It's The Economy, Stupid

I just listened to Michigan’s governor ranting about the outrage that Ontario is now manufacturing more cars that her state. This, she said, is proof that NAFTA isn’t working. It must be reformed.

But, Madam,

The southern U.S. now produce more cars than Ontario – far more – Kentucky, Alabama, South Carolina, etc.

Will changing NAFTA, change this fact?

The Democrats are in a bind in this Presidental year, IMO. In order to secure the working class, they are jeopardizing just about every other class. NAFTA is not perfect but the facts show that it sent lower value, lower wage jobs to Mexico and created higher value, higher wage jobs in the USA.

I am not saying there wasn’t displacement. It is still being felt in Michigan, et. al.

But, on balance, the return to Lou Dobbsian protectionism will be a major step back.

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I don’t know if it is ironic or not, but Albertans are restless. They are looking for the ‘next big idea’. This story outlines some of the big ideas that are being considered.

Funny stuff. New Brunswick needs “the next big idea” – not Alberta. Alberta could sit on $100/barrel oil for 70 years and just grow rich and fat.

New Brunswick, on the other hand, faces economic disaster if the Equalization going up/population going down trend continues.

What’s are next big idea?

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A couple of blogs back, I said that New Brunswick should target the Arabian Peninsula. These countries have piles of cash to invest abroad to diversify their holdings. They are doing developments all over Europe and the US.

Calgary is listening (not to me to the concept):

Calgary Economic Development (CED) is coordinating a strategic trade mission to the Middle East in March, to explore the abundant opportunities for Calgary companies to create business synergies in that region. Several Calgary energy and real estate companies will meet with business leaders in Qatar, Abu Dhabi and Dubai from March 1- 6, 2008. Mayor Dave Bronconnier will be accompanying this mission. The focus of the mission will be on clean energy, capital projects and real estate investment.

With us it’s always follow the leader. Take my advice. Eastern Europe. Go to Eastern Europe. Do deals with the outsourcers there to put their nearshore North American IT development centres in New Brunswick.

Oh and don’t forget about Dubai.

Think about Scandanavia.

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Al Hogan is right to be pushing this tax revolt! I was wrong!

Gotcha.

Statistics Canada just released its 2006 household spending data. Here is the average household expenditure on personal taxes:

AB $18,616
ONT 14,869
BC 13,929
CAN 13,634
MAN 12,282
SK 11,920
QC 11,218
NL 10,074
NS 10,074
NB 9,590
PEI 8,046

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I know that some snide remarks will be forthcoming but I still think that we should be impressed with the financial services back office sector development strategy in Halifax right now. While Premier MacDonald was ringing the NYSE bell on Wall Street, a major deal was getting put to bed:

Citco, the leading global provider to the hedge fund industry, has chosen Nova Scotia again. The international financial services company is making Halifax one of its key locations for Citco’s industry-specific technology development, creating up to 325 new jobs over the next six years. Positions will range from technical support to software and application development.

The province, through Nova Scotia Business Inc., is investing in the expansion with a payroll rebate set at a maximum $7 million over six years. The rebate will be invested incrementally as the company achieves hiring targets. The Department of Economic Development is investing $1.47 million to support start-up costs and training.

This is tailor-made economic development in the new 2008 context. Nova Scotia is not selling cheap labour and not attracting low wage jobs. These are $70k+ jobs that pay serious taxes into the provincial coffers. And it proves that a highly targeted effort with highly professional people can lead to good results. Halifax wasn’t on anyone’s radar until Lund and the gang came calling.

Actually I am quite disallusioned with these trips to ‘Toronto’. All the politicians make them and get relatively little out of them (IMO). The problem is that most of the Bay Streeters already have well formed opinions of Atlantic Canada as a backwater sucking on the hind teet of Confederation. Maybe Lund is right. Maybe the ‘trips’ should be to Bermuda or Helsinki or Dubai.

Don’t get me wrong. I have written before and extensively that corporate Canada should be investing more in Atlantic Canada – their little part for the good of the country. But these days you are just as likely to see a GM Canada closing its Moncton warehouse and moving the jobs back to central Canada as you are some Bay Street firm setting up a new facility here.

For the most part – and there are some exceptions – corporate Canada is investing almost exclusively in the 4-5 major urban markets. They will put retail stores in Atl. Canada and offices that absolutely have to be here to get access to the local market but to put manufacturing here, IT development, back offices, etc. – very unlikely.

If corporate Canada continues to treat this region like an annoying hinterland, maybe the Bermudans will be more receptive or the Finns or the Danes.

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A couple of years ago Ontario and the Feds put up $1 billion in cash subsidies for the auto sector in southern Ontario. The Globe is reporting that the Flaherty will be throwing another $200 million in the pot in his budget today.

I realize that pragmatism wins out over ideology in politics but for me its a bit like finger nails on a chalkboard. To say out of one side of your mouth government shouldn’t be in the business of ‘picking winners and losers’ and then on the other side announcing subsidies for the lucky winners – seems a bit too callous for me.

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I have to admit a little nostalgia for kiddie movies. I used to watch several a week with my kids when they were young. I particularly liked Winnie the Pooh – who used to bang himself on the noggin and say “think, think, think” when he needed to remember something.

I am reading Richard J. Gwyn’s new book John A: The Man Who Made Us and enjoying it so far. I don’t read enough Canadian history as I should.

