I’m trying to write using the Blackberry this morning. Am on my way to the nation’s capital but the kids wanted to stop off here.
Read the recent thread between Vincerolly and Mikel below. That’s the kind of dialogue I like to see here although I realize that people are busy.
I am listening to Gladwell’s Outliers on the trip up here. I’ll have more to say on this but I think there is an interesting application of his theory to help understand why places like NB chronically underperform.
I also listened to a podcast from IBM’s Institute for Economic Development based in Ireland. Maybe we should try and get IBM to put a similar facility in NB.
I see that NB is goiing to be ‘protected’ in any Senate reform. Phew. The current model has worked so well for us I am glad we will be protected. Maybe we should go Serengeti Plain with our politics. Maybe we would be forced to rethink things.
Front page ROB story yesterday on the potential impact of the Fort Macmurray slowdown on places like NB. I wrote this story in my column three weeks ago. Glad to se it gaining nationa attention because it is serious.
Finally, I have to chuckle when I hear NB politician’s talking about the need for a stimulus package. It’s fun. If ontario had the economic performance of NB over the past decade it would have been a national diaster. We bragged about it. Now that the national economy is going into a funk NB now needs a ‘stimulus’. We needed a stimulus five years ago – ten – when we realized that the economy wasn’t even creating enough jobs to sustain the current population.
I am 41 today. Getting old, I guess.
Just a quick note on government subsidies to support job creation. I think we really must avoid giving out taxpayer money for short term make work projects. It seems to me they are politically expedient but do nothing for long term economic sustainability.
Anyone involved in economic development knows what I am talking about. Sometimes it is crass politics (Bernard Lord giving $5 million to UPM to keep the mill open past the election) and sometimes it is done with good intentions or maybe naively.
For example, there are dozens if not hundreds of cases like this one. New Brunswick company gets a contract to do $25 million worth of work for a U.S. firm. It’s a set contract that expires after 18-24 months. Company needs to hire 100 people. Company goes to government and gets $2 million ‘loan’ to support the ‘expansion’. Two years later, the contract runs out and the people are laid off.
If you are offering tax breaks or grants or loans or whatever, it should be to foster long term jobs. You will never get 100% certainty but if you know the jobs will end after two years – I would be very reluctant to give taxpayer money – unless there was a clear case that these jobs were sustainable in the longer term.
Besides, if the company’s competitors were smart there would even be a NAFTA challenge to some of this stuff. In the case I mention above, that is the government directly subsidizing a company to lower the bid costs on a project. Usually it is too small potatoes to matter but again if you want long term economic development we should be trying to work on projects that will create generational jobs.
We have talked about Richard Florida here on several occasions but I really think that Florida’s approach is now going well beyond just creativity. Now we read a new Federal Reserve report that cities with “the things that make a city delightful, such as parks, historic sites, museums, and beaches – “disproportionally attracted highly educated individuals and experienced faster housing price appreciation.”
Again, I have the same concern as I did with Florida. Do cities with strong economies generate the tax base that provides excess revenue for city hall to invest in ‘delightful’ things and thereby be more attractive to migrants or did city hall in the midst of a crappy economy invest in ‘delightful’ things and that turned everything around?
We have got to get this causality thing figured out. We need to look more closely at correlation. What would be better for the Miramichi – a new pulp mill and 800 high paying jobs or investment in more ‘delightful’ things like a new museum?
ADI is a great New Brunswick company and one of the few services-based firms that actually has markets outside New Brunswick. The vast majority of architecture, engineering and other professional services firms in the province only do work in the province.
But I was disheartened by the CEO’s comments in this commentary. Particularly this comment:
In the engineering and architecture industry, a country-wide consolidation is taking place. Atlantic-based firms are becoming part of companies with head offices in larger centers with profits being invested outside our region.
