It's The Economy, Stupid

Read this article about Team Pennyslvania – an initiative that I think has been quite successful at attracting industry to that state.

Notice the name of the writer. She is the CEO of a local firm in Pennsylvania.

Let that digest.

Then think about New Brunswick.

Imagine if the CEO of Ganong or Irving or other members of the New Brunswick Business Council – was co-chair of an organization called Team New Brunswick designed to attract industry to New Brunswick.

This is the nub of the thing.

New Brunswick-based business leaders (most of them) continue to talk about expansion of local business and in some cases are actually hostile to attracting industry.

If the new Liberal government wants to engage the NB Biz Council, in my opinion, it should provide leadership on this issue. On attracting new industry to New Brunswick. New industry that will increase the labour shortage and probably push up the wages and costs of the firms in the NB Biz Council.

Does the NB Biz Council have the ‘maturity’ to understand that in the long run a strong economy in New Brunsiwck will be better for them? Even at the cost of rising wages and labour shortages?

Or will the NB Biz Council actually discourage external investment and demand more and more programs designed to help them expand (vested interests)?

This is an interesting debate to be sure. I, for one, support the Team Pennsylvania concept and would like a similar model here. I think it would be great if Ganong, McCain, Irving, Pizza Delight, McKenna, et. al. were fully onside and actually out helping encourage foreign investment to New Brunswick.

I’ll believe it when I see it.

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The Daily Gleaner ran a story yesterday on the population decline in New Brunswick. Campbell Morrison takes a balanced look at the issue.

Statistics Canada predicts the decline could mean the province would be home to as few as 708,000 people by 2026.

The issue confounded governments as long ago as 1997, when former premier Frank McKenna asked Joan Kingston to head a select committee on demographics. Kingston, now the principle secretary in Premier Shawn Graham’s office, said the issue is key to New Brunswick’s future prosperity.

“It is a very important issue when you consider that, in order to increase productivity and in order to have good economic engines firing on all cylinders, you need a workforce to do that,” she said in an interview.

“It is very important (for) economic development.”

I hope Ms. Kingston et. al. understand the chickenness and eggness of this issue. You need industry to attract people. You don’t attract people and then go get industry. The trick is to convince industry that people will move here for good jobs.

So, I would survey expats to confirm this theory. I would publish all the inmigration data for a place like Moncton that has shown an ability to attract several thousand people from outside New Brunswick in the past decade.

If we spend too much time on the people side of the equation and not enough on the economic side you will end up with – surprise, surprise – Bernard Lord’s model. Go to Toronto with Labatt beer, invite expats to a room and tell them about all the opportunities in New Brunswick. Then send them to a website that shows only call centre jobs.

It didn’t work for Bernie and it won’t work for Shawn.

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I like the CBC. Some of the best, if not the best, reporters in New Brunswick are employed by the public broadcaster.

But I’ll say this.

If Robert Jones got a bee in his bonnet about the root causes of the economic malaise in New Brunswick, every CBC listener would qualify for an honourary doctorate in the subject.

I heard another Jones piece this morning on the auto insurance sector.

He’s like David with that little slingshot up against the mightly Goliath.

Or maybe he’s like Don Quixote:

El ingenioso hidalgo Don Quixote de la Mancha
(The Ingenious Hidalgo Don Quixote of La Mancha)
The book tells the story of Alonso Quixano, a man who has read so many stories about brave errant knights that, in a half-mad and confused state, he believes himself to be a knight, re-names himself Don Quixote de la Mancha, and sets out to fight injustice in the name of his beloved maiden Aldonsa, or as he knows her in his mind, Dulcinea del Toboso.

Robert Jones de la Mancha.

I like it.

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Another article in a western Canadian paper educating westerners about the excessive federal funds sent to Atlantic Canada to prop up rural communities. This is from the Victoria Times Colonist:

Government programs aimed at helping rural areas can easily go wrong. Think of all the federal funds sent to Atlantic Canada, encouraging people to stay in the region despite a persistent shortage of jobs.

The writer must be talking about the billions spent in the last decade to prop up the aerospace industry – no, wait, that’s Greater Montreal.

Well then, he (she) must be talking about the $1 billion fed/prov incentives for the auto sector over the past three years. No, that would be southern Ontario.

