It’s The Economy, Stupid

For those of you that wonder why I have such a negative opinion of the Moncton Times & Transcript, I offer up today’s ‘We Say’ editorial segment. This editorial summarizes perfectly why this newspaper is, in my opinion, a significant contributor to the the problem of economic development in New Brunswick.

We Say says:

The Conference Board of Canada has released a report predicting New Brunswick’s population is about to take a steep decline and that this will severely hamper economic growth, limiting it tow about two per cent per year over the next 10 years, but there is no reason to either panic or to have a great amount of faith in the report.

This is unbelievable and a bit like Premier Lord during the last election when he said he didn’t believe the Statistics Canada labour force survey data. The Conference Board of Canada is internationally recognized. Who is Al Hogan to question them? (never mind the typo - it’s Al’s). Further, even if there was a grain of truth to the Conference Board report, shouldn’t the local media be raising the alarm rather than trying to downplay it?

We Say continues:

The problem with warnings and economic predictions based on such estimates is that they rely on assumptions that may well never materialize. Moreover, the very warnings tend to spur people on to taking action to ensure the dire consequences are never seen. Add the fact that at all three levels of government, officials are working very hard indeed to not only reverse the population trend, but to prove the predictions wrong, and residents would be well advised to take the report with a very large grain of salt.

The population of New Brunswick has declined every year since 1999 and the majority of the last 15. Who is Al Hogan to say that government officials are “working very hard’ to reverse the population trend? Immigration numbers are down. New job growth is down? How does he define working hard?

Residents would be well advised to take the Times and Transcript with a ‘very large grain of salt’ and judging from the unanimous dislike of the Trashscript from people posting to this blog, I think that recommendation has been heeded.

And for your smile of the day, We Say concludes with:

New Brunswickers need do only one thing - continue on as always, working hard on all fronts. There is no reason to believe we won’t in fact reap the fruits of our efforts.

In this Al is right on. New Brunswick, according to a recent study (of course Al would disagree with any report) has the lowest standard of living of any U.S. state and Canadian province along with PEI and Newfoundland. These are the ‘fruits’ of our efforts.

If all of our ‘hard work’ has led to the outcomes you see today, then I think it is going to take another look at the ‘work’ itself. But these media-supported malaise among the populace will most likely continue us on the path of mediocrity. Pump hundreds of millions into health care, cut efforts to stimulate economic development and then go begging to the Feds for more Equalization.

Sounds like Al’s version of Nirvana.

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Since Scott was concerned about the Internet usage data, I thought I would repeat it again. I have shown a variation of this chart before. Don’t rub your eyes, you are reading this chart right. It’s Statistics Canada data. New Brunswick was fourth in Canada among the provinces for Household Internet usage in 1997 (the year Frank left, coincidentally) and now we are dead last. In 1997, we were less than one percentage point behind the national average and now we are nine percentage points behind. We were five percentage points behind BC in 1997 and now we are a whopping 17.3 percentage points behind.

Why is this important? The answer should be obvious. If you recall the mid 1990s, the Internet was going to ’save’ places like New Brunswick. People could work ‘anywhere’. Rural communities were going to flourish. Telework would abound. Eureka, they said.

Further, New Brunswick in the mid 1990s was called the ‘Living Lab’ for telecommunications innovation. It was the first province to have a Minister in charge of the Information Highway.

Now, look how far we have come.

And don’t think you will hear or read about this in the media. I have never seen these figures on the pages of a New Brunswick newspaper. Apparently, this little stat doesn’t interest the folks in charge.

But, you will read this stuff here as I do consider it important.

And for those of you that are trivia buffs, I’ll ask you a quick history question. What was the goal of the eNB initiative launched with great fanfare by Premier Lord almost six years ago?

Sigh.

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In that highly successful comedy series from the 1960s, Hogan’s Heroes, one of the funniest characters was Sargeant Schultz who was famous for saying:

I see nothing. I know nothing.

Well, in Moncton, we have our own version of Hogan’s Heroes - except the difference here is that the heroes are the provincial Tory politicians and Hogan himself plays the role of Sargeant Schultz with this “I see nothing. I know nothing.” Now I doubt that our Al Hogan over at the Times & Transcript has the raucous private life of the original Hogan but he certainly has figured out how to play the Schultz role to a tee.