He is talking about the firms that have moved in here and bought up smaller players in the province and they are now part of national or international firms. On its face this comment is pretty benign. In fact it is true that national and international firms are likely to ‘invest’ profits elsewhere (although I suspect that much of ADI’s profits are invested elsewhere too – if the owners have any RRSPs or pensions or hold any shares of stock).
But the underlying message is that same old theme that I have been hearing for years. That is – we don’t want foreign investment here. Don’t come in here and gobble up our little firms or steal our workers, etc. etc. etc.
We need to have a healthy mix of local, national and international firms. If we only had a few local engineering firms, that would stunt competition and innovation. As my CEO friend said the other day, having a big international competitor here would force him and other SMEs to get more innovative and competitive.
Finally, I’d like to say that this swipe at Stantec is a bit disappointing. Local companie selling to national firms unlocks economic value that would otherwise stay locked inside the firm. We need to have some turnover of businesses to generate the kind of wealth that gets reinvested locally. Think Speilo, Whitehill, etc. When a local company sells to a national firm, they receive a return on the investment of their life’s work. Cashing out is an one important facet of the succession process. Hopefully the new owners remain committed to New Brunswick.
But we must not bury our heads in the sand here.
Confession time. I have actually never watched the movie Goin’ down the Road that I reference in my column today. It’s probably time to give it a look given all the rave reviews.
But, again, I am not sure how much time we need to spend backward looking. A lot of us spend a fair amount of time back there. It’s time to move forward.
Hey folks. Have a Merry Christmas and Happy New Year!
Ever have one of those conversations that just blows you away. I toil away here every day in columns, blogs, reports for clients, conversations, etc. trying to expand the conversation around economic development far and wide.
I ran into the head of a fairly large manufacturing firm in New Brunswick tonight at a Christmas party. I won’t say who or which industry because he and I were chatting in the friendly confines of punch and cookies – not for wide distribution. But I have to relay some of the conversation.
First we chatted about his business and then turned to government – of which he didn’t have much good to say and then I asked him what he thought we should do if we really want to reach economic self-sufficiency. He said without even a second thought that we need to focus on 2-3 industries and invest like crazy in them up and down the ecosystem (my word there). He then shocked me by saying that the government needs to go out and attract in the largest multinational player in that specific industry. He said the large players anchor the cluster and use a lot of SMEs in the market. Even if the SME (like this guy’s firm) doesn’t get any work they benefit from the cluster that builds up around the large anchor player (he cited the auto plants in Tennessee). He proceeded to name a number of services that they had to use suppliers in Montreal and beyond – increasing costs and reducing efficiency. These suppliers gravitate to the areas that have the large industry players.
By the way, that response was to my question “How do we create an environment that leads to 50 more firms like yours springing up in New Brunswick”.
Then I said to him that some company leaders have said they don’t want these big firms coming in and bidding up the price of labour and stealing their talent. His response? “That means we just have to work harder and smarter.” That’s gold, Jerry. Gold (reference to Seinfeld – not this guy).
It’s one thing when a consultant like me says that we need to attract large anchor companies in key strategic industries. It’s also one thing when the occasional economic developer says it (and increasingly they do say it) but when the captains of industry are saying it, then someone should start listening.
By the way – final point. This guy had nothing but good things to say about NSBI. I guess they must have operations in Nova Scotia as well. That says something as well.
New Year’s resolution for me. Get out to more parties where I can bump into more CEOs.
The mystique. They mystery. A ‘lobbyist’ now working for the government. Ooooooh. The Opposition is some angry that Doug Tyler, former McKenna Minister has gone from lobbyist to senior government position. As if that hasn’t happened before. New Brunswick is a small province. Ex Cabinet ministers many times end up with nice government jobs (just ask David Alward’s predecessor).
Of course I believe that senior government appointments should be vetted for conflict of interest but that’s tough in a small province. One thing I can say from 20 years of working in and around the system. There is definitely ‘lobbying’ that goes on but I have never witnessed it rise to the level of corruption. I am not saying that bribes, payoffs, blackmail, etc. don’t happen but I have never heard about it.
