It's The Economy, Stupid

According to the Export Development Corporation foreign direct investment (FDI) in Canada was $26.1 billion in the first nine months of this year, up from $8.2 billion in 2004.

Geez, I wonder how much of that $26.1 billion in foreign direct investment came into New Brunswick? How about the $100+ billion in the past five years? At an average of 8,000 jobs per billion of FDI, even if we had received ‘our share’ that would have meant over 20,000 new jobs.

For those of you that care about such things, Ireland had $80 billion in FDI from 2001 to 2004 while Canada had $62 billion. To put this into perspective, that’s about $20,000 per person in investment in Ireland compared to $2,000 in Canada per person.

Imagine for a moment if Atlantic Canada was able to attract $20,000 per person in FDI over the next four years. That would be $44 billion in investment and would translate into something like 352,000 jobs.

Tee hee hee. Hoo, hoo, hoo. Ha, ha, ha. Excuse my outburst but that even makes me laugh.

To bad. They did it in Ireland.

Just a final note. There was over $2 trillion in FDI into just OECD countries from 2001 to 2004. It seems to me that if New Brunswick got on that train and started to attract its share of FDI, there’s a lot to go around. Or maybe we should continue to support the pizza shop down the street or the pet store. Small business, afterall, is the backbone of the economy as they say.

http://www.cbc.ca/cp/business/051129/b112962.html
http://www.oecd.org/dataoecd/13/62/35032229.pdf

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I was part of the Maritime News discussion today on CBC – a panel discussion and call in on what should be the most important issue in the upcoming Federal campaign. The topics varied from how bilingualism is a drain on the economy to health care to the looming ‘deep integration’ with the US.

There were some callers discussing ‘economic’ issues but a lot of the traditional stuff around companies moving here for incentives and then ‘leaving after the incentives run out’ or the ‘race to the bottom’ or similar comments.

I still think we need to put everyone through an Economic Development 101 class. We can have disagreement on approach but fundamentally, everyone should realize that economies are driven by business investment and business investment is dominated by national and international firms.

These well intended social activists from rural PEI and Nova Scotia are feeding the Ontario economy with their pension fund and RRSP investments without even realizing it. If we had more of those large publicly traded firms here, at least some of their investment dollars would stay in this region.

We need small businesses. Sure. But small businesses do 99% of their business in local markets so if you want small business to grow, you need to stimulate the economy and you do that by attracting in business investment from outside.

And for those that believe cutting corporate taxes will work, please explain to me how. Corporate taxes paid in New Brunswick last year amounted to $152 million on a budget of $6.1 billion. It’s hard to see how cutting out that revenue would stimulate development. It would likely just provide a few more bucks for entrepreneurs to invest in their RRSPs and mutual funds which are investing in publicly traded firms in Ontario, Alberta, the US, etc.

Give me models for attracting our share of global business investment, please. I am fed up with all these theories about ‘innovation’ and ‘small business growth’ and ‘trade’. Cripes, we have spent 30 years trying to develop ‘value-added’ exports and 90% of our exports are still commodities – where the value add is added elsewhere.

Give me a Michelin in every city and town of 10,000 in Atlantic Canada and you will do more to grow this economy than all the EI, make work and small business growth programs combined. Period.

If you worried about these ‘Michelins’ leaving when the incentives run out – well then, give me another alternative.

I reiterate that judgement day is coming in Atlantic Canada. I’m no soothsayer but there were two more signs of it again this week. The Ontario Centre for Competitiveness and Prosperity issued another report warning that Ontario can’t keep subsidizing the rest of Canada and the Innovative Research Group released a poll showing that 40% of Albertans think Atlantic Canada is a drain on the national economy.

Either we get our act together and tackle our economic problems or we are going to get ‘rightsized’ real soon.

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Statistics Canada published their annual statistics recently on the agriculture sector in Canada. The provide information on revenue (receipts), expenses and income (profits). There is also information on any subsidization by government.

Anyway, for 2004, the agriculture industry in New Brunswick posted a $17.8 million loss (as a whole) compared to at 10.5% profit margin in Canada as a whole. And how about those Albertans. As if oil wasn’t enough – their agriculture sector posted the best profits in Canada.

The NB profit numbers might be an anomoly although there was zero profit in 2003.

My question, did anyone read about this in the newspaper? Or hear about it on the news? Maybe, I didn’t canvass every media source. But you would think that New Brunswickers would want to know about this and have some understanding as to why.

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It looks like were in for an election sometime in the new year. Already, this is being dubbed as a ‘Christmas’ election in the hopes that a few people may vote against the instigators.

Here’s what I will be looking for before I cast my vote.

The party that articulates the clearest vision for economic development in Atlantic Canada.

The party that agrees that government, as representative of us, must play an active role in economic development.

The party that will cast aside old models that clearly haven’t worked.

The party that will agree that we need to attract and support the development of new industries in Atlantic Canada to replace those that are declining.

The party that will say “if it’s good enough for Ontario and Quebec, it’s good enough for Atlantic Canada” (read: the massive industrial development spending on auto, aero, etc.)

The party that will agree that rural decline is not inevitable – that we need to spend a lot more effort on community renewal and a lot less on ‘easing the decline’.

The party that will not sugar coat the extent of the problems in Atlantic Canada. Pretending things are getting better belies the seriousness of the problems.

Think any of the parties will agree to my conditions?

Me neither.

But it felt good getting it out there anyway.

