It's The Economy, Stupid

It’s interesting how one meeting with a person can bias your opinion of them for a long time. I sat in on a meeting between Kevin Lynch, the new clerk of the Privy Council and a few business and community leaders here in Moncton way back in the mid 1990s when he was the top dog at Industry Canada. Lynch has been widely credited with the development of Canada’s knowledge industry strategy back then – based as I recall on the whole notion of ‘clusters’ which became the vogue term during the 1900s.

According to Paul Wells:

…..this is the best-reviewed appointment in recent Langevin Block history. When Eddie Goldenberg, Donald Savoie and Stephen Harper agree on anything, it’s basically a banner day.

Back to the meeting, Lynch railed on and on about New Brunswick and Atlantic Canada not taking advantage of the ‘knowledge economy’, about how we were being left behind. All in all it left me kind of worried that the top dog at Industry Canada had a rather overall negative view of our region. You see, I had hoped that Industry Canada (will its multi-billion dollar budget) would have saw a role in supporting economic development in Atlantic Canada. But I was left thinking that the top dog over there wasn’t too sympathetic to AC’s plight.

He moved on to the Finance department where he would have become intimately aware of Equalization, EI, etc. from the numbers side of things.

Now he’s running the show as the top civil servant in Canada.

Lynch was born in Cape Breton. He earned his BA in Economics at Mount Allison University.

My hunch, based on one measily meeting (and watching a few of his moves) that Atlantic Canada won’t be at the top of his priority list. We already have the Minister in charge of the public service saying they would reverse all the talk about moving federal government jobs outside of Ottawa (this was just a political ploy, he said). Now Lynch.

Gather up your britches guys and gals. Get ready for some tough love.

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As you know, my biggest annoyance about Canada over the past 15 years has been the breathtakingly deep disparity between the economic growth in a few regions of this country compared to everywhere else. Since 1991, the population of Canada has grown by almost 5 million people. This population growth has been coupled with an unprecedented economic growth. But, almost incredibly, New Brunswick is actually losing population. And we are not alone. Nova Scotia, PEI, Newfoundland, northern Ontario, most of Quebec (outside Montreal), Manitoba and Saskatchewan all have population challenges.

And how are the ‘rich’ areas of Canada responding? Well, by accelerating their efforts to raid what’s left of the poor regions’ best and brightest talent. Calgary, for example, has been running full page ads in markets like Winnipeg extolling the merits of moving to that fair city. Aberta reps were also recently in Moncton promoting jobs out west. And this talent recruitment effort is not limited to ‘skilled tradespeople’. IT workers, health care professionals are also being courted to move from ‘poor’ to ‘rich’ areas in Canada.

Now, I don’t think there should be formal efforts to stop governments from ‘raiding’ talent. I am not sure how you could stop it anyway.

I just think the optics of provincial governments aggressively recruiting away our best and brightest aren’t that good.

Who will be left, me and my cousin Ernie? Maybe you?

I just think this underscores the need for a real economic development strategy in New Brunswick. One where we can be recruiting Calgarians to move here. Don’t laugh. Over 50% of OAO Technology Solutions’ IT professionals were recruited into Moncton from outside New Brunswick back in the late 1990s (before they downsized but that’s another story).

I think a fairly good wedge of Canadians and immigrants would move here (not all but some) if there were good job opportunities.

But if there are not, they will not move here and further those that are left will continue to be courted to move out.

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Dubai announces $15 billion investment to develop aerospace sector
Canadian Press
Published: Sunday, February 19, 2006

DUBAI, United Arab Emirates (AP) – The emirate of Dubai said Sunday it would invest $15 billion US to develop a range of airport and aircraft businesses aimed at cashing in on massive growth in air passenger traffic in the Middle East and Asia.

A new company dubbed Dubai Aerospace Enterprise was created Sunday by government-linked developers with plans to invest heavily in 14 segments of the fast-growing airline and aerospace industry.

Dubai already owns Emirates airlines and one of the busiest hubs. It also plans to construct a second airport. The emirate now hopes to widen its reach by selling its expertise to China and India, where some 145 new airports are planned over the next decade, the consortium announced.

