Donald Savoie’s new report on the future of economic development (and other things) in Nova Scotia is out. He is not recommending consolidation as some had suggested of the various organizations (NSBI, ERD, Innovacorp, etc.) but it does seem he is pushing the need for more integration of service delivery.
I only read it quickly but he wants to strengthen NSBI with a greater trade development and is calling for a more streamlined process for company support projects. He also seems to want NSBI to work more closely with these allied organizations.
He is pushing for a more aggressive R&D tax incentive regime and cutting the capital tax.
He thinks the R&D focus should be primarily on the sectors with the greatest opportunity. Sound familiar?
He says “The provincial government should invest the necessary resources with the Atlantic Canada Opportunities Agency to assess properly the performance of the RDAs”. I think this is key. There is way to much moaning and complaining about the ineffectiveness of RDAs in both Nova Scotia and New Brunswick. Let’s figure out once and for all what is the most effective role for local RDAs. Are they are bookshelf for provincial and federal funding programs as some have suggested? Or are they a highly valuable development team providing services that grow key sectors of the local economy?
I think his point that it doesn’t require new money and there may actually be savings is a good one. He claims $500 million is spent on economic development each year in Nova Scotia. That seems high to me but I know from my own research that the amount of money – for specific economic development – isn’t the problem in either NS or NB. I do think we could see more provincial spending on activities that influence economic development (like R&D) but the direct spending is large and maybe could be cut.
In New Brunswick, there are something like 600 people employed for economic development organizations such as BNB, Enterprise Agencies, ACOA, Industry Canada, NRC, etc. That’s more than enough – the real issue is effectiveness.
I think Savoie missed the boat by not recommending better measurement of results. NSBI has done some interesting things in this area and is probably one of the better organizations for measuring results. Others are far worse. New Brunswick’s reporting and measuring of economic development is vague at best.
In the end, I would have liked to have seen Savoie delve more into the FDI piece. He seems to have accepted this as for granted – he isn’t against it and repeats on several occassions the important role of NSBI in this area – but he doesn’t develop it in much detail while there are pages and pages on how to foster more entrepreneurship.
I think he touches on the issue that I have been focused on in recent years – aligning economic development on a sector or cluster basis. There is quite a bit of language in there about stratetgic growth sectors. The truth is that a lot of government bureaucrats don’t want to talk about focusing on key sectors (except in a broad, almost marketing sense) because they think that will dissaude investment in other sectors. I disagree.
Economic development in the Maritimes is now more important than ever. While Savoie looks at the world through a public policy lense, his addition here is valid and should be implemented in large measure by Nova Scotia.
One of the things I like about industry reports such as this is they remind me that small jurisdictions can be very successful competing against large jurisdictions in attracting investment into important, fast growing industries. If I had a nickel for everytime someone said “we can’t compete with Ontario – or Quebec – or Fill-in-the-blank”, I’d have at least a few bucks.
Small jurisdictions can compete. They just can’t be all things to all people.
Take this industry – medical technologies. From the report:
A number of smaller states had high concentrations of MTI [medical technology industry] jobs. Minnesota and Utah had the highest concentration of MTI jobs relative to total employment—over 3 times the national average. Delaware, Massachusetts and Indiana followed, with over 2 times the national average.
Only California has more medical technology jobs than little Minnesota (1.6% of the US population – New Brunswick is 2.2% of the Canadian population).
You can’t get more New Brunswick than Minnesota – mosquitos, cold winters, huntin’ and fishin’ and yet it’s doing some really interesting things.
We have got to get over this notion that we can’t compete and put real horsepower into figure out how we can compete.
This is a very thoughtful and well written article on the complexities associated with economic development in rural New Brunswick – or what the subject of the piece calls rural New Brunswick – the Canada Research Chair in New Brunswick Studies at St. Thomas University, Tony Tremblay.
