It's The Economy, Stupid

I came across an interesting article this week in the Economist magazine. According to the magazine’s Intelligence Unit, Quebec has been the most aggressive province in providing ten-year tax holidays to attract investments in manufacturing, processing and financial services. The Economist also states that the most ambitious development agency is Quebec’s Societe Generale de Financement du Quebec, which takes equity positions to attract foreign companies. Good promotion for Quebec from one of the most internationally recognized business and economic publications.

Wouldn’t it be neat if we substitued ‘New Brunswick’ for Quebec in the second sentence and Business New Brunswick for the Societe Generale de Financement du Quebec.

And in case you feel that the right wing agenda (you know tax cuts, less red tape, less social spending, etc.) is taking over in New Brunswick, you will be comforted by the latest Economic Freedom of North America report by the Fraser Institute. Here is their definition ofthe economic freedom scale:

Economic Freedom of North America rates economic freedom on a 10-point scale. The all-government index captures the impact of restrictions on freedom by all levels of government. Economic Freedom of North America employs 10 variables in three areas: 1. Size of Government; 2. Takings and Discriminatory Taxation; and 3. Labor Market Freedom.

New Brunswick ranks 57th out of 60 states and provinces on this scale. Now, I usually don’t put a whole lot of stock into Fraser’s work but they have estimated that even small increases in a province/state ranking significantly increases per capita GDP.

Opps. I’m sorry. That was supposed to be good news but I think I just cheesed off everyone. The economic developers will hate the fact Quebec is internationally recognized for its incentive programs and aggressive economic development. The socialists will be upset that I have quoted a right wing think tank and the Conservatives (capital C) will be annoyed that we still have the 57th most socialist province/state in North America – despite six years of PCs.

Where’s Iron Mike when you need him or maybe off the sauce Ralph – Alberta scores 4th in North America for economic freedom. Only Delaware, Colorado and North Carolina have more economic freedom than good ‘ol Alberta – a bastion of liberty in a socialist country.

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Results of the latest quarterly survey of small-and medium-sized enterprises, by the Canadian Federation of IndependentBusiness (CFIB) were released yesterday. Businesses in Alberta and BC continue to lead the nation in optimism. On the other, businesses in Atlantic Canada displayed sharply lower optimism compared to the previous survey. Indexes in all fourAtlantic provinces are lower than at any time since late 2001.

You think Al over at the T&T will publish this little tidbit? He’s probably too busy writing another mindless article about Mapleton Park to notice.

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Tony Huntjens gave the closing speech to theCanadian Social Welfare Policy Conference which was held in Fredericton recently. In the speech, I think, Mr. Huntjens was delicately hinting that in the future, the amount of money available for social programs would be limited because of the marked increase in need (seniors programs, health funding, etc.).

I also think that Mr. Huntjens gave us a glimpse of the economic development policy of the NB government. He states:

Good fiscal management today will allow us to embrace the future with optimism, thanks to a thriving economy which can create more job opportunities and more wealth for our province, in order to remain socially compassionate through more investments in our social programs.

Now, I realize this speech was probably written by one of the outlawed and reinstated spin doctors, but really, what does this mean? Good fiscal management? Will it lead to a thriving economy? Has it?

That statement is a little bit like the guy who has massive credit card debt, rapidly increasing bills, and who knows his salary will be rolled back each year until retirment and he thinks that just making the minimum monthly payment on the credit card will ultimately fix everything.

Good fiscal management is only one piece of the puzzle. In fact, I think it can be a crutch. I, for one, would run up a little debt to get good highway infrastructure to the north. To attract significant business investments. To create an environment that is attractive for investment and skilled immigration.

New Brunswick has the lowest debt-to-GDP ratio in Atlantic Canada but what does that matter? Alberta has no debt at all. We need to be a little less focused on all this tinkering (marginal tax cuts, shaving departmental budgets, etc.) and make some bold steps to achieve strong economic growth.

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The Times & Transcript’s feature letter to the editor today entitled “City council needs lesson in democracy” suggests that the opposition to the development of a housing/commercial development at the corner of Mapleton Road and the TCH (on land zoned as highway commercial) is about democracy. It suggest that “Tearing apart our parklands” will be met with horrible vengeance by the public during the next election.

This is not about democracy. It’s about a few trouble makers exaggerating and distorting an issue for personal gain. If the public buys in to this notion of ‘tearing apart parklands’, it will be because of a very small cabal of folks who seem to be hellbent on tearing down efforts by the city to move things forward.

Again, and I say again, if all these naysayers would just put the facts on the table (i.e our old friend Al) and let the public decide in a fair way if this was a serious error in judgement or just developing land in the city in a balanced fashion, we would all be better off. But insinuating with great verbosity and highly inflammatory rhetoric that this is atrocious, tearing, rending or any other violent metaphor they want to use just confuses people (as it did me initially).

Confusion now hath made his masterpiece.
-William Shakespeare

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Tucker Carlson is best known as the ‘from the right’ person on CNN’s crossfire. He got his start over 15 years ago as a contrarian to the perceived left leaning media – CNN wanted to look ‘balanced’ – whatever that means in a world where Fox News has trademarked that term.

Anyway, I just read an article about Tucker that got me thinking. He has been scrapped from CNN as his ideas have become more radical as right wing thinking becomes mainstream in the U.S. So, what was once, ‘right’ is now ‘centre’ so guys like Tucker stray ever more to the ‘right’ in order to maintain their ‘contrarian’ image.

Now, ironically, the contrarians are coming from the left in the U.S. But I digress.