“Within 10 years, DAE will become an integral part of the global aerospace industry and a leading player,” said Sheik Ahmed bin Saeed Al Maktoum, a member of Dubai’s ruling family who heads Dubai’s civil aviation department.

Comment: It must be nice to have $15 billion to throw at the development of one itsy bitsy economic sector.

How’s this: New Brunswick to invest $15 billion to develop its aerospace sector.

Reality check: New Brunswick to invest $5 million, over five years, split among 15 economic regions in the development of something we’re not quite sure of but it wil lead to prosperity, trust us.

I once wrote a blog (can’t remember when) outlining that New Brunswick spends about $4 per month per person on economic development – less than on garbage collection.

Perspective, my friends.

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Donald Savoie’s new book is still not out (hopefully next month) but Chapters on line has an interesting write up on the book:

Visiting Grandchildren: Economic Development in the Maritimes
Author: Donald J. Savoie

From the Publisher“During his successful campaign to become Conservative Party leader in the spring of 2004, Stephen Harper said of the Maritime provinces, “”We will see the day when the region is not the place where you visit your grandparents, but instead more often than not the place where you visit your grandchildren.”" In Visiting Grandchildren, esteemed policy analyst and scholar Donald J. Savoie explores how Canadian economic policies have served to exclude the Maritime provinces from the wealth enjoyed in many other parts of the country, especially southern Ontario, and calls for a radical new approach in how Canadian governments determine policies that affect the different regions.

Savoie advocates a ’ratchet effect’ for national economic policies, whereby regions take turns at high growth, with the slow-growth region of one period becoming the high-growth region of the next, with none moving from slow-growth to decline. He demonstrates how this pattern has been effective in countries undergoing long-term regional convergence and how it would recognize that what is good for the Maritimes is good for Canada no less than what is good for Ontario is good for Canada.

Visiting Grandchildren looks to history, accidents of geography, and to the workings of national political and administrative institutions to explain the relative underdevelopment of the Maritime provinces. Savoie argues that the region must strive to redefine its relationship with the national government and with other regions, that it must ask fundamental questions of itself about its own responsibility for its present underdevelopment, develop a cooperative mindset, and embrace the market, if it is to prosper in the twenty-first century. Savoie’s work serves as the blueprint for a new way of envisioning the Maritime region.

This is the crux of my thesis too (I’m just not an esteemed scholar):

…regions take turns at high growth, with the slow-growth region of one period becoming the high-growth region of the next, with none moving from slow-growth to decline.

Based on my research, this is how the most successful economies work. Take the U.S., over 10, 20, 30 year cycles ( and more), growth has occured just about in every region of the country – but no region has been hammered negatively. New England slips, Arizona booms. Georgia booms, New York slips.

Successful national economies have good flow of labour and capital within the country. Communities overheat – capital moves to the next location. The overheated economy cools – capital moves back.

But in Canada, according to Statistics Canada, growth has been concentrated in four areas since 1973: Greater Vancouver, Calgary/Edmonton corridor, Greater GTA and Montreal.

Some would argue that Atlantic Canada hasn’t been on the radar since Confederation. That the only capital that flows here is to exploit natural resources. They have a point. Name me 2 or 3 industries that have flourished here that are not tied to natural resources or local market considerations (call centres are definitely one).

But the most curious thing about that write up is that Stephen Harper made that quip about Visiting Grand Children.

Wow.

I thought the ‘Calgary School’ wanted Atlantic Canada to just dry up and go away.

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This stuff just drives me nuts (you may have to sign up to read this article).

From the Toronto Star:

“For the better part of the last decade, we were missing in action,” said Economic Trade and Development Minister Joe Cordiano, who is to open a new trade office in the Indian capital of New Delhi today.

The 22-member delegation, led by Mississauga Mayor Hazel McCallion, is on a 10-day mission to Mumbai and New Delhi to convince Indian companies to set up shop in the GTA. It is the team’s second trip to India. The first, last year, was more exploratory in nature, said McCallion, adding that while she experienced culture shock last year upon arriving in India, the transition was easier this time.