I’ll make a couple of quick points. First, I am not sure that the ’post-industrial era’ is inevitable. As I have pointed out many times, there are 10s of millions of people in North America working in industrial jobs and there will be increasing pressure to do even more of that work closer to home. It is enormously energy intensive to offshore our carbon emissions to India and China. I believe over a longer time horizon – 20-30 years, there will be more industrial activity, not less in North America. I do not believe it will be a massive increase as I also think there will be a parallel decrease in overall consumption as people start to figure out we don’t need three cars each, massive houses, etc.
The question is where will this industrial activity take place? I see no reason – really – why a place like the Port of Belledune couldn’t become a large scale industrial fabrication centre with thousands of workers. It’s as good a place as any – we just need to get the value proposition right.
Tremblay’s assertion that communities have relevance and worth beyond their economic foundation is one I have made as well. I think we have to work on that foundation because communities that are increasingly ‘wards’ of the state – in my opinion – won’t last too long. Government and community leaders give up and let them wither.
Anothter point relates to the term ‘rural’. Miramichi, Bathurst and Edmundston are not ‘rural’ by Statistics Canada definition. They are small urban and take on all of the characteristics of small urban (not sure about Campbellton) centres. There is also no reason – intrinsically – why we can’t see modest growth in these rural areas – services, IT, engineering and other professional work.
My last point relates to his statement that we need long term strategic planning. This is huge but mostly ignored. Economic development in New Brunswick – and even more so Northern New Brunswick – has been about carving out some money from the budget and sprinkling it around the province. We need to more creative that that. We need to determine new industrial opportunities and then invest in the infrastructure (people, places, things) that make the province attractive to those opportunities.
We are kidding ourselves if we think the sprinking taxpayer money around model will ever work. I don’t think anyone has ever done a value for money audit on that spending.
If the government won’t listen to economic development types like me, maybe they will listen to an English prof at St. Thomas.
This is one of those recurring themes on this blog because it keeps coming up. Here is a really well written argument against subsidizing the film industry – right up until his concluding comment.
The raw bottom line is this: Subsidy-induced film activity may have glitz and surface appeal. But nationally, it’s a washout — film production lured from one place to another is classic “robbing Peter to pay Paul.” At the end of the day the country’s no less prosperous. The net economic impact is simply to enrich the filmmakers at the expense of state taxpayers.
The problem is that the state (and local) lawmakers are not concerned with ‘nationally’. When British Columbia ups their very lucractive incentives to attract film and new media – I suspect the ‘national’ doesn’t come into the discussion. When Quebec and Alberta raise their incentive rates to compete with BC, ‘national’ is not part of the discussion.
Pundits and thinkers like this guy who wrote this article have the luxury of speaking in theoretical terms or looking at national impacts – state and local economic development groups do not. If this very guy was put in charge of the film industry development organization in Louisiana, do you think he would be calling on state lawmakers to cut the tax credit programs?
I am not a big fan of direct taxpayer funded incentives to stimulate economic development. I have written widely on this topic. I think tax-based incentives make more sense but even those can end up generating a negative ROI for the taxpayer.
But I struggle with this idea of unilateral disarmament. Nova Scotia just gave $60 million to Daewoo to set up a 150 person wind turbine manufacturing facility in Trenton (the government has an ownership stake which makes it different than cash but it is still a lucrative incentive). Daewoo would have likely got more to set this up in the U.S. right now because of the huge federal and state cash designated to grow the renewable energy sector (although the Trentonworks facility was likely another important asset).
I would like people that think about these things to not take the easy way out like this guy did. There are Governors’ associations, Premiers’ groups, etc. If they want to get together and agree to total disarmament I say good for them. Other than that, I would like to see a little more nuance in the analysis.
For over 20 years, Ireland was among the leading companies in the OECD for economic and population growth. In the late 1980s, I remember hearing about airplanes full of insurance forms leaving New York to be processed in Ireland and then sent back digitally to the USA (sound familiar?). The country then went on to build substantial financial, back office, ICT and life sciences sectors through some very innovative policies and action.
