pay for our EI income support programs.

Having said that, maybe New Brunswick needs a new theme song. I am sure that Saskatchewan’s theme song and new ‘feel good’ campaign is working – that people are starting to feel better about their province and their communities. Maybe we should try that here.

In Saskatchewan, people were asked to write or submit songs and the best one was selected. I would be worried about a similar approach here.

…Given the current political climate in New Brunswick, we might end up with ‘Who Let The Dogs Out‘ as the new provincial theme song.

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For those of you that have been around, you may remember a term ‘telework’ that became popular over a decade ago as new technologies began to allow people to do a good portion of their work from home. Telework was expected to decrease traffic congestion in the big cities, result in cost savings to companies and provide a higher quality of life to the worker as they would limit their commute times – freeing them up for presumably more important things.

There was also another important angle to telework. It was supposed to become a major rural economic development tool. In theory, new technologies would mean that workers in rural New Brunswick could do the work just as effectively as those in downtown Toronto. Many economic developers in the mid-1990s were singing the benefits of telework.

While telework has started to get a foothold in larger urban centres as a way to decrease traffic congestion – it has absolutely bombed in Canada as a rural development tool. In fact, over 90% of high tech jobs (those for which the work is primarily done using a computer and the Internet) in Canada over the 1990s were created in the largest urban centres. The number of jobs that are tailored for telework actually dropped in most rural communities in Canada.

Now a new report by IDC in the U.S. finds that ‘home-sourcing’ is among the hottest new trends and a deterrent to offshore outsourcing. According to the report, home-based call centre agents are 25% more productive than in-house employees.

There is a good example of this (or a variation on this theme) inNew Brunswick. Virtual Agent Services has some 600 employees scattered throughout the rural communities of the province.

One of the great challenges for rural Canada today is the loss of their youth to larger urban centres. Many of them go because they want to but many go because they have to.

Maybe somebody should examine this a little further in the Atlantic Canada context. Call centre workers, bookkeepers, translators, graphic designers, programmers, etc. are just a few occupations that could be done from home or from small office in a rural community.

Finally, maybe government should lead by example on this. John Manley spent much of the late 1990s centralizing Federal government jobs in and around Ottawa. Scott Brison is looking at decentralizing. From my vantage point, 50 high paying government jobs in Caraquet would do more for that community than a decade of EI.

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A few years ago on a flight to Toronto, I happened to be sitting next to a senior policy advisor to a top New Brunswick politician. Over the course of our discussion, I outlined my thoughts around a serious economic development strategy with serious funding support and broad-based buy-in. He told me that I was right. The only way to truly change the course of a place like New Brunswick would be to take a radical new approach.

But, he informed me, you would not be in office long enough to see it through. You see, he said, when we do our public opinion polling in New Brunswick economic issues usually rank fifth or sixth in terms of priority usually slightly lower than filling potholes or garbage removal. People, he went on to say, have more or less come to the conclusion that the current economic state of affairs in New Brunswick is about all we can expect and so any massive new spending on economic development (and the short term implications on other spending areas) would lead to a public backlash and that is why no New Brunswick government will ever do it. New Brunswickers, he emphatically stated, don’t have the self-confidence to think we could actually compete with places like Ontario and British Columbia.

He concluded: So we muddle along. Not much ever changing and we hope that our guys and gals aren’t in office when the public finally wakes up and realizes that our rural communities are dying, our urban areas are not on a firm economic fitting and we are woefully dependent on the rest of Canada to pay for our basic government services.

I got off the plane that day feeling a little depressed. But after some reflection, I realized that if it is just an issue of public opinion, we should be able to change that. We just need to make the effort.

Franklin D. Roosevelt was famous for using his ‘fireside chats’ to engage the public in a dialogue over the most profound changes in the history of U.S. social policy. His premise was that by talking to people in a disarming fashion (hence the fire) using words and concepts they could understand, you could get people to support these monumental changes – and they did.

My ‘fireside blog’ is one small attempt to do this in New Brunswick.

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In recent years, government trade missions to foreign countries have come under some criticism. Prime Minister Martin apparently has cancelled the ‘Trade Team Canada’ approach and will not be taking delegations of Premiers abroad to promote investment or trade (although, it seems he personally will be spending a lot of time abroad considering his trips to Latin America, Africa and Asia in the past few weeks).

