It's The Economy, Stupid

I love cliches. I don’t really know why but I am always using them and on the look out for new ones. You know: He who laughs last, laughs best; Looking for a needle in a haystack; Put your foot in your mouth; Get your foot in the door, etc.

A personal favourite of mine is “government doesn’t create jobs, the private sector creates jobs”. I came across this one in an economic development strategic plan that I read this morning. It was actually quite full of cliches, I guess the consultant was paid per quip.

Anyway, I paticularly like this cliche because most of us say without even thinking. Even in the old days when I was out recruiting business to move here I would find myself making such comments.

The government sector in Canada represents one fourth of the entire economy (around 24% of GDP give or take). In places like New Brunswick, the government sector is even larger. As I have pointed out before, the vast majority of net new jobs created in this province over the past 7-8 years have been in public sector roles such as health care and education.

But beyond just the tens of thousands of government and public sector workers in New Brunswick (around 90,000 persons paid by the taxpayer out of a total employed workforce of around 350,000), the government also subsidizes various industries to create jobs. Think LNG, think call centres, think agriculture. Then there is the money governments put into research and development and other activities that ‘create jobs’ so to speak.

So, in a place like New Brunswick, you’d be almost better off with a new cliche: “the private sector doesn’t create jobs, government creates jobs”.

But, that just doesn’t have a nice ring to it, does it? Plus, our friends at the CFIB and AIMS would hyperventilate just looking at that particular string of vowels, consonants and spaces put together side-by-side.

So, let’s go on using our time honed cliche. Just don’t actually look at any numbers or anything.

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I had another conversation yesterday with a proponent of more cooperation between the Maritimes on economic development. She couldn’t believe that we don’t cooperate more. We share the same regional economy. We share the same fate. Why not cooperate? (hey, that’s got a little Dr. Seuss in it)

Anyway, I have commented on this in the past but for her sake (and anyone else clamouring for regional cooperation), here’s the crux of the thing.

If Alberta is successful, that’s fine for certain politicians and bureaucrats in New Brunswick or Nova Scotia or PEI.

But if Nova Scotia is successful, that’s not fine. That’s shines a spotlight on our own deficiencies. That starts people asking questions. If they can do it, why can’t we?

Because I am New Brunswick-based and because of the woeful state of provincial economic development here, I tend to pick on New Brunswick the most in this area but it does cut two ways.

NS Premier MacDonald obstructing the Molson plant in Moncton comes down to the age old rivalry between the two provinces. Anyone who says it’s about fairness is just being silly. Nova Scotia has similar beer ‘deal’ with Quebec – similar to the one it won’t sign with New Brunswick. Why Quebec and not New Brunswick? See paragraph 4 above.

Why won’t the provinces cooperate on attracting global business investment into the Maritimes? See paragraph 4 above.

Why won’t the provinces set up a combined Atlantic Provinces investment team based in Europe with the goal of attracting investment to the region? See paragraph 4 above.

Why won’t the region look at the issue of immigration in a coordinated way? See paragraph 4 above.

Why won’t the region take a coordinated position when dealing with Ottawa? See paragraph 4 above.

If PEI is successful, New Brunswick will resent it. If Iowa is successful who cares.

It should be the opposite. We should be celebrating the success of our sister provinces in Atlantic Canada – not emoting jealousy. We should be emulating it – not discounting it.

We need to face it. Right now Nova Scotia and PEI are eating New Brunswick’s lunch when it comes to attracting good paying, high quality jobs from international firms. That’s a fact. Instead of denying it or ignoring it or saying “New Brunswick is focusing more on helping our local businesses”, this province should be looking closely at those two provinces and emulating and building on their successful models.

And as for the beer thing. Premier MacDonald should get past this and sign the beer deal with New Brunswick. I know that probably half his advisors and half the population would prefer the beer be produced in Ontario and shipped here rather than produced in “New Brunswick” [quote/unquote] Nova Scotia’s neighbour. But at the end of the day, Nova Scotia should celebrate this plant being in the Maritimes at all and New Brunswick should celebrate Nova Scotia’s success.