My point is this. Wouldn’t it be interesting if in a few years blogs like this one became old hat? If my ideas about investment and economic development were so mainstream in New Brunswick, that I would have to stray further and further to the ‘right’ in the non-ideological – methaphorical sense of that word? If the publisher of this blog cut me off for being too wacko? If the CBC stopped airing my commentaries because they were either boring (mainstream) or I had gone too radical?

Unlike Tucker, I would like to work myself out of a job. If New Brunswick gets serious about economic development and attracting investment and people to the province, I would gladly change the topic of this blog to baseball, music from the ’20s or ’30s or some other topic that I think I have some knowledge of.

But until then, I will keep my knowledge of Al Jolson, Louis Armstrong, the Andrews Sisters, Bing Crosby, and all the other old time singers to myself.

I’ll keep preaching to you about the need for our province to attract business investment.

And, no, I do not own any bowties.

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I have been watching the foreign direct investment flows into and out of Canada in recent years with increasing alarm. Obviously, there will be ebbs and flows here but the trend is decidedly outward and that is not good, long term, for economic growth here.

The latest OECD figures released this week show that in 2004, an estimated $6.3 billion in foreign direct investment came into Canada down from $66 billion in 2000. The 2004 figure is the lowest inflow of FDI into Canada since 1993 – at the tail end of the recession. Conversely, over $26 billion in investment flowed out of Canada in 2004.

Now, to put this into some perspective. Australia (a country with a smaller population than Canada) had $42 billion in inward investment in 2004, Belgium $34 billion, Ireland $14 Billion, Italy $16 billion and Spain $9.5 billion.

As by far the biggest beneficiary of FDI, Ontario is obviously spooked by this trend. They announced this week the establishment of four new International Marketing Centres in Tokyo, London, Los Angeles and New Delhi. Their sole purpose will be to attract investment from those countries to Ontario.

Even though New Brunswick has never really benefited from FDI, I think we should have a similar focus. A few billion in new investment would be just what the doctor ordered right about now to help the economy start to move in the right direction.

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Once in a while I get the feeling that either the rest of the world is crazy or maybe it’s just me.

I have been questionning the actual population figure in New Brunswick ever since the 2001 Census data was published. At that time, the Census revealed that New Brunswick’s population was 729,500 down from 738,000 in 1996. Statistics Canada provides estimates of population growth/decline in each year since 2001 and the population has either been stagnant or has shrunk a little bit.

So, this sounds fairly straight forward, right? Wrong.

Everyone one and their dog continues to state that the population of New Brunswick is 750,000 – even, you guessed it, Statistics Canada. Click on their population tables (not from the Census) and you will see a population of 750,000.

I just got back from a presentation by the former Minister of Business New Brunswick, Norm Betts, in which he makes the case for more immigration and he cites the 750,000 figures and the slow decline forecasted through to 2026.

Is it 750,000 or 729,000? Apparently the Federal government thinks it is 729,000 as they attempted to claw back Equalization monies based on the lower population count after the Census.

Why does it matter? It matters big time. If guys like Norm and all of the other policy makers and influencers are forecasting a population of 725,000 by 2026 and it is really that level in 2005, there are huge policy implications. By my rough guess (based on an extrapolation of the birth/death data and the out-migration trends), I suggest that without a major change in direction, we will be at well under 700,000 by 2026 – most likely closer to 650,000.

Today, at 729,000 or 750,000, we need almost $2 billion in taxpayer dollars from other provinces just to pay the bill for government services and the cost of these services continues to rise.

Massive Equalization, costs increasing and population declining.

Is it me?

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Lisa Hrabluk’s weekend commentary called “Revolutions start by neighbours talking” makes a very good point. She says we need “a citizen’s movement” to “set the agenda for New Brunswick’s renaissance”.

Based on what I am reading about NextNB, we disagree with the subject of the discussion, however.

I hope during all of these ‘talks’, they spent a lot of time with companies from outside New Brunswick as to why they would never in a million years locate here. That, my friends, is where the real valuable research lives. If you can unlock the secrets to attracting investment, then the people will follow – this is a proven fact in almost every fast growing economy that I have studied.

So, NextNB, continue to tinker. I hope your initiative has some success.

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I apologize for the quality of this image but all the green is Mapleton Park and that little piece of orange on the right is where George Leblanc’s little old man watches Chickadees. This is the zoning map for the City of Moncton.

Please note the two major highways – the TCH and Mapleton Road – right in Chickadee alley.

Please send George Leblanc’s old man to the green area which is much more conducive to Chickadees anyway.

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Somebody remarked to me one time that I was mistaken about the figures I use for Employment Insurance. In fact, they said it was ridiculous to think that over 100,000 of New Brunswick’s 350,000 working people would be on EI. That, he said, would mean that almost one in three persons are collecting EI during the year. He went on, when you back off all the government-related jobs (administration, health care, education, etc.) that, for the most part do not collect EI, that would mean almost one out of every two non-government workers was on EI. That, he said, was crazy.

Well, crazy or not, it’s true.

In 2003, the last year with Tax Filer data, 110,000 New Brunswickers claimed they earned EI income during the year. Now, if we back away the 7,000 women that had babies that year (yes, maternity leave falls under EI), that leaves over 100,000 people on EI during 2003. The total working population that year was just under 350,000 persons so, in fact, one in three and if you exclude government-related work, almost one in two workers collected EI in 2003.

Them’s the facts, sir.

Oh, by the way, the number of persons collecting EI is up since 2000. Population down, EI claimants up. Sound’s like a recipe for economic success to me.

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