There needs to be systems in place to ensure that government money is spent appropriately (and that includes who gets hired) but I am equally if not more concerned about having accountability systems to ensure that government money is spent effectively.
It’s an outrage with former Minister Norm Betts spends $90 for burger in Boston but there isn’t even a whiff of interest in whether or not the tens of thousands of taxpayer dollars spent on that trip to Boston was an effective use of money.
You could say the same thing about all departments of government. There needs to be at least as much accountability related to outcomes (results) as related to the processes (how the money was spent). It kind of misses the point to be outraged about NB Power bonuses (a 0.02% cost item) and hardly even mention the actual success or failure of NB Power. That is not the best example because the TJ has done a pretty good job of reporting on the activities of NB Power. I’d double the Deputy Minister salaries in a heartbeat if it resulted in a doubling of the effectiveness of their departments.
Some folks, notably the Times & Transcript (surprise surprise) believe that any attempt to have a more rational approach to municipal government in this province is an attack on rural New Brunswick.
That’s hogwash. The Finn report was a sensible report with an interesting approach that should have been at least considered rather than shelved within 30 minutes of publication. As Finn rightly pointed out, we have had dozens of reports over the years on a more sane model and have done nothing about it. Why are New Brunswick politicians so afraid and gutless to make any change that might cause even a bit of political pain?
To Al Hogan I say this. The current model of LSDs, tiny municipalities, economic development agencies not coordinated with planning agencies not coordinated with infrastructure plans with no political power and – for much of the province no real local government at all – is a failure.
We lack a fundamental ability to try and solve things creatively. For guys like Al Hogan it always comes down to a cash grab – trying to squeeze more property taxes out of rural citizens (does Al live in an LSD?). Instead of looking at the longer term issues – all well laid out in the Finn report – it becomes an exercise of red herrings.
Newsflash. New Brunswick is a backwards province. We could be a model for effective urban/rural development. We could be a model for innovative approaches to urban/rural health care, economic development, education, service delivery but instead we get mired in the same old crap that has held us back for a century.
New Brunswick will never become a self-sufficient province. Will never be a place where people want to move to. Will never get over its giant and generations old self-confidence problem if we can’t make even the most basic changes like how we do local government. Take a look across Canada. New Brunswick and Newfoundland are the only two provinces with such a frigged up system of local government. All others have a more serious approach.
I’m not saying the report should have been accepted lock, stock and barrel. There were things that I didn’t agree with and would have tweaked. But to get the ball rolling it would have been a great starting point.
I want you to have a look at all of these deals - the winner, second and third place and all the honourable mentions. This is the kind of blockbuster economic development project that can help transform an economy. I can’t remember the last one of this caliber in New Brunswick – maybe Bricklin.
We have had capital intensive projects – potash expansion, LNG, nuclear refurbishment – but beyond the construction activity the leave behind economic benefit to the province is relatively small (although I am not complaining, we’ll take what we can get).
It would be interesting to see the province get on the short list for a mega project like this and then pursue it with gusto. When I was ‘in the ED system’ way back when, I helped work on a project that was 1,500 high paying jobs and a $500 million investment. I think that one went to South Carolina.
Sometimes it is interesting to read foreign media and their coverage of Federal government ‘largesse’. This is a story in Scandinavian Oil-Gas magazine about the federal and provincial government money being poured into a Norwegian owned company in Quebec. The incentives include C$350 million in export guarantees, $10 million from Invest Quebec and this little juicy ditty:
A free-trade agreement signed in 2007 between Canada and Norway included a clause guaranteeing a Canadian government rebate on expenses for ships built in Canadian yards. CECON called the government’s refund on expenses “grant refund guarantees towards all remaining pre-delivery instalments” on the company’s three new-build ships at Davie yard.
So, naturally, we can expect the journalist to talk about the federal largesse. The article states “Now Canada, too, is helping build Norwegian ships.”