It’s a great big playground out there. And the high school bullies are picking on the kindergarteners. But I believe four of those little tots can compete with one pimply, confident but self conscious teenager. They’ll stand on one another’s shoulders and look the bully right in the face.

And hit him with their lunch pail.

If they can stop hitting each other.

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One of the media reports yesterday talked about how the defection of Joan/Wally to the Libs would be good for Moncton. Good for Greater Moncton because there are two more voices around the government table. You know, about the exact same logic used when David Emmerson crossed the floor to join the Federal Tories.

Who knows.

I can tell you this. The Liberals will alway be handicapped in Moncton as long as Al Hogan’s the editor of the T&T. His editorial this morning was vitriolic. It reminded me of his piece after Lord got hammered in the SJ by-election. Instead of at least some nuance, Al blasted Saint Johners and basically told Lord to forget Saint John and get on with governing.

Now Lord is commuting to Montreal to hustle corporate Canada at $400/hour.

There was a lesson for Lord in the SJ by-election. As a matter of fact, there were warning signs all over the place but when your #1 fan is the editor of the largest newspaper in the province, it’s hard to get perspective.

So, Al’s loving David Emmerson’s cross and hating Joan/Wally’s cross is consistent with his ideological views.

But the voters in Greater Moncton deserve a little more credibility in its local newspaper and indeed, so do Progressive Conservatives.

I have heard from a two PCs that Jeannot Volpe is going beserk. And this can’t be good for the party.

In many ways, Al Hogan is the reason the Tories held on to their power in 2003 with the slimmest of majorities.

But, in my opinion, he is also one of the reasons they nearly lost in 2003 and did lose in 2006. When a government is not challenged in the editorial pages, there is something seriously wrong.

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Fascinating stuff.

To be understated about it.

What I find amazing about newspapers is that they will let every Tom, Dick and Harrietta talk about economic development like they know about it.

Here is Karen Blotnicky, lifelong economic development expert – no, wait a minute – professor at Mount Saint Vincent University.

She states (excerpts with my comments below):

Too much is effort focused on getting new business to come from away. Nova Scotia has literally generations of experience with luring larger corporate employers who create many jobs for a short period, then pick up stakes and leave when the going gets tough. John Bragg of Oxford Frozen Foods recently offered interest-free loans to first-time homeowners who wish to buy homes in the Oxford area.

Wow. Nova Scotia and New Brunswick spend less on attracting industry than just about every other province, state or country that I have ever studied. We have sales staff residing in foreign markets and our FDI trends have bee woeful (with the recent success of NSBI as an abberation). Please name the “generations of experience”. Does she mean Michelin? Or maybe Crossley Carpets? No, she must be talking about Keane or Convergys. Hmmm. Certainly there have been firms that have came to Nova Scotia and closed but I would argue that the effect of that is amplified because there hasn’t been more FDI into those communities.

Nova Scotia has a much higher percentage of rural-based entrepreneurs than the Canadian average. Maybe it is time for Nova Scotia to start looking at who is already here when making plans for economic development.

95% – and she should friggin’ know this as a ‘marketing’ ‘professor’ of these small firms sell into the local market only. Encouraging 5000 more small, rural-based entrepreneurs to sell into the local market will only lead to 5000 bankruptcies.

The regional development agencies have long known that the secret to economic growth is as much about keeping existing entrepreneurs as it is about gaining new ones.

What regional development agencies? Of course part of any good economic development plan is business retention and expansion but at the expense of attracting new industry? Not a chance.

Yet, much government policy is focused on bringing in those new ones from away. The primary mandate of Nova Scotia Business Inc. is to attract new employers to the area. In many cases, these employers bring low-wage jobs with few benefits.

