It's The Economy, Stupid

I had a chat yesterday with one of my left-leaning friends and he starting going on about the exciting election of Barack Obama and how it means a whole new day for Canada-U.S. relations.  He said he could see a number of areas where the two countries could work together.

I was a bit shocked.  This guy (I don’t think he reads my blog) was a virulent opposer of Atlantica and was one of those that said it would lead to a worsening of labour standards and turn New Brunswick into Mexico (I am paraphrasing).  Now he can see areas to work more closely together?

Well, I told him – and you – that the opposition to Atlantica has all but turfed the initiative.  It was hard enough getting government and business leaders to seriously consider the idea but once Maude Barlow and a few others came in with their own version of the shock doctrine – it was all but dead.

So it seems that for many it wasnt’t the big bad U.S. of A – it was the big bad Bush.  Now he is gone and so essentially is what could have been an interesting initiative (Atlantica) to re-establish better two-way trade with a historical and natural trading region in the Northeast US.  Many serious people – economists and policy makers- believed that in the long term – better economic ties with our neighbours to the south would have led to a far better economic development environment. 

The initiative was never really given any oxygen because of what seems to have been a dislike of George Bush.

Too bad.

Uncategorized atlantica, Economic development, george bush, maude barlow

Gov. Bob Riley and other state officials are spending four days in Puerto Vallarta, Mexico, trying to sell industrial site consultants on Alabama. Neal Wade, director of the Alabama Development Office, said 25 site consultants are attending the Alabama International Business Conference, which runs Thursday through Sunday in the coastal resort.  Wade said the conference will give site consultants an opportunity to dine, golf and enjoy other activities with the governor and first lady Patsy Riley. Other participants include Alabama House Speaker Seth Hammett, state Finance Director Jim Main, and Ed Castile, director of Alabama’s industrial training program. Sharing the cost of the conference with the state are Alabama Power Co., PowerSouth, the Economic Development Partnership of Alabama and the North Alabama Industrial Development Association, Wade said.

We could learn a lot from Alabama about how things are done.

Uncategorized Alabama, Economic development, site selectors

For old timers to this blog, you can skip this one because it is essentially a repeat but I was asked yesterday to explain why this blog exists.  Here is a novel explanation.

Most people ask this question:  What do we need to do to see significant economic development in New Brunswick?

I ask a different question:  What do we need to do to see significant new, private sector business investment in New Brunswick (i.e. new manufacturing plants, new software development studios, new back offices, new regional warehouses, etc.)?

Think about the normal answers to that first question:

We need to support our small businesses.  We need to encourage entrepreneurship.  We need to invest in training.  We need to cut taxes.  We need to reduce red tape.  We must increase access to capital. We need to invest in education.  Government needs to get out of the way. We need to invest in roads (a politician was quoted yesterday saying this).  We need to invest in R&D.  We need to have a strong health care system.

Essentially, when you ask the first question above, the answer will invariably reflect your (and mine) personal experiences and biases.

But ask the second question.  How do we attract significant new private sector business investment (far more than we have seen in the past few decades)?  Then if you answer “we need to invest in education” you see the correlations start to thin out.  The reality is if you ask how to stimulate significant new private sector investment and you do your research you will find that it ends up being a bundle of factors that lead to more business investment. 

In my opinion (and hence this blog), if your goal is significant new private sector business investment the correlations are highest with things such as the competitiveness of your operating cost structure, access to industry-specific R&D facilities and funding programs, tax incentive programs, quality of your marketing effort, ability to prove an available quality workforce for the specific business (and if possible proof that people will move to NB for the specific jobs), etc. 

Things such as health care and even education are more loosely correlated to business investment (although for certain sectors like biosciences the correlations are much higher) and road infrastructure, no disrespect intended, is only weakly correlated to new business investment (again it depends somewhat on the sector.  No one would put a warehouse in the Scoudouc industrial park until that road was pushed through to Route 15).

I think if the politicians, economic developers and community leaders started to really consider these issues they would come around at least partially to my point of view and they would take far more seriously the issues that I think are highly correlated to business investment and back off – at least short term – on issues only weakly correlated to new business investment.

Consider Miramichi again because that seems to be a topical area for discussion.  The local MP was talking in the media about all the new money going into roads and he hoped new tourism projects – to foster ‘economic development’ in the Miramichi.  All due respect, roads won’t do it and seasonal tourism jobs at $9/hour won’t replace $35-$40/hour mill jobs.    This MP should look at this blog and ask himself if he is allocating his resources wisely.

Again, that is my opinion and I welcome alternative views.

Uncategorized Economic development, miramichi, Scoudouc

I like Norway.  I don’t know why we don’t spend more time investment prospecting there.  It is a small market and there is limited potential but it could be a niche market.  New Brunswick doesn’t need piles of investment every year.  I would say 8-12 large manufacturing, ICT or value added back office projects would be fine.  A few out of Norway doesn’t seem that crazy.  Everyone is fighting for India, China, US, French, etc. investment (Quebec has 100 people in France I was told).  Not many are fighting for Norwegian investment.

Maybe the Miramichi might get some Norwegian investment but I hope the deal is good and it replaces a big chunk of the 1000 or so high paying jobs lost at the two UPM operations.   While I cautiously applauded the Birla takeover of the mill in Nackawic it was at less jobs and lower pay – a net loss to the province.  And Minister Mesheau called it his greatest achievement as Minister.  At some point, a BNB Minister’s greatest achievement should be something that is a net positive gain for the economy.

Uncategorized Economic development, Norway, upm

I see in this article that the City of Toronto is relaunching its economic development agency (formerly known as the Toronto Economic Development Corp.) as Invest Toronto.  Invest Toronto’s mission is to market and promote the city in new and imaginative ways, especially to foreign investors.  Kind of interesting considering I have heard a number of economic development agencies in the Maritimes talking about taking the emphasis away from promotion and investment attraction.

What do you think?  Will Enterprise Chaleur ever be rebranded as Invest Chaleur?  Nah.  Business New Brunswick as Invest NB?  Nah.  ACOA as Invest Atlantic Canada?  Nah. 

Maybe we can learn a few things from our friends in T.O.

Uncategorized Economic development, Invest Toronto, Toronto

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?

Uncategorized causality, Economic development, miramichi, richard florida

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.

Uncategorized accountability, Doug Tyler, Economic development

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.

Uncategorized Economic development, Jean Guy Finn, local government, self-sufficiency

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.

Uncategorized blockbuster deals, Economic development

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.”

Uncategorized Economic development, Norway, Quebec