Certainly, it’s the billions in tax breaks to encourage development in the oil sands. No, sadly, that’s Alberta.

Millions to grow the film/new media industry? Nope. That’s B.C.

Billions to support the agriculture sector? Not really. Most of that goes to farmers west of the Ontario border.

$590 million to develop port and rail infrastructure? Guess again. That’s Prince Rupert/Vancouver.

Let’s dig deeper.

How about the $4 billion Technology Partnerships Canada? Nope. Not one investment in rural Atlantic Canada.

How about the billions in federal government R&D spending? Not really. Outside of Halifax, not much of that money is spent in Atlantic Canada.

Oh, I get it. They’re talking about EI.

Tell you what, Victoria. You give us the billions in R&D, industry incentives and infrastructure subsidies and we’ll give you the EI.

That would be fun. Snooty, faux British accent Vancouver Islanders on EI and Miramichiers complaining about their lazy arses.

Oops. Just day dreaming again.

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Premier Graham is setting up a task force to make recommendations on how the province can become self-sufficient.

Why I titled this post ‘groan’ is the last paragraph in the article:

While Graham said he’s open to new ideas, taxation will be one of the issues examined by the task force. “We know we are losing productivity in our economy compared to other jurisdictions,” he said. “That’s why the task force will be looking at the taxation issue to make sure we are at appropriate levels.” The previous Conservative government under Bernard Lord made a series of tax cuts. New Brunswick has the lowest small-business tax rate in the country.

I hope they don’t spend too much time on taxation. I say this for several reasons:

1) New Brunswick companies don’t pay much tax now. It’s like 3% of total revenues – far below Ontario and Quebec (I’m not talking ‘rates’ here, I am talking about real taxes paid. ‘Rates’ don’t matter – it’s ultimately what is paid that matter). Not to put to fine a point on it but a recent study in the US found that ‘tax rates’ was one of the least relevant issues when it came to ‘site selection’ (where companies decide to site a facility).

2) Lord cut small business taxes to the bone and what happened? The number of small businesses declined. New Brunswick had the worst SME performance (in terms of growth/decline in the number of SMEs) of all but one province in Canada! There is always a temptation to think cutting taxes will help stimulate economic growth but in my research that only works at a national level or when there is a massive cut. If this group looks at taxation, I hope they focus on tax credits for job creation and investment. Just cutting a tax will reduce tax revenues with no promise of more investment. Arizona will give you a 25 year corporate tax break if you invest $1 billion or more. Sounds good to me.

2) Lord has cut small biz taxes and demanded more and more Equalization (now at $700 million more per year). If Graham’s goal is ‘self-sufficiency’ (i.e. no more Equalization), he should be very stingy when it comes to taking away tax revenue. It must lead to far more new tax revenue that that which was lost. And the Lord example is a clear and recent one that just cutting taxes has no direct correlation with economic growth.

This task force must come up with strategies to grow new industries – and at very strong growth rates. Further, these new industries cannot be clustered only in 203 urban centres. They must be able to grow in central and northern NB as well.

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I have an admission to make. Over the past couple of years, I have been buying up old time music CDs. Al Jolson, Bing Crosby, Fred Astaire, Judy Garland, Ethel Merman, etc. As if I wasn’t boring enough, now I listen to music that my grand parents listened to.

But I digress.

One of the more catchier tunes is from the Bing Crosby Show circa 1949. It’s called Boise, Idaho and it’s a duet with Judy Garland. It’s basically a song about how wonderful that city is to live in.

Now, I read that Idaho is the third fastest growing state in the USA and that the growth is fuelled by in-migration.

Idaho. As a percentage of the US population, Idaho is smaller than PEI -relative to Canada’s population. Idaho. 1,700 miles from Chicago. 2,500 miles from New York. 1,100 miles from LA.

In short. It’s small and isolated from the major population centres of the US.

Sound familiar?

It’s refreshing when I hear of these places growing strongly. I, maybe mistakenly, draw some hope that New Brunswick could also be a growing province some day.

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Interesting.

It would seem that a few ex Atlantic Canadians are still interested in the homeland.

Do you think they pine for the rolling hills of Albert County? Or the majestic Annapolis Valley? How about the Nord Shore (see below)?