This is about the 15th article I have read in the Herald slamming the only truly successful provincial business attraction team in the Atlantic provinces (PEI is a distant second). So she thinks the $70k annual salary in the financial services firms is low wage? She thinks RIM will pay low benefits? How about Michelin in the rural area? Low wages to be sure. Cripes.

Unfortunately, when these large employers pack their bags and go, they leave Nova Scotia’s communities in a worse state than before they came.

I have said it before. Local businesses close their doors 90%+ more than foreign-owned ones. Yes, when a large employer leaves a community it does cause hardship. That’s why we should have had 10 instead of one.

At the same time, they manage to displace a lot of homegrown local entrepreneurs who are loyal to the area and who provide job opportunities close to home.

Huh? What the heck is she talking about? The vast majority of large foreign companies that set up here sub-contract to at least seven local firms up to several dozen. Who gets displaced? She’s crazy. Was there a local tire manufacturer that was put out of business by Michelin?

To lure families to job opportunities, Oxford Frozen Foods’ the blueberry processor will provide loans of up to $20,000, or 10 per cent of the property’s value. Borrowers will have up to 10 years to pay the loan off, without interest. But that’s not all: the loans are forgivable if things don’t work out. That kind of consideration is not something that you would get from a multinational corporation.

Huh? If we had a dozen more Oxfords we wouldn’t need foreign investment. That’s the friggin point. John Braggs aren’t just sitting out there waiting for a $5,000 grant.

Credit unions across Canada are also offering a microcredit program to help small entrepreneurs get started. If you are looking for $10,000 or less, and you have a viable business plan, you may be able to get money for starting a business, even if your credit is not perfect. This is not the first time that microcredit has been used to facilitate the growth and development of small-scale entrepreneurship. But it is the first time that a financial organization as trusted and as stable as the credit union has fully embraced the notion of microcredit.

All I will say is that we need macro solutions not microcredit. I am not against trying to find high impact, high potential entrepreneurs but more dough to create more small businesses to compete for less and less business in the local market is friggin’ crazy. And if the professor thinks that all these firms are going to take their business global – she’s nuts.

It is time that Nova Scotia did more to keep our homegrown businesses viable while encouraging the development of new businesses among those who are already here.

Final point. As I have said before. This stuff is feed for the grist mill. It sounds great. Support local biz. Bad multinationals. How dare we? Listen folks. Nova Scotia is going down. Another major national recession and there may be little left. The only hedge we have is to make hay while the sun shines. NSBI needs to double/triple its efforts and help grow real, durable and successful new sectors in Nova Scotia – urban and rural – and start to help regrowing the population. If NSBI can attract 4-5 new good sized manufacturers to the Debert Industrial Park you will see a dozen thriving local small businesses spring up to service them.

This is not about local or foreign control. Obviously I prefer local ownership. They are more loyal to community. Sure. But there are trillions of dollars in global investment that are all but passing Nova Scotia and the Maritimes by. Once in while we get something like offshore oil or gas and that sector gets an investment boost. We need to build grounded, local industries. Ontario has auto, financial, etc. Quebec has aerospace, biotech, etc. These sectors were seeded with billions in foreign investment and hundreds of millions in public sector investment. If Nova Scotia had leveraged the success with Michelin to attract 100 more – what a different province Nova Scotia would be today. Sure 10 would have closed – maybe 15. And there would be hardship. Sure. But think of it. Tens of thousands of good paying jobs keeping our people here.

If this marketing professor has a way to incubate more John Braggs – bring it on. Other than that shut up and stop playing to people’s fears and prejudices. It’s this attitude that will lead Nova Scotia further down the path it is already on. When they close MSVU because of a lack of students, Professor Blotnicky will just go on down the road. No skin of her teeth. But I wonder if she will look back and regret her comments as she moves to Calgary (one of the top destinations for FDI in the past 10 years in the
world) or Vancouver (beneficiary of billions in Hong Kong investment in the 1990s) or Toronto (one of the most foreign investment intensive cities in the world).

