It's The Economy, Stupid

Warning: I don’t spend a lot of time thinking through issues of global warming and the best ways to mitigate it. However, I am curious about this whole carbon tax debate.

A few years ago I had coffee with a guy who was an adamant supporter of a “revenue-neutral” carbon tax under which the price of fuel would more than double to about 1.50/litre but consumers would get that back in tax cuts elsewhere. Essentially, it would raise the cost of carbon emission activity but cut elsewhere so that the overall hit on consumers would be neutral. He told me in my case, the cost of running my car, heating my house, etc. would go up by a few thousand but I would get that back in income tax reductions by a similar amount.

Well, funny thing about these things is that we are almost at $1.50/litre without a carbon tax and the government is taking in windfall taxes from the high cost of gas (although NB did cut a few pennies off its gas tax when the Libs got in).

So, now everyone is freaking out about a ‘carbon tax’. Al Hogan is turning red, chomping the cigar and yelling at his minions to crank out anti-carbon tax stories.

Question for those of you more tuned into this stuff: What is wrong with a carbon tax if you get it back elsewhere and it encourages more conservation and new technology utilization? Can we be a ‘cheap’ energy province and have a ‘carbon tax’?

Questions. Questions. Questions.

On July 1, 2008, subject to approval by the legislature, British Columbia will begin to phase in a fully revenue-neutral carbon tax.

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I should have probably found my way to this event in Toronto. I remember blogging about this group early on but the summit that was put on not only attracted some heavy hitters it also seems to have focused on a lot of important topics (such as industry attraction and cheap energy) rather than the usual moaning and griping about the raw deal dealt Atlantic Canada over the years or the generic tax cut, trade liberalization line (not that either one has no merit but both have been talked about for oh, let’s say, 140 years with limited outcomes).

Tangible policies like a focus on industry attraction, finding a way to become a low cost area for energy, etc. are far more interesting to me.

By the way, should we be promoting this?

The East Coast of Canada is the place to be if you are in love with more people professing about love there; 89 per cent of those from Atlantic Canada said they were in love, while only 67 per cent of those in the Pacific Coast province of British Columbia said the same on love.

Or maybe it’s that old card saw “Lucky at love, unlucky at economic development”?

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When I say it, eyes glaze over. When Scott McCain, president and chief operating officer of the Maple Leaf Foods Agribusiness Group, says it necks start getting sore from that quick snapping motion.

From the TJ yesterday. Scott McCain:

“My biggest concern in some of the business climate in Atlantic Canada is trying to find ways to offset the disadvantages we have with respect to scale and competing with other businesses that are global in nature,” said McCain. “If we are on the path of building an energy hub in electricity, oil and gas. .. my question is, can government and industry and citizens get their head around providing some of these commodities at a potential discount to global prices to create an incentive for industry to locate there, to grow there and produce there.” McCain posed his question during a panel discussion on the future of energy sector development in Atlantic Canada during a summit hosted in Toronto by East Coast Connected, Dalhousie University and the Rotman School of Management.

Rotman School is too busy advocating tax cuts to worry about something that actually may give the the region a real competitive advantage. However, I take this as a very good sign.

Give David Shipley at the TJ a pulitzer for getting this topic – an extremely important one – into the mainstream.

Give McCain kudos for linking the two – energy hub and actually offering cheap energy – into a longer term view.

David Wheeler, dean of the faculty of management at Dalhousie University, said the region shouldn’t embrace cheaper energy as a way to sustain or lure in industries. Instead, “Atlantic Canada should get used to higher energy costs in order to encouraged much-need investments in renewable energy and diversification from fossil fuels,” he said. “Those in lower income groups and targeted industries with a future should be shielded from some of the rising costs,” said Wheeler.

Now, this is trickly. Wheeler, in his cushy six figure salary, saying Atlantic Canada should “get used to higher energy costs”.

That’s the problem with these guys. Some jurisdictions in North America will be ‘low cost’ energy locations. Some will. That is a fact. Why shouldn’t it be Atlantic Canada? In addition, why does lower cost energy have to be in conflict with diversification from fossil fuels? Wouldn’t Churchill Falls 2 be diversification from fossil fuels? Wouldn’t nuclear energy be diversification from fossil fuels?

The truth is guys like Wheeler look at national and international realities (and they are real) roll out the same old platitudes for this region.