The team made one pitch last week in Mumbai at the annual 4-day meeting of NASSCOM (the National Association of Software and Service Companies), held at the swanky 5-star Grand Hyatt Hotel in North Mumbai, near the airport.

The association has 600 members including India’s largest high-tech firms such as Tata, Infosys and Satyam, all of which already have offices in Canada.

The alliance hired a consulting firm to target 40 small-to-medium-sized Indian software firms at the conference that are likely candidates to set up operations in Greater Toronto. They ended up meeting face to face with about half of those targeted.

Saurabh Mehta, owner of Avani Cimcon Technologies Ltd., a small software company in Ahmedabad, Gujarat, about 450 kilometres northwest of Mumbai, skipped the president’s speech to meet with GTMA members.

Mehta, whose $2 million (U.S.) company specializes in software solutions for the financial services sector such as banks and insurance companies, employs 100 people in Ahmedabad.
The company has served U.S. clients out of an office in Santa Rosa, Calif., since 1993, “but doing business in the U.S. is getting more and complicated due to security concerns after 9/11,” said Mehta, adding that the wait just to meet with U.S. embassy officials in New Delhi for an interview for a visa is six months.

He is considering either Vancouver or Toronto as near-shore locations from which to expand his business in the U.S. and was impressed with the GTMA’s showcase effort.

Vancouver or Toronto as near-shore locations.

Please tell me how Vancouver or Toronto can be positioned as near-shore locations. Near-shore locations are supposed to be communities close to large economic areas (like the US) but that offer more competitive costs (so that outsourcers can service the large market at a lower cost).

Atlantic Canada is the logical near-shore alternative in Canada but the larger urban areas have stole our thunder.

Good for them, shameful for us.

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Have you ever been ‘prequalified’ for a loan? This issue of prequalification is starting to be all the rage in economic development. For several years now, U.S. states have been developing ‘megasites’ in advance of any specific project (I recently saw this in Ireland too). This involves getting the zoning in place, ownership, basic site services, architectural renderings, etc. In some cases, it even involves pre developing the kind of incentives packages that could be made available for certain uses. In addition, these ‘megasites’ are approved by the various state governments and then marketed to potential large users.

Another trend is the prequalification of whole communities as site selection ready. Arkansas is doing this as are a number of other states:

Mike Maulden, director of external affairs at Entergy Arkansas, [recently] awarded “Select Site” certification to 13 Arkansas communities. The new program created by Teamwork Arkansas recognizes Arkansas communities that have met a stringent 50-point criteria for site selection standards.

I believe that this model should be deployed in Atlantic Canada. It would help local communities understand what they need to do to be ‘investment ready’. In other words, to have a fighting chance to attract new business.

It wouldn’t be that hard to do. Just get a copy of Arkansas’ or Virginia or Ireland’s approach and then work with local communities to get them on side.

Just do it, somebody.

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If you look at economic development in 20 or even 50 year chunk, there are some megatrends that influence the success or failure of a community, province/state or country. One of these trends relates to transportation. 100+ years ago, Parrsboro, Nova Scotia was a vibrant town on a major trade route – both by sea and by road. In fact, Parrsboro was the size of Calgary in 1904. Now, after being cut off by both sea and road, Parrsboro is the shell of a formerly bustling town – a few grand, old houses and a populace struggling to keep the town afloat.

This context is why I am so adamant that Halifax needs to become a super port – the entry point for global cargo in the 21st Century. I have blogged about this a lot but a few articles in recent weeks have given me cause for hope.

It seems that the global shipping industry is indeed looking for an uncongested port on the east coast to ship cargo through. The cost and congestion of shipping cargo through U.S. eastern seabord ports is becoming a problem.

I think the whole Atlantica concept is lynchpinned by the Port of Halifax. If the Maritime Provinces were to become the favoured entry point for US and Canadian trade, it would open up tremendous opportunities across the region.