I, however, am a big supporter of trade and investment missions – particularly those that involve Prime Ministers and Premiers. It has been my experience that many companies are impressed when they are visited by a high level politician and it can add weight to trade and investment discussions.

That is why I fully support Premier Bernard Lord’s trade mission to Texas this week. I hope this signals more interest in trade and investment on his part.

I would provide one caution, however. These missions can be very expensive costing taxpayers tens of thousands of dollars. So the Premier would be well advised to select destinations strategically. I was very much against his visit to Russia a few years ago. Almost no New Brunswick companies went on that trade mission and in addition Russia has no value as a market for New Brunswick goods. From 2000-2003, the average annual amount of exports from New Brunswick to Russia was about $3M per year – or 0.04% of our total exports. Contrast that with the United States which consumes 89% of our total exports.

Russia was a collosal waste of taxpayer dollars. The U.S. is an infinitely better market to focus on.

In an effort to boost public confidence in these perceived ‘junkets’, I suggest that the Premier’s economic development officials publish a report card each year that outlines these missions, their costs (yes including the $90 hamburgers) and their outcomes. This would do two things. It would provide the public with accountability and it would allow the government to assess their value.

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I can’t help myself. This weekend’s article in the Telegraph Journal by Lisa Hrabluk is a tailor made example of how reporters are just rewriting what they are being told by government spin doctors.

A few examples:

On the job creation front – she only quotes 2004 data because that favours the government. On the export front, she goes back four years. Weekly earnings – she only quotes 2003 data.

Hear’s a thought, Lisa. Why not complete a full review of the economic performance going back to the start of the mandate instead of using the cherry picked data put out by the province? If you did, here is what you would see:

• Third worst rate of job creation (employment growth) in Canada from end of 1998 to end of 2004 (6% growth compared to 19% on PEI, 11% in Nova Scotia and 11% nationally.
• Exports are up strongly -but remove petroleum products and and the past three years almost every major category is down and down significantly – a major concern (see my previous blog on this).
• Year-end unemployment rate has dipped below 9.5% but, and I can’t believe that no reporter has ever looked at this, there are still communities in New Brunswick where 30% or more of the total workforce uses the Employment Insurance system each year. Also, we have the worst record on population growth/decline among the four Atlantic provinces since 1999. Oops. Forgot to mention that.
• She talked about the declining level of government transfers to people as income support. She forgot to mention the new Equalization formula that will bring hundreds of millions in other Canadian’s tax dollars here because our economy is not strong enough to generate anywhere near enough tax dollars to pay for even basic government services.

Finally, why the heck is she using 1983 as a comparison date for GDP growth? I’ll tell you why. Because the Premier’s Prosperity Plan has as a goal signficantly reducing the GDP gap with the Canadian average and we only reached the national level once in his five full years in office – again a much poorer showing that PEI, Nova Scotia and Newfoundland.

Until somebody in government or the media or in the pubs starts telling people the truth, we will continue to flounder. In 2001, the PEI spend four times as much as New Brunswick on economic development (adjusted for population) and they have outspent New Brunswick for at least the last decade. The result? 19% employment growth, a new aerospace cluster, record exports (not inflated by the Irving Refinery).

Hrabluk and her colleagues continue to provide the government with the rationale to cut into economic development spending even deeper. A study out last year found NB was last in Canada for economic development spending (this was lauded by the Times & Transcript by the way).

In order to be a ‘have’ province (and I believe the economic self-sufficiency should be the long term goal of any province), we would have to lead the county in economic growth, population growth and income growth for something like 40 or 50 years. In the last five, we have lagged the country on all three measures.

Here’s a final thought. Maybe all reporters covering economic issues should be required to have some training in the field. In addition, maybe instead of just rewriting government press releases, maybe we should dig a little deeper.

In the long run, somebody might thank you for it.

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This is a blog about economic matters but I can’t help but comment on the Times & Transcripts blatant defense of Premier Lord in Saturday’s paper.

Now anyone who reads the T&T realizes that it is stronly supportive of Premier Lord and his policies. In fact, there is some speculation that many of the Premier’s policies are formulated after reading the editorial pages of the T&T – a sort of symbiotic relationship.