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If you read the ‘Sleuth’ today in the Times & Transcript, you would have read of ‘big new plans’ for downtown. However, they all depend on Premier Lord and his legacy. The new justice centre, apparently, is critical to the development.

Well, if history is any judge (read: Gunningsville Bridge), they could be in for a long wait.

Is it just me or does it seem to you that whenever government money is involved things take ten times longer to get done.

Maybe one of the signs that Moncton has become a ‘real’ city would be when it could get a few deals done without waiting for years for the political climate in Fredericton to be right.

Here’s a thought. Build your hotels, office buildings, convention centre, et. al. Leave a hole for the Justice Centre. When, and if, Fredericton gets around to approving the funding for it, it will get done.

But Moncton’s downtown development would get done without worrying about a Premier’s legacy.

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A lot of people already this morning have asked me why Research in Motion didn’t announce its 1,200 person R&D facility in New Brunswick. I think this is a complex question without a five cent answer.

But the political answer is that we are not challenging our provincial government to take the issue of attracting industry seriously enough. And the biggest culprit of this is Al Hogan (I know once again) over at the Times and Transcript.

Here’s today’s We Say:

Day care deal should be better
We Say: Premier Lord tried his best to get the most positive day care deal possible for the province

And if the political pressures from the short-sighted special interests, Shawn Graham, and the feds forced the premier to essentially capitulate, then they have done the province no favours. We’ll have ended up with second best.

The other day it was those ‘damn’ Saint Johners that lost the election for the Premier. Before it was Paul Martin who was holding up the gas tax deal. And on and on.

How many other people can Al Hogan blame for the failings of the government?

How is this related to economic development? I’ll tell you why.

Tomorrow, the editorial pages in New Brunswick should be legitimately asking the question why did Nova Scotia attract RIM? Why has Nova Scotia doubled job growth compared to New Brunswick since 1999? Why has Nova Scotia attracted four times as many immigrants? Why are Nova Scotia residents among the top users of the Internet and New Brunswick is at the bottom (this is very relevant to companies like RIM that want an Internet savvy workforce)?

But they won’t. Al Hogan will either a) ignore it altogether, b) blame the Feds for ‘putting it in Nova Scotia’ or c) launch another spirited defence of the Premier’s economic development policy.

If Al Hogan had any sense (and any legitimacy), he would ask the tough questions. He would probe the tough issues. Then, in turn, a few people might start thinking up in Fredericton that there is something to this thing called economic development.

But he won’t. And they won’t. And we’ll keep reading about RIM in Nova Scotia. And Chrysler in Ontario. And Dell in Edmonton. And Bombardier in Montreal. And so on and so on.

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AllNovaScotia.com is reporting this morning that Research In Motion will be announcing a huge research and development centre to be located in Dartmouth, Nova Scotia.

They are suggesting that 1,200 jobs are involved.

If this is true, hallelujah.

A mini economic spinoff model:

1,200 jobs @ $60k = $72M in direct payroll

The multiplier on those highend jobs would be at least another 1,200 jobs (services, retail, etc.) at much lower average salaries but we are still looking at round $45M in indirect payroll.

The taxes paid in Nova Scotia (income, HST, etc.) should amount to $20 million or more per year.

Add in at least 800 housing starts.

A very large corporate office space.

It’s all good.

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Industry Canada press release:

The Honourable David L. Emerson, federal Minister of Industry, and the Honourable Joseph Cordiano, Ontario Minister of Economic Development and Trade, today announced support to DaimlerChrysler Canada Inc. (DCCI) as part of the company’s planned investments in its Windsor and Brampton, Ontario operations.

The Government of Canada has committed a $46 million investment, and the Government of Ontario has committed $76.8 million through the Ontario Automotive Investment Strategy to support DaimlerChrysler’s $768 million investment. The investments are critical to ensuring the industry’s competitiveness in a global market place.

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From the National Post:

The GM job cuts will not affect the Ontario government’s plan to invest $435-million in the company as part of a project to upgrade the infrastructure and research capacities of the automaker’s plants in the province.

The federal government is contributing $200-million to the $2.5-billion project, with the remainder coming from GM.

Phew. You think Premier Lord and Paul Martin will ever get together and invest $635 million into one company in New Brunswick?

Don’t forget, GM is supposedly investing $1.9 billion into that project.

Wanna bet New Brunswick will get a few more bucks for ‘innovation’ or some other abstract concept?

I’ll take the $635 million for a semiconductor plant. Or an aerospace plant. Or an auto plant (I hear KIA’s in the market but that’ll go to Ontario, no doubt).

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Occasionally, people post in this blog criticizing economic development success stories such as Ireland. On that point, I am unrepentant. Attracting large scale business investment into your province must be a top priority in poor places like New Brunswick.

According to this article, the Dublin subsidiary of Microsoft paid almost $1 billion in corporate taxes to Ireland between 2001 and 2004.

$ 1 billion in four years.

Now let’s put a little perspective on this, shall we? New Brunswick’s total government budget for this year is just over $6 billion. Total corporate taxes to support this budget are $152 million (that’s according to the government’s own data). Microsoft, one company, pays almost double in corporate taxes in Ireland than every corporation in New Brunswick combined.

Since you asked, Microsoft in the U.S. paid $4.4 billion last year in corporate taxes.

So the lesson here is that we need to attract companies because they contribute vast amounts to the public purse (directly and indirectly).

Since you asked, NB generates approx. $608/per person in corporate tax compared to $1833/per person in Ontario.

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