Of course, some have been calling for this for decades. But now global forces are kicking in. Massive congestion on the west coast. The emergence of the Suez Canal as an important shipping lane for North American cargo. Security and cost issues.

Now we need a rail system that takes a left turn around Sussex and would ship cargo directly to New England and beyond without the silly step of being shipped to Chicago.

New Brunswick and PEI (and Maine) should get on board this train metaphorically speaking. The Federal government is spending hundreds of millions to expand port facilities in rural British Columbia while Halifax gets crumbs. The three (maybe four) provinces should lead this charge and make that port our ticket back into to the North American trade system. Maybe we could then redress the economic harm to this region that was done by spending billions to develop the St. Lawrence shipping lane and cut off, effectively, Atlantic Canada as a trade route.

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I was talking to an ex-MLA the other day and he expressed bewilderment with the fact that occassionally some irate constituent would call up and say that the MLA was only ‘in it for the pension’ or something to that effect.

Now I read that Tanker is ‘under pressure’ not to bring down the government because he might jeopardize his pension.

His pension.

So, that’s what it’s come to in this poor province. Politicians worrying about qualifying for their pension are driving the agenda. “I’ll lose my pension”.

I won’t make an overt value judgement about this except to say that pension protection should not be at the top of the priority list for an MLA. I’m sorry – maybe that’s because I don’t have a ‘pension’ either but we elect these people to run a $6 billion organization. We expect them to take the issues of government dead seriously.

If Tanker believes that bringing down the government is in the best interest of his constituents, he should make that vote. Period.

I’m not saying he does, however.

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I have to admit since I started writing my blog in 2004, I am starting to see the themes that I have been promoting starting to get more prominence in the media in New Brunswick. I stake no claim to this – I just think that more and more people are wising up to the realities staring us right in the face.

Consider this Telegraph Journal article published yesterday. I don’t know if that link will work for you our not but I will summarize its content. It was penned by Rick Buckingham, president and CEO of 2 for 1 Pizza Inc. based in Fredericton. It was entitled The apocalyptic effect of the loonie on small-town N.B.

Mr. Buckingham almost correctly summarizes the lack of economic development in all of New Brunswick except Moncton and Fredericton:

Times are good in Moncton and Fredericton, two cities quite insulated from the vagaries of our economy. This is due to the fact that Fredericton is essentially a government and pseudo-government city with the likes of NB Power, two universities, and a smattering of engineering, call centres, and high-tech firms. Moncton’s economic growth is coming from call centres, software firms, a university, a new brewery and diaper factory and is increasingly becoming a travel hub for our province.

He than states his case:

The problems and solutions facing rural New Brunswick are enormous.

He then continues to talk about the crisis facing the forestry sector and its potential impacts on rural NB. Well framed work. He makes an interesting point that I haven’t heard before:

In Atlantic Canada, stumpage fees which are negotiated in five- to 25-year deals, are the highest in the world rivaled only by Japan. Although New Brunswick remains a successful forest product exporter, we are faced with the real threat of Latin America and South America with its huge, fast growing, eucalyptus plantations becoming the low cost producers on the planet. This will exasperate an already precarious situation.

Golly, wouldn’t it be neat to hear this from an actual government worker/elected official?

He concludes:

Our survival is at stake. We must either face the facts and find lower cost solutions, which in most cases are difficult choices, or the high Canadian dollar will do it for us. In effect, without change on the part of all stakeholders, it will make for a very unpleasant situation here in New Brunswick and abroad.

Sound familiar? I wonder why a pizza flipper even cares about this stuff but I am glad he does. If we can’t get straight talk from government and from journalists, maybe the pizza flippers will rise up and provide us with intelligent and relevant discourse.

I’ll take a large with extra pepperoni with a sprinkle of prosperity, please.