Anyway, Gwyn spends a little time on the rise of Scotland during the 18th Century. Here is how Wikipedia describes it:

The Scottish Enlightenment was a remarkable period in 18th century Scotland characterized by a great outpouring of intellectual and scientific accomplishments rivaling that of any other nation at any time in history. What made it even more remarkable was that it took place in a country which was among the poorest and was thought to be among the most backward in western Europe prior to that time, in addition to having a substantially smaller population base and infrastructure than many other major western European nations.

Reading this stuff just reinforces my belief that New Brunswick needs to spend a lot more money and focus on researching economic development issues. Wouldn’t it be neat if some of the best ideas for regional economic development eminated out of New Brunswick over the next 50 years?

We get so stuck in our own little worlds, haggling over little issues and the world just passes us by sometimes.

I think the public and private sectors in New Brunswick should fund a non-partisan think tank on economic development. Not your standard academic fair where you get a paper published every three years on the use of goat milk to stimulate rural economic development in Botswana (although that is important). No, as I have outlined on these pages before, I am talking about a serious policy support research institute that is pumping out research on the best global models for dealing with regional economic disparities, attracting global biz investment to poorer regions, fostering successful entrepreneurship in a place like New Brunswick, etc.

I would tack on a robust economic monitoring and benchmarking effort and take a broad view. Ideally, the stuff published in New Brunswick would find applicability in Wales, Maine and underperforming parts of Germany, France, etc.

Just throwing more crap around to see if anything might stick.

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I once heard a business guru (I can’t remember which one) say that most CEOs are rabid capitalists until they pass through the door of their own business every morning. From that point on, they spend their time lobbying governments for incentives, looking for tax breaks, angling for favourable legislation, etc. One only has to look at the auto sector, the aerospace sector, the agrifood sector and the pharma sectors in Canada to see this play out.

So, I was grinning ear to ear yesterday when I heard the Chief Economist at Fidelity Canada intone with great indignation that the government shouldn’t be “picking winners and losers”.

Er, I guess that doesn’t apply to Fidelity itself, which received one of the largest incentive deals I have ever seen for a financial services firm when it got $69 million from North Carolina back in 2006.

I wonder what the Chief Economist would say to that?

Maybe that bit about people that live in glass houses…… comes into play here?

I’m sure he would fumble through a response about why that was different some how.

Don’t get me wrong. I would be as happy as NBT if all governments around the world stopped giving financial incentives to companies to set up in their jurisdictions. But they never will and I think New Brunswick should be the last place to unilaterally disarm.

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The ‘sleuth’ in the Times & Transcript is running another ‘rumour’ about Bernard Lord running in the next federal election. She says “There are some rumours that just refuse to die and Sleuth was hit again this week with one that has more lives than most cats.”

The reason it refuses to die is because the T&T keeps it going. No other media outlet is talking about it. The former Premier isn’t talking about it. I think Edith Robb and Al Hogan want their boy back on the scene and they figure if they talk about it enough, they might get their way.

Another LOL moment from the TJ is the PC energy critic’s comments:

Opposition MLA Bruce Northrup, energy critic for the provincial Progressive Conservatives, said the Tories are “a little bit happy” that the rate increase has been cut to 5.9 per cent.
However, he noted “it’s still an increase.” “The government is putting the money in their pocket and not the good people of New Brunswick’s pockets.”

You will recall that in the early 1990s, New Brunswick was one of the lowest cost producers of electricity in Canada. Now, after the Tories and their great energy policies, we are now importing electricity from Quebec because it is cheaper that producing power at Colson Cove.

Someone serious told me we should just hand the keys to NB Power over to Hydro Quebec. It may be a good idea.

Finally, in the chuckle column, I find it absolutely fascinating that no media outlet picked up the story of the Nova Scotia Premier ringing the closing bell at the NYSE this week on Wall Street. We got literally 10 or more stories about Shawn Graham’s every move in Toronto – but nothing on a story that has 10 times the significance. Macdonald is only the second Canadian Premier in history to ring the bell and the NS delegation was in New York touting their growing financial services back office cluster.

Maybe I am the only one that finds that funny but I really do. Note to the NB media. If you aren’t reporting what others are doing, how will your readers be able to compare how we in New Brunswick are doing?

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Neat stuff:

NOTE TO EDITORS–Premier To Visit New York Stock Exchange
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Premier Rodney MacDonald will visit the New York Stock Exchange on Tuesday, Feb. 26, to celebrate Nova Scotia’s recent success in the international financial services sector.

Premier MacDonald will be joined by Economic Development Minister Angus MacIsaac, Stephen Lund, president and CEO of Nova Scotia Business Inc., and industry representatives. To mark the occasion, Premier MacDonald will ring the closing bell at 5 p.m., AST.

Premier MacDonald, Mr. MacIsaac and Mr. Lund will be available for telephone interviews from New York. To arrange an interview, contact Sarah Levy at 902-222-3658 or by e-mail at levyse@gov.ns.ca .

A live webcast of the closing bell, beginning at 4:55 p.m., AST, will be available at novascotiabusiness.com . A photograph is expected to be posted on the Communications Nova Scotia website about an hour after the event.

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Media Contact: Sarah Levy
Nova Scotia Business Inc.
902-222-3658
E-mail: levyse@gov.ns.ca

**end of message**

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