Why doesn’t the genius of Wheeler tell us how to keep the 40% of Dalhousie graduates that leave Nova Scotia each year? Why doesn’t his academicship tell us how to avoid the chronic out-migration? Why doesn’t he advise New Brunswick on how to limit the growth of Equalization?

I’d like New Brunswick to embrace alternative energy but I also think that there will be places in North America that will offer cheap energy and there will be industries looking for it.

Maybe 10 out of 10 on the irony scale but biofuels development is an energy intensive effort. If you had cheap electricity, the business case for biofuels development would be better here.

Maybe Wheeler didn’t think that one through.

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I have reviewed a lot of community branding and marketing efforts in the past couple of years. I won’t single any out because I don’t want to annoy residents of those communities and because they may be clients (or may be in the future?).

I once asked the CEO of a local economic development organization why he was running so many advertisments in En Route magazine. For his target market it seemed so strange to me. His candid reply was “because my board of directors likes to see city x being advertised when they fly to Toronto”.

I asked another Executive Director of an ED organization why he was advertising the “invest in city x” message in local magazines. That sounded counterintutitive to me. He said the reason was to raise awareness of the organization in the local market.

Then I could name you a number of communities that are blatantly self-aggrandizing in their branding and promotional activities. Again, the audience for this seems to be internal, it would seem.

My point here is that I am not convinced that local economic development folks understand their market and how to promote themselves to it (I am talking about attracting industry).

It seems to me that the overwhelming majority of effort – from logo creation through to advertising is focused on what would look good to the local audience.

All this crap about best city for this and best city for that – if it is not independently verified – is just over the top mumbo jumbo.

I have no problem if a community promotes winning some award or recognition that is third party. I do have a problem with arrogant branding and promotion.

New Brunswick is a province that is struggling. The pervasive theme that should thread through all of our promotional activity provincial and local should be that we are trying to improve ourselves and that we will work harder to gain your business.

Let’s face it. New Brunswick is the underdog. It has to be more aggressive. More focused. More down to earth.

If Lada or Yugo started branding themselves as “The Best Car in the World, Bar None” it would come across as downright silly. I think the analogy holds for provinces/states and cities.

If New Brunswick is too over the top it will come across as silly externally (while maybe trying to mask over insecurities locally).

Ultimately, the problem with preaching to the choir this message of greatness is that eventually we will start to believe it and will have no real appetite to change.

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You know I read a lot – occupational hazard I guess. I just finished up another report looking at the Irish Miracle (among others). A bunch of economists authored the report and it focused the grand macro-economic policies of Ireland such as trade liberalization, monetary policy, fiscal policy, educational policy, infrastructure policy, etc. etc. etc. All the stuff that economists like to talk about.

But, like almost all the other reports, there was no mention of the importance of ‘sales’. I guess economists and policy makers thumb their noses at the even more dismal science of economic development. For folks that have never been in sales (particularly the business of selling a community or jursidiction), that goes as an afterthought.

But it shouldn’t. I took executive sales training back in the 1990s when I was out selling New Brunswick and the guy said that standard line that only about 20% of sales is the product and 80% is the ‘intangibles’ like relationship building. Translated to the economic development business that would mean that 20% is the economists’ stuff and 80% is the getting out there and doing the ‘economic development’.

Certainly not the best parallel but you get my point. Someone should talk about the Irish Development Authority’s 20 international sales offices. Someone should talk about the many games of golf, the long dinners, the schmoozing of clients. Someone should discuss the impressive marketing efforts and public relations activities. And then there is all the little stuff that is done by economic development agencies to support site selection that would be considered small potatoes by the high and mighty economists.

Maybe some of those economists should get out there and try to actually sell something. Put on the “My name is…” tag and stand in a booth sometime. Get their hands dirty. It’s not all policy talk and gin tonics.

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Donald Savoie has a new book out called:

Court Government and the Collapse of Accountability in Canada and the United Kingdom. I just heard a discussion of the book based on this story in the Toronto Star.

He argues that Canada has evolved into a court-style government, where the prime minister sits as “king” and has a “court” of select senior ministers, mandarins and lobbyists that rule the nation. Savoie says Parliament has been reduced to a bit player and cabinet ministers are now mere pawns.

You remember that he started this line of thinking back in the Cretien days and it seems, according to Savoie, Harper has elevated the centralization of power to a new art form.