Let’s hypothesize a little dialogue from our version of Hogan’s Heroes:

Schultz storms in on Hogan (Lord) and the boys and finds the second worst job creation in Canada since 1999, a 37% increase in the provincial budget while population is declining, a rural outmigration, and much more dependency on Equalization.

Schultz (Al Hogan): I see nothing. I know nothing.

Hogan (Lord): Schultz, I know that this week a conference in Ottawa predicted dire outcomes for Atlantic Canada if we don’t embark on a new economic development strategy; I know that Atlantic Yarns just laid off several hundred workers; I know that there were national stories about the problems we are facing in New Brunswick; but could you reserve your We Say segment on Saturday to gush over me spending $6 million in Moncton? I know. I know. $6 million represents only less than 1/2 of 1% of the health budget each year but I could surely use the positive press. Please use words like “to be commended”, “great progress”, “crucial investments”, and then finish it with “Premier Lord merits recognition for being on the right path and moving as rapidly as he can.” I know, Schultz, you have gushed over me several times in the last few weeks but I really need one more (we have a by election coming up you know).

Schultz (Al Hogan): Okay, Hogan.

Klink: Schultz! What’s this I hear about a declining economy, out-migration, increasing dependence on EI and Equalization! What’s this I hear about the lowest R&D spending in Canada! What’s this about New Brunswick having the lowest percentage of households in Canada connected to the Internet! Schultz!

Schultz (Al Hogan): I see nothing. I know nothing.

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Al Hogan over at the Times and Trashscript ran a ’semi-negative’ story on the economy today. However, even at that, the subtitle of the article “Atlantic Canada has ‘turned a corner’”.

The article quotes some MPs being mildly optimistic.

What corner, exactly, have we turned? The closure of Fraser and Atlantic Yarns? What corner is that? The Premier demanding more Equalization or else? What corner is that?

Here we go with another $200 million for Andy Scott’s People Building New Brunswick strategy. Before we had an ‘Innovation’ strategy. Claudette wants to (in the article’s quote) “grow our small- and medium-sized companies”.

Funny how Ontario and Quebec are spending hundreds of millions to attract large industries and in New Brunswick we focus on ‘people’ or ‘innovation’ or small businesses.

Sigh.

Andy, here’s a hint. Give that money to large, multinational firms to invest a couple of billion dollars here - create a couple of thousand real, new economy jobs.

But they won’t. The last big forward thinking economic development deal was Michelin - 25 years ago or so. And we all know how badly that turned out - ironic pause - as they are still employing 2,500 people, paying good wages in three rural towns in Nova Scotia.

That was a ‘colossal’ failure - wasn’t it?

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Another Canadian Press article hammering AC and propping up Alberta.

Economic boom in Alberta luring skilled workers from East Coast
http://cnews.canoe.ca/CNEWS/Canada/2005/10/27/1281487-cp.html

They quote some hapless ex New Brunswicker:

Christie says he may go back to New Brunswick one of these days - to retire. He says he won’t be going back to work in shaky industries propped up by political expediency and taxpayers’ loans.

Let’s be clear about one thing, Mr. Christie, journalist Chris Morris and every other person who doesn’t want to do any research, when you include agricultural subsidies, Alberta usually provides more subsidies to industry than New Brunswick. And agriculture is just like any other industry in my books.

Do we have shaky industries? Yes. Are may propped up and heavily subsidized because no one has the guts to do anything better? Yes. But don’t give me that crap about New Brunswick being a place saturated with government subsidies to business. We are saturated with EI and Equalization but we are among the lowest for government subsidies to industry (per capita, as a percentage of GDP, etc.).

Alberta’s wealth has come from what’s in their ground. Fine.

New Brunswick’s will come from what’s in our heads and our hearts - and that’s a heck of a lot harder.

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Just a quick note on the closure of Atlantic Yarns’ two plants in northern New Brunswick on the heals of a Fraser closure.

This stuff happens. In the economy, some businesses fail and others succeed. Government’s should not be in the business of subsidizing losers. But this is a lesson not learned by Danny Williams in Newfoundland and apparently by our guys in New Brunswick who are owed something like $29 million in loands from this company.

For a government with no concrete strategy to attract business investment into the province, panicking and trying to subsidize a company that is here already but with a terrible business model, is commonplace. This seems easier.

But if there had been five new plants open in that area, losing one - one with a bad business model - would not seem so bad.

But there was no effort to bring in the five so we now are desperately trying to protect the one.