The country overheated – just like Ontario in Canada – because of the sustained above average growth. In addition, Ireland had more exposure to the financial meltdown than Ontario. Housing prices have dropped and unemployment is around 13%.
It’s important to point out, just like Ontario, that the recent economic retrenchment is only a fraction of the economic build up over the past two decades. It is clear that countries and jurisdictions that overheat end up with a correction at some point.
But I am bullish on Ireland. Their economic development infrastructure (people, programs and policy tools) is still robust and – I would argue – among the best in the world. They will need to do some recalibration now – because eastern Europe has been eroding some of the country’s value proposition. The G&M has an article talking about a construction worker who was making 150k Euros per year because of the massively overheated construction market during the overheated phase of the economy.
Rapid growth does change things. You move from reducing local unemployment to attracting expatriates to attracting immigrants. That does change the dynamic. You end up with very significant growth in housing and other costs of living. That forces up wages but also makes urban centres less attractive for workers starting into the workforce. And, maybe a bit counterintuitively, it forces a rapid escalation of government spending because there is a lag between the spending on public infrastructure and the time it takes to get that investment back through tax revenue.
But Ireland will be back. Just like Ontario and, yes, just like California. California has been – with a few fits and starts – an above average economic growth engine in the U.S. 200 years. There are those who say this is the end of the road. I disagree.
There is an enormous store of capital, goodwill, entrepreneurial spirit and just plain scale in these places that is brought to bear when times get really tough.
The recent NB Power/Hydro-Quebec saga was a stark reminder to me of the importance of making evidence-based decisions. There were people with almost no knowledge of the industry and even less knowledge of energy asset valuation, long term market trend analysis, etc. posturing as credible experts and getting away with it. They were widely cited – along with their wacky theories such as NB Power being worth $42 billion – in the mainstream press – print and radio/TV. At the same time, many of the credible, impartial voices were drowned out.
That exercise taught me some valuable lessons. I don’t have a problem with people being against something because it just doesn’t feel right or because it sets off their crap-o-meter. Sometimes intuition is a good tool -sometimes the only tool – we have (think Gladwell’s Blink). But I can’t stomach the idea of basing a decision – of serious magnitude on quack science because it validates intuition.
Another valuable lesson for me was the importance of not posturing as some kind of expert in areas where I have little expertise. I can render an opinion – and I do so on an hourly basis – but I am now more sensitive to position this as just an opinion – based on my limited knowledge of the subject matter.
Which brings me back around to Statistics Canada. I was surprised that the agency was letting Minister Clement get away with his comment that voluntary would generate the same results as mandatory regarding the filling out of the long form. Now the chief statistician has resigned - and he has cited this strange assertion as just plain wrong.
There must be something else going on here. All of the Minister’s reasons for scrapping the long form are very thin and just about every ‘expert’ has come out against it. The privacy argument is bogus. The Canada Revenue Agency can conduct a full body cavity search to make sure you are paying your fair share of taxes. I have a friend who just finished a three year ordeal with CRA where he had to share just about every possible piece of private banking and legal document. Governments can and do intrude into our privacy on a regular basis. The long form Census is one of the least intrusive ways.
Like John Ibbitson in the G&M today, I hope the Tories backtrack on this – set up some kind of commission to study it or something.
I hadn’t planned on commenting on this again but all the craziness around has prompted me to write one more time. Opponents are suggesting it is a) an invasion of privacy, b) ‘forced’ labour on Canadians, c) a free ride for organizations that should go out and get the data themselves, d) in response to an outpouring of anger from Canadians at forcing them to fill it out. There are secondary concerns but these are the main four.
As for invasion of privacy, all governments require citizens to provide personal data for a wide variety of uses – it’s all used in confidence – Statistics Canada data is suppressed all the time to ensure that you couldn’t possibly figure out who the person or company is. And in the end, people can ‘lie’ if they don’t want to share their information. That’s just the plain truth.
As for forced labour (mentioned here and elsewhere), we are forced by government to do lots of things – many against our will. If this is such an issue pay people $5 to fill it out.