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News flash. I hear Joan Macalpine and Wally are crossing the floor this morning to be come Liberals. I guess Joan will be visiting my house now for support.

I was told in the past that I live in ‘Frenchy and crackhead’ territory and that’s why Joan Mac never even dropped off a brochure during the election.

Now Frenchies and crackheads are her constituency.

Cool.

As for Wally. Well, I guess the alternative would have made for awkward pillow talk.

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The Liberal Party of Canada put out a press release yesterday entitled:

Canada is Not for Sale: Protecting Our Economic Sovereignty

In which it served up the standard claptrap about the perils of foreign direct investment (apparently the Conservatives are proposing changes that might encourage more foreign companies to invest here).

What’s amazing to me is that this is the Liberal Party of Canada. You know: Trade Team Canada. Remember the PM and Premiers flying around the world to attract investmen to Canada?

Now they are fighting against the evils of foreign investment?

Funny stuff. Outward investment from Canada is more than double inward investment from the world over the most recently reported four year period (OECD data).

Apparently not only have the federal Liberals become a one issue party (Green) they must have fired anybody that understands economic development. During the 1990s (ahem, under the Liberals) inward investment was higher than outward investment. And that fuelled unprecedented economic expansion. Maybe Stephane Dion wasn’t around then…

You’ve come a long way baby.

This ain’t your father’s Liberal Party.

Interestingly, this morning I can’t find this press release anywhere on the Libs web site. Hmmmm.

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I had a conversation today with another of these economic developers that is known to push the envelope as it were when it comes to this business.

Anyway, he told me that the powers that be (so to speak) in provincial economic development circles these days want to place more emphasis on supporting local companies and less on attracting foreign investment.

That’s where the logic part comes in.

Statistics Canada tells us that 80% of small, local businesses will go bankrupt within five years.

A recent world bank study confirmed that 80% of all foreign firms that invest in your community will re-invest within five years.

We, therefore, want to put our effort in helping the 80% stave of bankruptcy for another year or so. I guess the 2-3 foreign investments over the past two years (not including the virtual call centre) was too much for the bureaucracy to handle.

Which is probably why New Brunswick is at the arse end of Canada and the US when it comes to economic standard of living and our government’s ability to raise taxes to pay for public services.

Don’t get me wrong. I have always said that a tightly focused support effort designed to help real entrepreneurs grow into national and international markets – is positive economic development. Nurturing grass roots efforts to build community economic development capacity can be positive economic development. But attracting lead firms, well capitalized multinationals with good business models, must be part of the mix.

In addition, I find it hilarious that New Brunswick’s New GovernmentTM releases position papers (i.e. self sufficiency task force) stating that we must be much more intentional about attracting global investment and a federal Commons committee out this week recommended repositioning much of our trade development effort into foreign investment attraction and our boys finally decided to read now the memo from 1976 that recommended supporting local firms.

Funny stuff, if it wasn’t so bloody serious.

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I have tried to explain what I believe to be the difference between governments investing in growth companies in strategic sectors by helping to support issues such as training, infrastructure building, etc. – investments that support efforts to growth specific industry sectors.

What I dislike – in fact abhor – is government propping up bad business models (like Newfoundland and Stephenville paper plant) or overspending well beyond any reasonable tax-based payback to the jurisdiction.

This is another good example of a bad investment – in my opinion. $300,000 per job each year for 35 years – Subsidies for aluminum producers. This is a press release from the Montreal Economic Institute complaining about recent subsidies to aluminum producers in Quebec. The politics of it are clear but the lost opportunity cost of investing that money in other areas is staggering.

This kind of thing give economic development a bad name.

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It figures that Al Hogan would take a belligerent posture towards the so-called bailout of the Caisse in Shippigan. He has a commentary in today called “Why must citizens bail out ‘banks’?”.