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Leave it to Al Hogan over at the Times & Transcript to provide us with a nuanced and thoughtful account of the Tanker Malley defection. Today he runs a front page story about Tories being asked to sit as independents in which he copies, verbatum, hastily slapped together content from the Premier’s Office about all the gravy the government has heaped on Miramichi since 1999. No context, no nuance, just an almost word for word reprinting of the government defence of its handling of Miramichi. Here’s a clip:

The Regional Development Corp. has infused roughly $18.2 million since 1999. The province has made commitments totalling $7.1 million from the Miramichi economic development fund. The province is also splitting the costs of a new $8-million wastewater treatment facility for the south side of Miramichi and $1.3 million is earmarked for a water and wastewater facility.

Malley’s comments notwithstanding, Miramichi-Bay du Vin received $498,116 in special project funding, the second most in the four local ridings. Since 1999, Malley’s riding received $20,000 from the Development Assistance Program, $268,816 from the Family and Youth Capital Assistance Program, $188,100 in Special Projects and $21,200 from the Community Events Program.

Now the reason why we know that Al and his buddy Daniel McHardie cut and paste verbatum the content that was faxed/emailed to the T&T from the Premier’s Office is that no one else would throw up a $21,200 expenditure unless they were trying to scrape up every possible shred of evidence provided that poor community. Imagine, we [the government] have spent over $30 billion since coming to office and we are proud to report that we gave $21,200 for a community event. That’s 0.0001% of the provincial spending during that time. Thanks a bunch.

Then Al in the ‘We Say’ segment, again shows that this is a complex, two-sided affair.

We Say: No premier can responsibly govern giving in to “do this or else” threats

Mr. Malley was on the government side and unhappy, apparently, because he was bypassed for a cabinet post.

Uh, there is not one shred of evidence for this. Only Lord’s statement with no proof.

If Premier Lord is unconcerned and uncaring about the plight in the Miramichi, why did he travelled all the way to Finland to personally plead the province’s case with the owners of the UPM mill?

The proof is in the pudding, fellas. Not in a trip to Finland to get front page coverage by the T&T.

Premier Lord had to reject Mr. Malley’s demands. And if these demands made with the threat of leaving the party can be proven, then they should be turned over to the Conflict of Interest Commissioner or even the RCMP for investigation of influence peddling or extortion. The whole thing shows why Mr. Malley should not be in the cabinet.

Well, Al, based on your coverage, the demands have already been proven.

Moreover, with a new Tory plan and budget due next month, Liberal leader Shawn Graham will need to think very carefully before bringing down the government. Just because they “can” doesn’t necessarily make it good political sense. If the premier in fact reduces taxes (as promised) and increases spending on the key “five in five” areas, the Liberals would bring down the government at their own peril.

Finally, Al thanks for getting to your real point, you are scared stiff that your buddy, the guy you have propped up with hundreds of positive stories and We Says will lose and lose big. What would that say about the influence of the T&T if Lord was defeated despite all your best efforts?

Eventually New Brunswickers are going to figure out that marginally decreasing tax rates is no substitute for vision. Saying they will increase spending on the ‘key “five in five” areas is a ridiculous assertion during an election year. Spending has increased 36% since 1999 a rate almost as high as Alberta – even though NB’s population is declining while Albert has added 14.5% to its population.

Maybe Al Hogan and Bernard Lord one day will take Politics 101 – together. Maybe they will realize that the best politicians zoom in on the key challenge of the day – like Robichaud and equal opportunity. That challenge in New Brunswick is the economy. And the Premier and party that starts to take this seriously will win my vote and I think the confidence of New Brunswickers.

One last point on Tanker and the Miramichi. I don’t have an easy answer there. The Miramichi is at a tipping point. It could go forward, become a regional trade area (witness the new Wal-Mart and the rumours about East Side Marios going there) and become a strong secondary economy in New Brunswick. Or it could fall backwards. If that mill closes in 2007, and 1,200 high paying jobs leave that region, the community may never recover.

Without being trite, leadership over there on that complex issue is not making one trip to Finland. Increasing power rates, the rising currency and the supply of wood are making that mill (like many others) non-competitive. If the government had started hedging for this in the 1990s and built up a cluster of animation and IT firms around the very good community college there, this may not have been such a big issue. But they didn’t and it is.

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