Don’t forget one simple but very potent fact. The $120 million that Danny Williams will dole out to Abitibi over the next 12 years will not create one single new job. Not one ounce of new economic activity.

It’s a Cape Breton coal industry economic development strategy all over again. Spend taxpayer dollars to delay the problem to the ‘next government’. They then try the same thing. And the next thing you know you have Cape Breton - 30 years of subsidies running into the billions and still the poorest economy in Canada. Now, they are starting to get serious and are attracting new industries that will hopefully sustain the economic with a proper foundation for the next generation.

Just a note on the Williams Abitibi deal. If you look at the opportunity cost associated with $120 million - just for fun:

The $120 million for Abitibi would have bought:
-A brand new airport for the town plus money to subsidize three flights a day for 15 years.
-Six luxory resorts for the region.
-A personal cheque for $400,000 for every worker in the plant ($120M spread over 300 employees).
-A Toyota plant (that’s what Ontario paid - whether Toyota would locate in rural NL is more problematic)
-A personal cheque for $15,000 for every man, woman and child in Stephenville.

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The Public Policy Forum held a conference entitled Economic Transformation in Atlantic Canada this week in Ottawa. The web site only contains a backgrounder and the ACOA minister’s speech and I haven’t read much about it in the press. I guess other things are too important.

I will say are few things, however; about the backgrounder to the conference. It’s a 17 page summary of interviews the PPF made with a dozen or so people. I was blown away to see that there were no local economic development groups on that list and only one provincial economic development representative. There were a pile of ‘association’ employees, a few think tankers and a few private sector firms.

I will reiterate. The CFIB is a great organization but its interest is small business - not attracting business to the region. The companies that are here are focused on their own business and what would help it grow - not on attracting business to the region. The Chambers of Commerce are looking out for their membership - which has no firms from outside the region. And the universities, well, that’s the clearest of all. I don’t think I have ever heard a university chancellor, president or provost call for more foreign business investment into Atlantic Canada. They want funding for their costs and more speculative R&D.

So, it is no wonder that this backgrounder barely mentions the issue of attracting business investment. There was a cute point in the document where it states that one of the interviewees said we should follow the ‘Ireland’ model.

Cute. Ireland led the globe in foreign direct investment for something like 12 out of a 15 year people. There were years in the 1990s when Ireland had more foreign direct investment than Canada (we have six times the population and all of that foreign investment went into Ontario, BC and Quebec anyway).

So, if you want to ‘invoke’ the Irish model, you need to set this in the context of what it did. You can yak all day about ‘tax breaks’, ‘free education’, ’streamlined regulation’, and good ‘marketing’ but at the end of the day, Ireland attracted billions of dollars worth of business investment into that country. In 2003 and 2004, Ireland attracted $41 billion in FDI compared to only $13 billion into all of Canada (OECD data) - and we all know where the bulk of that $13 billion went.

If the PPF had interviewed the GHP, EGM, ECBC, or most of the urban economic development groups, they would have gotten an earful about the need to attract foreign investment and less about helping small business, funding unversities, etc.

If the PPF and the Feds figure this out, we may end up seeing substantative change in Atlantic Canada. Ireland has a little more than double the population of Atlantic Canada. So, if we were to match their results, we would need to see about $10 billion per year in FDI into Atlantic Canada. At an average of 20,000 jobs per $1 billion foreign investment, that would be about 200,000 new jobs per year.

Now, considering that all of Atlantic Canada in the past six years has generated a net new 50,000 jobs, 200,000 per year (or 1.2 million over six years) would be a slight improvement, don’t you think?

Sounds a bit like prosperity (not the Tory lexicon version).

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As you know, everyone and their sister is talking up the need for immigration in Atlantic Canada. It has taken on the stature that ‘clusters’ had ten years ago. Even John Ibbitson, Mr. Six Cities Canada, says in his latest book that the Federal government should massively expand immigration into Atlantic Canada. Go figure. I thought Ibbitson wanted to shut down the Maritimes.

Anyway, there is talk about ‘integrating’ immigrants into the community. This is key, they say. Well, I think we need to ‘integrate’ New Brunswickers into a multicultural setting.

Here’s a quick story. A young couple come to UNB to study from a Latin American country. Their mother and father miss them and decide to move to Canada to be near the kids. They set up a restaurant in Fredericton. But times are tough and the numbers don’t seem to add up. It seems that he is buying way too much inventory for the sales.