The free ride argument is the worst. The US Census data is all free – every scrap (at least that I have used and I use it extensively). The Canadian data – other that some standard tables – is all at a cost when used in a commercial capacity. I spent (on behalf of my clients) over $5,000 last year on Statistics Canada data.
As for the outpouring of anger from Canadians, I never heard of it. And I have never heard of anyone going to jail for not filling the long form out. I had to fill it out last time and they called me several times to ensure I received it, ask if I needed help, etc.
A major point – raised here by someone – is that if the data becomes voluntarily filled out it cannot be compared to previous years and it won’t necessarily even represent Canada as a whole. The only way to get a true cross section, is to make it random.
I think this matters. We need to understand the nuance in the demographics. All provinces are different. There are huge ethnic and linguistic differences. The socio-economics are very different. We already have a federal government that likes to ram national, inflexible programs onto a group of very diverse provinces. Wait until we don’t have good data to highlight these differences. The Census long form is the best set of data on granular aspects of the Canadian population.
I had a 1,000+ word blog all penned around the theme of trying to understand why New Brunswickers have a primarily hostile perception of business – particularly ‘big’ or ‘international’ business. I had taken a look at all five political party websites and found populist, anti-business rhetoric on four of them – including the new People’s Alliance scorning foreign investment and calling New Brunswickers ‘peons’ well – here’s the quote:
“We will be wandering around once more, hat in hand, looking for a new knight on a white charger who will come to rescue us poor NB peons in exchange for exploiting our resources”!
What resources AREVA will be exploiting is beyond the point. Why ruin a good piece of populist rhetoric with little old facts?
Then the transition to the fact that 3/4ths of the residents in the Gulf region of the U.S.are against the ban on offshore drilling even after the horrific realities of the BP spill. Person after person interviewed on the TV program talking about how important companies like BP and the oil industry are to the quality of life and standard of living in the Gulf region. Even the normally jaded journalist seemed surprised by this.
But in New Brunswick attracting a BP or an AREVA or whomever – even without a tragedy like that oil spill – makes us peons.
Then I watched that movie Inception – another movie where corporations are portrayed as doing anything to steal secrets from their competitors.
We are bombarded with messages – politicians, media, movies, documentaries, etc. that portray the for profit enterprise segment of our society as inherently malevolent (saving for some positive rhetoric for the small business) and that the role of government is to protect us from business.
This is not a New Brunswick issue but it sure is firmly entrenched here.
But like the movie Inception, in the end it is about ideas. We organize ourselves and our societies around a few main themes and everything we do pivots off those themes.
My idea is that New Brunswick needs more business investment and more industry to broaden our tax base and keep our population modestly rising. We need to have more balance between the public services we want and the tax revenues our economy can generate.
And that means orienting our public policy and our community efforts towards attracting that investment and industry.
What the Peoples’ Alliance and all the other parties won’t tell you is how they would address our economic development challenges. They talk in vague generalities but if they ever got into power we would end up with more variations on the same theme.
There are very few guarantees in life.
Tom Peters, probably the most successful management guru of the 1980s, once said that American businessmen were true capitalists – until they walk through the front door of their businesses each day. Then they spend their time trying to wring tax breaks, grants, monopolies and other non-market benefits out of government.
Normally, this is under the umbrella “everyone is doing it so we have to be in the game”. You know what I mean. If my competitor is getting a tax break or government forced positive market conditions, it is only fair that I do as well. And I am sensitive to that argument. Governments shouldn’t change the conditions on the playing field to favour one over the other because if they do, it forces this kind of incentive war of attrition.
The interesting thing is that New Brunswick is actually one of the least offenders in this area. The think tank Fraser Institute periodically publishes a report on the amount of government subsidies to industry by province and New Brunswick, adjusted for the size of its economy, routinely ranks among the lowest users of subsidy to industry.
If we are going to use incentives, I favour government using tax breaks and other incentives where there is a clear return on the investment of taxpayer money on that investment. I do not recommend utilateral disarmament.