Nova Scotia election: Looking for clarity on economic development
A couple of people asked me to weigh in on the Nova Scotia election. As long time readers will know I have a horrendous track record of choosing winners in political races – I think I have been wrong most of the time – so I don’t make predictions anymore but I’ll make a few observations.
You have to cut through the ‘politics’ and look for serious policy positions – and this can be hard. Every party will talk about doling out new money – for university students, for seniors, for health care, etc. – but how to pay for it is another issue.
The PCs in Nova Scotia seem to be talking about the most radical change – eliminating the small business corporate tax, raising the population to 1 million, eliminating ‘corporate welfare’ but if you look closely the pathway to 1 million is not well defined – at all. Remember Shawn Graham made BHAGs (big, hairy, audacious goals) but was also skimpy on the details. NB was going to eliminate equalization by 2026. It was going to raise its population by 100,000. It was going to attract 5,000 immigrants per year. I won’t go back to the Lord years but he also served up whoppers (like rising to 4th in Canada among the provinces for R&D spending). The Alward government eschewed the BHAGs in favour of slow and steady wins the race but some folks would argue that slow and steady has turned into inertia. By the time of the NB election next year, we will still have a huge provincial deficit and a stagnant economy.
What does this mean for the Nova Scotia election?
If you under-promise and under-deliver (Alward) you risk apathy. If you over-promise and under-deliver (Graham) you risk frustration. You have to find a way to under-promise and over-deliver (?).
While most economists (not all) promoted the idea of a hike in the HST to balance the books it doesn’t seem to have led to political gains in Nova Scotia. According to RBC Economics, NS has balanced its budget while New Brunswick looks to be stuck in deficit position until at least 2017. But Nova Scotians don’t seem to be giving the NDP government credit for the balancing.
The federal Tories, IMO, were quite good at targeting niche segments of the population – mom business owners (now can access EI), volunteer firefighters (now can expense equipment), parents with young children in sports and arts (now can deduct costs from taxes), etc. Young women in general break heavily towards the NDP, Greens and Libs but the Tories saw a niche in suburban female business owners. I think there are potential learnings from this for NS and NB politicians although some hard core Tories might bristle against using the tax code/targeted tax breaks for political gains.
In the end, I don’t see anything in any of the NS platforms that will lead to a substantial boost in the provincial economy. Lowering/eliminating small business taxes is a gimmick that doesn’t work. Lord did it in New Brunswick and the number of small businesses declined and the number of people employed in small businesses declined. Politicians love this gimmick because small business owners tend to be politically active and are spread across the province (they are also fairly influential).
If the NS tories want to stimulate employment growth among small businesses they need to figure out how to get more of them exporting or they need to figure out how to grow the economy in other ways which will benefit the 95 percent of small businesses that generate 100% of their business within Nova Scotia.
None of the parties seem to be talking about immigrant entrepreneurs as a growth strategy. I’d like to see at least one party talk about attracting immigrant entrepreneurs that will use NS as a base for North American markets. We tend to view foreign investment as a big company thing but there are thousands of entrepreneurs looking to get into the North American market and very few of them ever settle in the Maritimes.
It would be interesting if one of the parties would have an honest discussion about oil and gas development. They won’t, of course, because it has become toxic. This is a shame. We should at least be exploring the potential of oil and gas as a growth opportunity across the region. This has been a huge boost to the Saskatchewan economy – which looked a lot like the Maritimes in the mid-1990s.
Attracting investment to Nova Scotia also seems to be a subject with limited attraction. I haven’t heard much about this but someone should be talking about expanding Halifax’s role as a financial services hub, attracting investment into life sciences and ICT. I guess multinational companies don’t ‘vote’ but the thousands of people employed within these firms do vote. I would shout out to the Michelins, Pratt Whitneys, General Dynamics’, etc. and thank them for investing in Nova Scotia and ask for more.
Finally, we need to foster a new wave of ambitious NS-based entrepreneurs. Not the lifestyle small business owners but the insatiable entrepreneurs that want to use NS as the platform to build a global business. We see some of those but relatively few. There doesn’t seem to be much policy discussion around that other than some interesting moves on the VC and incubation front.
I would encourage all politicians to tell the public the truth. Without a moderate to solid growth rate, Nova Scotia will continue to wither economically and that will put even more pressure on the cost and quality of public services. Politicians have been reluctant to draw the direct link between economic growth and the quality of public services. This is a mistake.