So, he begins to suspect the Canadian workers and he sets up a Web cam in the restaurant. So, the Canadians were pocketing cash, stealing food and other fun stuff while this genteman watched from his vacation in Latin America. He came back, fired that crew, got more and had the same problems. These people apparently would fill up a garbage bag with good food - fruits, vegetables, meat, etc. and then take it out with the other garbage and take it with them when they left - all caught on the Web cam.

Long story short, the immigrant ended up with serious health problems due to stress and him and his wife moved back to Latin America.

Now, I know you will say this is an isolated case - and I agree. But if there are Canadians who think they can take advantage of an immigrant because their English is bad or some such thing, then I think we have a problem.

Imagine leaving a third world country full of corruption only to be bilked and cheated in Canada.

Shame on somebody.

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Canadian Press is reporting today that the Newfoundland government will invest $10 million a year for at least the next three years to keep Abitibi Consolidated from closing its paper mill in Stephenville. In addition, the story states that the deal can be renewed for up to 12 years after the initial deal expires in 2008.

Now frequent readers of this blog will know that I am in favour of targeted government incentives to stimulate new jobs but this deal is unbelievable. $10 million to sustain 400 jobs - that $25,000 per job per year and the company, as I read the press release, has the ability to keep the deal 12 more years after 2008. That would end up being $150 million to sustain 400 jobs.

Makes Premier Lord’s Molson deal seem like peanuts, doesn’t it?

I just hope the folks in Nackawic aren’t reading the newspaper tomorrow when the news of this deal breaks.

Do you think Premier Lord would spend $150 million to keep the mill in Nackawic open?

It’s deals like this that frig things up. Government incentives should be designed to stimulate the creation of new jobs that are sustained by a profitable and long term underlying business plan (i.e. the new Toyota plant in Ontario) not as a pure subsidy to keep people off EI. But even if you prefer subsidies to EI (and there is some benefit to this thinking) the subsidies shouldn’t be double or triple what the EI would have been.

We need to stop subsidizing bad business models and start stimulating good ones.

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I have always liked Pennsylvania Governor Rendell ever since I got an email from him asking me if I wanted to expand my business in his state.

After receiving that email, I did a little digging and while some of the more cynical people around may say he is more bun than burger (sizzle than steak, et. al.), I like his style.

You see he got elected exactly on the platform I would like to see in New Brunswick. Pennsylvania was slipping. It was losing jobs. Many of it’s anchor industries were in decline. So the would be Governor Rendell campaigned on the promise that the economy would be his primary focus and passion. That he would turn things around.

And while he has implemented a number of programs for small business growth, his preoccupation is attracting business to his state. He sends emails with his smiling face asking business people to expand in his state. He has an aggressive marketing and advertising campaign in multiple foreign markets. He personally spends at least half his time (they say) on economic development files. He jets to Korea and Japan. He makes speeches constantly on the need to revitalize the state.

And they have branded the whole initiative as the ‘New Pennsylvania’. I like that. Now, don’t get me wrong ‘New New Brunswick’ would most likely elicit some bad jokes but the spirit is what I like.

Wouldn’t it be cool if we had a Premier even half as committed to economic renewal as Rendell?

It doesn’t make sense to pretend things are great and make big noises with little effort. Governor Rendell knows this. Governor Blagojevich of Illinois knows this. It seems (we’ll see) that Jean Charest is coming around (his economic development minister is using Frank McKenna as his role model when it comes to attracting business).

It’s time for a politician in New Brunswick to lay it all on the table. Population decline. Traditional industries in trouble. Out-migration of our top talent. Rural exodus. Second worst educational performance in Canada. Lowest use of the Internet in Canada. Least amount of money spent on R&D in Canada. Increasing reliance on Equalization and Employment Insurance.

And then sketch an initiative that tackles these issues head on (please don’t use the word prosperity, though. I think New Brunswickers have been deprogrammed as to what that word means - in New Brunswick ‘prosperity’ means all those features of New Brunswick as listed above). And, like Rendell, et. al. realize the absolute critical importance of attracting new business and investment into New Brunswick. And then go out and tirelessly make it happen.

Then if you get interest from a national party it will be for actual work and actual results rather than you fitting a certain demographic profile….

But who knows, maybe I’ll get an email from Bernard Lord asking me to invest in New Brunswick some time soon….

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