For inspiration look to the Irish.

North Shore Song

Well Anglophone or francophone,
Are just the same to me.
Miguasha’s shore, you can hear her roar
Friend or mon ami.

Rise Again

The time is nie, the time is nie
When every Scots man will cry
Rise, aye we will rise again
Fra heather glen ta button ben
We will rise this we ken
Rise, aye we will rise again

Though Charlie’s gone we’ll plod on
Wi our honour and our song
Rise, aye we will rise again
As long as there’s a hundred men
Scotland will rise again
Rise, aye we will rise again

Giddy up.

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The Telegraph-Journal is running a lead story this morning called “Do or die for N.B. forestry” quoting experts saying that massive change will be required such as downsizing the number of mills, turning the focus away from pulp and reducing labour cost through mechanization and other efficiencies.

This is an issue near and dear to my heart. For years, government has made almost no attempt to help these communities adapt to the new economic realities. No real attempt to grow new industries to reduce dependency on forestry, fishing and mining.

It just seems like yesterday that Bernard Lord was announcing $250 million for the forestry sector to put it on a firm foundation for the next generation or some such crap. The industry applauded (including Irving). I said it was just a bandaid back then and it would seem I was right.

They had the yackoff smirnoff report and said no (play on the name of the real consultant). They opted for short term bailouts and forgiveable loans. Remember, the Indian firm that bought the Nackawic mill and got $67 million in subsidies said on the day of the opening that he would likely need more from government.

In Night Train, Bruce Cockburn says “in the absence of a vision there are nightmares“. He’s right on the money. We near clearly definable options for rural New Brunswick. We need real targets. The public needs to know that if the government is going to invest $250 million more that it will lead to not just tiding over the forestry industry for another 12 months but a real solution for a generation.

Stephen Harper just announced $350 million in incentives for Pratt & Whitney to create jobs in Montreal.

How about $350 million for 2,000 – 3,000 high paying manufacturing jobs in Miramichi? Or Tracadie? Or Bathurst? Auto plants, as one example, have a shelf live of between 25-35 years and a closure rate (in that initial period of almost zero). When Ford and GM mothball auot plants, it’s typically the older ones that go because of the massive investment required up front to get them going.

That’s generational economic develompent support not short term bandaids.

I was in Halifax this weekend and saw several advertisments (movie theatre, newspaper, TV) promoting careers in the animation and gaming business. We know that PEI is moving in this direction. New Brunswick, once again, is last off the mark. Is New Brunswick even targeting animation and gaming as a growth industry? Who knows?

Just once, I would like someone to come up with a plan for economic development support in New Brunswick. One with targets. One with significant investments. One with alignment (fed/prov/local, R&D industry, education/training, industry attraction and entrepreneur support all pulling in the same direction).

More quotes about the dire straits of the forestry sector just don’t cut it for me.

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Come on, New Brunswickers! Eat, drink, be merry – for tomorrow we will have to read more Al Hogan crap.

Not only do we have one of the lowest per capita spends on eating out, we had the second worst rate of growth last year.

Go get it! Transfat! Burgers! Fries! Giddy up!

Source: Statistics Canada.

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This is likely my final post before Christmas so I’ll end with my Christmas wish list.

All I want for Christmas is:

A local newspaper that supports good government policy and condemns bad politics (the T&T just savaged the Libs this a.m. for cutting the HST rebate on electricity). The T&T never once even eluded to the policy implications of this tax cut (disincentive to reduce energy consumption). No other province (or US state as far as I know) has implemented anything like this cut. In Europe they have been increasing taxes on energy consumption. This was purely and only designed to cover over mismanagement by the government of NB Power. It was bad policy and even on the CBC we get YouTube (which of course is a valid angle to the story but it would have been nice to have a tax policy expert weigh in on the actual merits of the tax).

Just one of the Federal government’s multi hundred million dollar corporate subsidies (Toyota, GM, Ford, Bombardier, Pratt & Whitney, Bell Helicopter, on and on and on). A big fat juicy high paying manufacturing plant in Northern NB (or southern for that matter) would be a nice Christmas present? What? Do I believe in Santa Claus? Why yes! Of course!

More R&D in New Brunswick. Being last place in Canada sucks.

Have a Merry Christmas and Happy New Year.

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