It’s funny why he never has a commentary about why should citizens bail out Irving (the LNG project, the $250 million forestry subsidy, etc.), but bailing out the poor citizens of Northern NB that had their savings with the Caisse, those demons should be hammered – so Al infers.

But I digress.

Because I don’t know the specifics of the Caisse situation, I won’t comment directly on it. I will comment on Al’s snide remarks about bailing out banks, however and with his little “what we could have done with that $60 million musing”.

First, residents have to have confidence that their savings are protected. That is why there is deposit insurance in every developed country in the world. To let the Caisse ‘fail’ and have a run on the bank by its customers and not enough money to meet the run, would be disasterous and should never be allowed by government. Now, of course the Tory government (or any government) should have had processes and oversight in place to ensure that it never came to this. These oversight mechanisms are in place for most of the traditional banking sector in Canada. But regardless of why this happened, I will never be convinced that letting the Caisse fall was an option because it would hurt most the poorest members of that institution.

Second, Al’s commentary (or whoever wrote it) rambles on about what we could have done with that $60 million. True enough. And I suspect that everyone around that Cabinet table agonized about this. But it’s disingenuous for Al Hogan to talk like this. He who fought rabidly to get the toll taken off the Moncton-Freddy highway (why he did is quite clear) – I still remember 11 straight editions of the T&T with this story as front page news. 11. This toll highway deal which was ultimately criticized by everyone -even Volpe had regrets about it – cost the citizens of New Brunswick at least $300 million and residually millions more every year in lost toll revenues from non New Brunswickers. And Al Hogan along with the Toll Busters – were the two major influencers of this infamous Bernie Lord decision.

What could have New Brunswick done with that $300 million, Al? How about the $250 million forestry subsidy mostly to bail out your owner? What could we have done with that? How about the $50 million LNG subsidy? What could we have done with that? I suspect we could rhyme off dozens if not hundreds of examples of government spending that was capricious if not downright offensive.

But protecting New Brunswicker deposits they made in good faith -without knowing about any bad management or illegal practices – is one of the smarter things that governments can do.

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A lot of people, including me, were wondering why the Irving-owned media has been so hostile in its reporting of the Portage Vale residential resort project (except one article yesterday in the TJ). Now, it seems more clear. J.D. Irving, Limited holds the 25-year licence, renewable every five years, for all or part of the Crown parcel. Apparently, the Crown can give Irving rights to cut on other land.

Now, here is the Minister’s comment. Remember, this is the ‘self-sufficiency’ government:

“I want to make it clear there is no done deal by far,” he said. “Don’t expect a bulldozer to come in this summer as get to work.”

He does go on to say that “the project has incredible promise for the area, but it has to follow “every letter” of the process“.

I have tried to take a nuanced view of the Irving empire in this blog and in my professional dealings over the years even as many of the people that I trust and admire told me story after story of how this family has stifled business, investment, innovation and even free speech in the province. I try to balance the monopolistic and predatory actions of the empire against the jobs and economic activity they bring to the province.

But I may be changing my view. Events in the past few months, conversations had and other signs (including the incessant drumbeat in the comments to this blog) are giving me pause.

The problem is that all the so-called negative influences of the Irvings are anecdotal. I have yet to see any real journalism on the subject (even in the non-Irving media). There are no books on the subject (at least recent that I can find). Only bloggers and numerous anecdotes served with coffee and a crueller.

Why won’t anyone actually write an investigative – and balanced – book on the subject of the Irvings and their influence on the province’s development over the years? I would dearly love to see this and I think that hundreds if not thousands of other people would as well.

I do think that the English print media concentration in New Brunswick is downright spooky. Are there any other examples in the world where a province/state’s virtually entire suite of dailies, weeklies and community papers are owned by one entity – and a massive conglomerate at that? You might argue that if an external entity like CanWest or Transcontinental operated all the newspapers it might be less suspicious but an entity that is involved in almost every industrial sector in the province?

Done for now.

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