However, I was blown away by their We Say entitled Graham hurt House’s dignity. Now I am not a big supporter of any political party – I support ideas and vision. But this We Say crosses any line of media impartiality. I, and many of my colleagues, listened on the radio to the exchange between the Premier and various opposition members. We heard him say the words ‘bend over’ apparently quoting an opposition member’s comments. We heard him make a slur directly targeted at New Brunswick’s only aboriginal MLA. And to a man/woman we were blown away by the lack of poise and dignity shown by the Premier – who I might add has previously shown more poise and polish than that. My only thought when hearing his comments was that if my staunchly conservative (note the small ‘c’) parents heard his vulgar language, they would probably instantly have convulsions. My parents, like many older conservatives, have the Premier type-cast as a nice, Catholic boy with a good upbringing – butter wouldn’t melt in his mouth.

A heap of lead would melt in his mouth now.

And for his propaganda arm, the Times & Transcript, to defend these actions is unbelievable. They state, and I quote: “And anyone who knows the premier knows that the man doesn’t have a racist bone in his body and, in fact, goes to great lengths to show all people he meets and deals with great respect and consideration, whether he agrees with them or not.” That sounds like it was penned by the Premier or his office directly – not by the editorial board of a credible newspaper.

By the way, T&T propagandists, these outburts in the Legislature are exactly where the public gets a real look at a ‘man’s’ character or his ‘bones’ as you put it. Put someone under fire and they show their true colours.

And no amount of deflecting onto Shawn Graham or anyone else will take away from that.

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Politicians love to throw around statistical one liners such as ‘led the county in growth’, ‘lowest unemployment in a generation’, etc. When the stats go in their favour they shout from the highest heavens. When they don’t, there’s always an excuse. I still remember Premier Lord suggesting that he ‘didn’t believe’ the extremely poor employment numbers during the last election campaign. He didn’t believe the most respected statistics agency in the world – Statistics Canada.

That’s why I am curious why the Premier and his propaganda arm, the Times & Transcript, did not jump on the manufacturing shipments story this month. New Brunswick led the country in the growth of manufacturing shipments from October to November. Surely a good news story.

Yes, it is a good news story – but like all statistics – be wary. As I have discussed elsewhere in this blog, there has been considerable growth in our manufactured goods exports over the past few years. However, when you remove petroleum products (i.e. the Irving Refinery), there has actually be a substantial decline in almost all other manufactured goods exports.

Not to understate the importance of the Refinery but it doesn’t create a lot of wealth or jobs for a large number of New Brunswickers the way a sawmill does or other forms of manufacturing.

The underlying problem remains. The sectors that have driven this economy for decades are losing steam and will not get it back. And there is no plan to develop alternative industries to take their place.

Therefore, we are looking at some very tough years ahead.

But the spin machine will march on.

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Politics is an interesting game. When you are in the opposition, you hammer away at the government for its policies and lack of results. Then when you get in office you continue to blame the previous government for all that’s wrong in the province. Then, slowly, you begin to take ownership. And after a few years, you are vigorously defending the same things you were vigorously attacking just a few years previous.

Premier Lord touted all of his government’s successes in last nights State of the Province Address. Employment’s up. Unemployment’s down. Yadda Yadda Yadda. He didn’t mention that jobs are up because of the worst employment record in Canada in 2003 (a slight bounce back in 2004). He didn’t mention the hundreds of millions in lost exports – mostly hitting rural New Brunswick businesses. He didn’t mention the closure and downsizing of several anchor employers in rural communities. He didn’t mention the woeful test scores in this year’s OECD ranking of students.

In fairness, Mr. Lord refused ‘to take all the credit’, in the words of the Telegraph Journal reporter, acknowledging the “hard work, dedication and commitment of all New Brunswickers.” It does take a lot of dedication and commitment to finally decide to leave your province and move to Alberta for a job. Here’s a tip, Mr. Premier. Basing your employment strategy on people leaving New Brunswick is not the best economic policy.

Politicians get so caught up in the ‘spin’ that they begin to believe their own stories. I am reasonably sure that the Premier himself actually believes this stuff.

I remember when the Tories first took power in 1999. They hired an auditing firm to review the books and sure enough, they found a ‘real’ deficit of hundreds of millions of dollars and that the previous government had cooked the books (this story was repeated all across Canada). Then, miraculously, when the Finance Minister came out with his first budget, the books were balanced. What happened to that ‘real’ deficit?

Don’t look to our local papers – those transcribers of government press releases – for answers.

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