It’s all kind of creepy, really. I also heard a BBC documentary postulating that the reason China was so successful was that its government was not constrained by democracy. So are we moving towards a new wave of authoritarian regimes (democratic or not)? Hugo Chavez would fit the bill.

I am currently reading Fareed Zakaria’s current screed on globalization and I have Richard Florida’s Who’s Your City in the on deck circle. I might wait until Savoie’s book comes out in paperback but I suspect it will be a worthwhile read.

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The blog is back online. There are a few posts to catch up on.

Shipley has an interesting story this morning on McKenna talking up Atl. Canada economic development.

Citing interprovincial trade barriers, McKenna says:

The former premier pointed out a sign at the New Brunswick-Nova Scotia border that highlighted the ridiculousness of some trade barriers. The sign banned New Brunswick bees from crossing into Nova Scotia. “They bees do not know this,” he said.

I would take that one step further. When you are driving on the Trans Canada Highway from Nova Scotia to New Brunswick, you never see a kilometre distance sign to Moncton (or vice versa). You see “New Brunswick border”. It’s a small thing but it goes to the heart of the lack of cooperation for over a century. NS had a beer deal with Quebec and it didn’t want to do one with NB. Moncton window manufacturers – with cheaper prices – couldn’t get contracts in Nova Scotia 30 years ago. A simple sign saying xx kilometres to Moncton or Halifax is impossible because of a ‘border’.

I have said this ad nauseum. The Atlantic Provinces are reluctant to cooperate because of the slight possibility that one might get ahead of the other. Heaven forbid.

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I talked on occasion to labour-sponsored fund proponents that say the problem they have is finding investment-grade opportunities in Atlantic Canada. So, I say, go out and find ‘investment-grade’ opportunities in the wider world and attract them to here with equity investment (among other things).

We’re an insular bunch in Atl. Canada. We have ‘programs’ for local firms and ‘programs’ for attracting investment. I say why not have both?

If you have a program that provides early stage funding to stimulate great idea companies, why not make that available to any and all companies that want to invest in Atl. Canada?

NSBI – usually on the vanguard of such things – has done this.

Impath to move head office to Halifax
The Nova Scotia Business Journal

HALIFAX – Formerly Ottawa-based Impath Networks Canada Corp., a developer of video surveillance solutions, has decided to move its head office to Halifax. The province of Nova Scotia – through Nova Scotia Business Inc. (NSBI), a business development agency – will invest $2 million in the company, sources said, along with $1 million from the GrowthWorks Atlantic Venture Fund.

Some have told me that GrowthWorks is having a hard time finding enough projects in Atl. Canada. So, go to NSBI, BNB, PEI Biz Dev. and ask them to peddle the Fund to the broader audience.

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I just listened to a documentary on this. By my count there are now about a dozen countries promoting themselves as a destination for medical tourism.

It’s really not that crazy an idea. The Americans pay – by far – the most for health care in the world. The comparative cost – full cost all in – for major surgeries in the U.S. is double or triple the cost in Canada.

People have so many entrenched notions about health care – this would never work in New Brunswick but I think it should at least be given a serious look. What sector has the highest average wages in New Brunswick? Health care. What sector has been growing the fastest in New Brunswick? Health care. What cost has been eating up the vast majority of new government spending in New Brunswick? Health care.

So, you go to the medical schools, double your seat allocation in various programs. Ramp up the infrastructure and start promoting the heck out of NB as a place for medical procedures.

Your direct flights to Boston and New York get a huge boost. You could charge 40% or 50% more than the cost of the service and plow that money back into the system. You could create hundreds maybe more of high paying health care jobs and you would be an innovator.

Cripes, why would an American fly to Israel if they could get the service in New Brunswick?

I know that it’s a nutsy idea – but I think it could be work exploring.

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I just heard a report on the Rogers News station talking about the ‘droves’ of people moving back to New Brunswick. They quote Minister Keir as thrilled that New Brunswick has finally beat the out-migration curse.

Hmmm.

If you took the net out-migration just over the last 10 years and added back the people lost to out-migration (not everyone out but the net of in versus out), you would have an unemployment rate in New Brunswick of over 14% and one would expect a fair amount of panic among the politicians. However, since those folks got fed up and left, a few come back and we get media reports of ‘droves’ which is defined as ‘herd’ by Websters.

Maybe.

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